<PAGE> 1
As filed with the Securities and Exchange Commission on April 15, 1998
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
ALKERMES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2472830
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
------------------------------
64 Sidney Street
Cambridge, Massachusetts 02139
(617) 494-0171
(Address, including zip code, and telephone
number, including area code,
of registrant's principal executive offices)
Richard F. Pops, Chief Executive Officer
Alkermes, Inc.
64 Sidney Street, Cambridge, Massachusetts 02139
(617) 494-0171
(Name, address, including zip code, and telephone
number, including area code,
of agent for service)
------------------------------
Copies to:
Morris Cheston, Jr., Esq.
Martha J. Hays, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
(215) 665-8500
------------------------------
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]____________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ] ____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
<PAGE> 2
<TABLE>
<CAPTION>
====================================================================================================================================
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------
Title of each class of Proposed maximum aggregate Amount of
securities to be registered Amount to be registered offering price(1) registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
$3.25 Convertible Exchangeable Preferred Stock 2,300,000 shares $115,000,000 $33,925
- ------------------------------------------------------------------------------------------------------------------------------------
6 1/2% Convertible Subordinated Debentures $115,000,000 ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share 3,881,940 shares(2) ---- ----
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(i).
(2) Such number represents the number of shares of Common Stock initially
issuable upon conversion of the Preferred Stock registered hereby and,
pursuant to Rule 416 under the Securities Act of 1933, as amended, such
indeterminate number of shares of Common Stock as may be issued from time
to time upon conversion of the Preferred Stock by reason of adjustment of
the conversion price under certain circumstances outlined in the
Prospectus.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE> 3
ALKERMES, INC.
2,300,000 shares of $3.25 Convertible Exchangeable Preferred Stock
$115,000,000 6 1/2% Convertible Subordinated Debentures
3,881,940 shares of Common Stock
-----------
This Prospectus relates to the offering by the selling shareholders named
herein (the "Selling Shareholders") of $3.25 Convertible Exchangeable Preferred
Stock, par value $.01 per share (the "Preferred Stock"), of Alkermes, Inc., a
Pennsylvania corporation ("Alkermes"). In addition, this Prospectus relates to
the offering by the Selling Shareholders of 6 1/2% Convertible Subordinated
Debentures (the "Debentures") of Alkermes in the aggregate principal amount of
up to $115,000,000, issued or issuable upon exchange, at the option of Alkermes,
of the Preferred Stock. Finally, this Prospectus relates to the offering by the
Selling Shareholders of up to 3,881,940 shares (subject to adjustment under
certain circumstances) of Alkermes's common stock, par value $.01 per share
("Common Stock" and, together with the Preferred Stock and the Debentures, the
"Securities"), issued or issuable upon conversion of the Preferred Stock or upon
conversion of the Debentures, if the Preferred Stock is exchanged for
Debentures.
The Preferred Stock was issued and sold in March 1998 in transactions
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), to persons reasonably believed by the managers
who placed the Preferred Stock (the "Initial Purchasers") to be "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act) (each a
"QIB") or institutional accredited investors or sophisticated investors. Prior
to resale pursuant to this Prospectus, certain of the Preferred Stock was
eligible for trading on the Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") Market. The Preferred Stock resold pursuant to
this Prospectus will no longer be eligible for trading on the PORTAL Market.
Dividends on the Preferred Stock are cumulative from the date of original
issue and are payable quarterly, commencing June 1, 1998 and payable each
September 1, December 1, March 1 and June 1 thereafter, at the annual rate of
$3.25 per share of Preferred Stock. Prior to March 6, 2001, the Preferred Stock
is not redeemable at the option of Alkermes. Thereafter the Preferred Stock is
redeemable at the option of Alkermes, in whole or in part, at the declining
redemption prices set forth herein, together with accrued dividends. See
"Description of Preferred Stock -- Optional Redemption." The Preferred Stock has
a liquidation preference of $50 per share, plus accrued and unpaid dividends.
The Preferred Stock is exchangeable, in whole but not in part, at the
option of Alkermes on any dividend payment date beginning March 1, 1999 (the
"Exchange Date") for the Debentures at the rate of $50 principal amount of
Debentures for each share of Preferred Stock. The Debentures, if issued, will
mature on the tenth anniversary of the Exchange Date. See "Description of
Preferred Stock -- Exchange Provisions." The Debentures, if issued, will contain
conversion and optional redemption provisions substantially identical to those
of the Preferred Stock. See "Description of Debentures."
Holders ("Holders") of the Preferred Stock are entitled at any time,
subject to prior redemption or repurchase, to convert any of the Preferred Stock
or portions thereof into Common Stock, at an initial conversion rate of 1.6878
shares of Common Stock for each share of Preferred Stock, subject to certain
adjustments including a Non-Stock Fundamental Charge or a Common Stock
Fundamental Charge (each as defined). See "Description of Preferred
Stock-Conversion Rights." The Common Stock is currently traded on The Nasdaq
National Market under the symbol "ALKS." On April 13, 1998, the reported closing
price of the Common Stock on The Nasdaq National Market was $22.875 per share.
<PAGE> 4
Alkermes will not receive any of the proceeds from the sale of the
Securities offered hereby. The Selling Shareholders directly, through agents
designated from time to time, or through brokers, dealers or underwriters to be
designated, may sell the Securities from time to time on terms to be determined
at the time of sale. To the extent required, the specific amount of Securities
to be sold, the respective purchase price and public offering price, the names
of any such agent, broker, dealer or underwriter, and any applicable commission
or discount with respect to the particular offer will be set forth in a
Prospectus Supplement. Alkermes has agreed to bear substantially all expenses of
registration of the Securities under federal and state securities laws, other
than, among other things, commissions, fees and discounts of underwriters,
brokers, dealers and agents. In addition, Alkermes has agreed to indemnify the
Selling Shareholders against certain liabilities. See "Plan of Distribution."
The Selling Shareholders and any broker, dealer, agents or underwriters
that participate with the Selling Shareholders in the distribution of the
Securities may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by them and any profits on the
resale of the Securities purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Selling Shareholders have
agreed to indemnify Alkermes against certain liabilities. See "Plan of
Distribution."
----------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE SECURITIES.
----------------------
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 REPRE-
SENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is _______ __, 1998
2
<PAGE> 5
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C. a Registration Statement on Form S-3 under the
Securities Act with respect to the Securities offered hereby. This Prospectus,
which constitutes part of the Registration Statement, omits certain of the
information contained in the Registration Statement and the exhibits and
schedules thereto on file with the Commission pursuant to the Securities Act and
the rules and regulations of the Commission thereunder. Statements contained in
this Prospectus as to the contents of any contract or other document referred to
are not necessarily complete and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, and each such statement is qualified in all respects by such
reference. The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements, information statements
and other information with the Commission. Such reports, proxy and information
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the Commission's Regional Offices at Seven World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Avenue, Suite
1400, Chicago, Illinois 60661. Copies of such material also can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates, or from the Commission's internet
web site at http://www.sec.gov. The Common Stock is listed on The Nasdaq
National Market and, in connection with such listing, the Company also files
reports, proxy statements and other information with The Nasdaq National Market.
Such reports, proxy statements and other information filed by the Company can be
inspected and copied at the offices of the Nasdaq Stock Market, 1735 K Street,
N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company filed with the Commission (File No.
0-15972) are incorporated herein by reference:
(i) Annual Report on Form 10-K for the year ended March 31, 1997;
(ii) Quarterly Reports on Form 10-Q for the quarters ended June 30, 1997,
September 30, 1997, and December 31, 1997;
(iii) Current Reports on Form 8-K dated September 30, 1997, February 18,
1998, February 27, 1998 and April 15, 1998; and
(iv) Item 1 of Registration Statement on Form 8-A dated June 28, 1991, as
amended by Form 8-A/A dated January 17, 1997 including any amendments
or reports filed for the purpose of updating such description.
In addition, all reports and other documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act,
prior to the termination of the offering made hereby, shall be deemed to be
incorporated by reference into this Prospectus. Any statement contained in this
Prospectus or in a document incorporated or deemed to be incorporated by
reference herein, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
incorporated by reference herein (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 Alkermes, Inc., 64 Sidney Street,
Cambridge, MA 02139, Attention: Michael J. Landine, Senior Vice President and
Chief Financial Officer (telephone number (617) 494-0171).
Alkermes(R), ProLease(R), Medisorb(R) and the Alkermes logo are registered
trademarks of Alkermes, Inc. RMP(TM), RMPs(TM), RMP-7(TM), Cereport(TM) and
Receptor-Mediated Permeabilizers(TM) are trademarks of Alkermes, Inc.
Intron(R) is a registered trademark of Schering Corporation, a subsidiary
of Schering-Plough Corporation.
3
<PAGE> 6
- --------------------------------------------------------------------------------
SUMMARY
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
See "Important Factors Regarding Forward-Looking Statements."
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors," appearing elsewhere in this Prospectus or
incorporated by reference herein.
THE COMPANY
Alkermes, Inc. (together with its subsidiaries, for purposes of this
Summary and the Risk Factors, hereinafter referred to as "Alkermes" or the
"Company") is applying the tools of biotechnology to the development of
sophisticated proprietary drug delivery systems. The Company is developing
product candidates based on three independent drug delivery technologies:
ProLease, which is designed to enable single injections lasting a few days to
several months to be made of proteins or peptides otherwise given by more
frequent injection; Cereport, which is designed to enable increased drug
delivery to the brain by transiently opening the blood-brain barrier; and
Medisorb, which extends Alkermes' technology for injectable sustained release
and is designed for more traditional small molecule pharmaceutical compounds.
ProLease is a proprietary technology for the stabilization and
encapsulation of fragile proteins and peptides in microspheres made of common
medical polymers. Several ProLease product candidates are being developed in
collaboration with large pharmaceutical companies. With Genentech, Inc.
("Genentech"), Alkermes is developing a ProLease sustained-release formulation
of Genentech's human growth hormone ("hGH"). In December 1996, following the
completion of a feasibility agreement, Alkermes announced a collaboration with
Johnson & Johnson for a ProLease formulation of an undisclosed product for the
treatment of hormone-mediated disorders. In January 1998, following the
completion of a feasibility agreement, Alkermes announced a collaboration with
Johnson & Johnson for a ProLease formulation of erythropoietin ("EPO"). Also, in
collaboration with Schering-Plough Corporation ("Schering-Plough"), Alkermes is
developing a sustained-release formulation of Intron A, Schering-Plough's alpha
interferon, which is approved for use in several infectious diseases and certain
oncology indications.
Cereport, Alkermes' second drug delivery system, is a novel pharmaceutical
peptide based on bradykinin, a compound occurring naturally in the body and
known to affect vascular permeability. Following injection, Cereport increases
permeability by triggering a brief relaxation of the tight cellular junctions of
the blood-brain barrier. During the time that permeability is increased, drug
molecules in the bloodstream can diffuse into the brain in concentrations
greater than can usually be achieved.
To support the extensive clinical development of Cereport, Alkermes formed
and transferred substantially all of its rights to its Receptor-Mediated
Permeabilizer ("RMP") technology, including Cereport, to Alkermes Clinical
Partners, L.P. ("Clinical Partners"). The research and development funding from
Clinical Partners, which ended as of June 30, 1996, was not sufficient to
complete clinical trials and obtain regulatory approval of Cereport. The Company
has the right to reacquire such technology by purchasing all of the limited
partnership interests. This right will terminate in the event the Company ceases
funding the development of Cereport. Alkermes has used and intends to continue
to use its own resources to develop Cereport. In addition, the Company has
entered into an agreement with ALZA Corporation ("ALZA") pursuant to which ALZA
is providing to the Company certain development funding for Cereport and has the
option to acquire commercialization rights for Cereport. See "Risk Factors --
Need for Additional Funding; Uncertainty of Access to Capital" and "--
Assignment of Cereport Technology; Effect of Exercise of Clinical Partners
Purchase Option."
Medisorb, the Company's third drug delivery system, is a proprietary
technology for the stabilization and encapsulation of traditional, small
molecule drugs in microspheres made of common medical polymers. In May
- --------------------------------------------------------------------------------
4
<PAGE> 7
- --------------------------------------------------------------------------------
1996, Alkermes announced a collaboration with Janssen Pharmaceutica
International ("Janssen") for the development of a Medisorb formulation of an
undisclosed Janssen proprietary product.
Alkermes' business strategy is to develop and acquire drug delivery systems
to address significant new drug delivery opportunities arising in the
pharmaceutical industry. This strategy has four key elements: (i) develop and
acquire broadly applicable drug delivery systems and apply them to multiple
pharmaceutical products; (ii) collaborate to develop and finance product
candidates; (iii) apply drug delivery systems to both approved drugs and drugs
in development; and (iv) establish independent product development capabilities.
The Company was incorporated in Pennsylvania in 1987. The Company's
principal executive offices are located at 64 Sidney Street, Cambridge, MA 02139
and its telephone number is (617) 494-0171.
THE OFFERING
THE COMMON STOCK
<TABLE>
<S> <C> <C>
Common Stock outstanding as of April 2, 1998(1)......................................... 21,072,546 shares
Common Stock to be outstanding assuming conversion of the Preferred Stock(1)(2)......... 24,954,486 shares
Nasdaq National Market symbol........................................................... ALKS
</TABLE>
- --------------
(1) Excludes as of April 2, 1998 outstanding options and awards for 2,159,598
shares of Common Stock at a weighted average exercise price of $8.22 per
share and outstanding warrants to purchase 1,069,400 shares of Common Stock
at a weighted average exercise price of $7.05 per share.
(2) Assumes no adjustment to the conversion price of the Preferred Stock.
<TABLE>
THE PREFERRED STOCK AND DEBENTURES
<S> <C>
Securities Offered................ 2,300,000 shares of $3.25 Convertible
Exchangeable Preferred Stock (the "Preferred
Stock"), par value $0.01 per share.
Dividends on Preferred Stock...... Cumulative from the date of original issue
at the annual rate of $3.25 per share of
Preferred Stock, payable quarterly out of
funds legally available therefor on the
first day of March, June, September and
December, commencing June 1, 1998, when, as,
and if declared by the Board of Directors
out of funds legally available therefor. See
"Description of Preferred Stock --
Dividends."
Conversion Rights................. The Preferred Stock will be convertible at
the option of the holder at any time, unless
previously redeemed or exchanged, into
shares of Common Stock at an initial
conversion rate of 1.6878 shares of Common
Stock for each share of Preferred Stock
(equivalent to a conversion price of
approximately $29.625). The initial
conversion price with respect to the
Preferred Stock is subject to adjustment in
certain events, including a Non-Stock
Fundamental Change or a Common Stock
Fundamental Change (each as defined). See
"Description of Preferred Stock --
Conversion Rights."
Liquidation Preference............ $50 per share of Preferred Stock, plus
accrued and unpaid dividends. See
"Description of Preferred Stock--
Liquidation Rights."
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE> 8
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Optional Redemption............... Prior to March 6, 2001, the Preferred Stock
is not redeemable at the option of the
Company. Thereafter, the Preferred Stock is
redeemable at the option of the Company, in
whole or in part, at the declining
redemption prices set forth herein, together
with accrued dividends. See "Description of
Preferred Stock -- Optional Redemption."
Exchange Provisions............... The Preferred Stock is exchangeable in
whole, but not in part, at the option of the
Company on any dividend payment date
beginning on March 1, 1999 (the "Exchange
Date") for the Company's 6 1/2% Convertible
Subordinated Debentures (the "Debentures")
at the rate of $50 principal amount of
Debentures for each share of Preferred
Stock. The Debentures, if issued, will
mature on the tenth anniversary of the
Exchange Date. See "Description of Preferred
Stock -- Exchange Provisions."
Voting Rights..................... Except as provided by law, holders of shares
of Preferred Stock will not be entitled to
any voting rights, except that, among other
things, holders will be entitled to vote as
a separate class to elect two directors if
the equivalent of six or more quarterly
dividends (whether or not consecutive) on
the Preferred Stock are in arrears. These
voting rights will continue until such time
as the dividend arrearage on the Preferred
Stock has been paid in full. See
"Description of Preferred Stock -- Voting
Rights."
Debentures........................ The Debentures, if issued, will bear
interest at a rate per annum of 6 1/2% of
the principal amount thereof payable
semiannually on March 1 and September 1 of
each year, commencing on the first interest
payment date following the date of exchange.
Prior to March 6, 2001, the Debentures are
not redeemable at the option of the Company.
Thereafter, the Debentures are redeemable at
the option of the Company, in whole or in
part, at the declining redemption prices set
forth herein, together with accrued
interest. The Debentures are not entitled to
the benefits of any mandatory sinking fund
payments. At the option of the holder, the
Debentures may be converted into Common
Stock at the same conversion price as would
have been applicable to the Preferred Stock
if the Preferred Stock were outstanding. The
Debentures will be subordinated to all
Senior Indebtedness (as defined). The
Indenture (as defined) will not limit the
amount of additional indebtedness, including
Senior Indebtedness, which the Company can
create, incur, assume or guarantee, nor will
the Indenture limit the amount of
indebtedness that any subsidiary can incur.
See "Description of Debentures."
Risk Factors...................... An investment in the Securities involves a
high degree of risk. See "Risk Factors" on
pages 8 through 18 for a discussion of
certain factors that should be considered in
evaluating an investment in the Securities.
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE> 9
- --------------------------------------------------------------------------------
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
Some of the information presented in this Prospectus constitutes
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, the Company's business is subject to
significant risks and there can be no assurance that actual results of the
Company's development activities and its results of operations will not differ
materially from its expectations. Factors which could cause actual results to
differ from expectations include, among others (i) the Company and its
collaborators could not be permitted by regulatory authorities to undertake
additional clinical trials for ProLease, Cereport or Medisorb or clinical trials
could be delayed; (ii) product candidates could be ineffective or unsafe during
clinical trials; (iii) the Company's collaborators could elect to terminate or
delay development programs; (iv) the Company could incur difficulties or
set-backs in obtaining the substantial additional funding required to continue
research and development programs and clinical trials; and (v) even if product
candidates appear promising at an early stage of development, product candidates
could fail to receive necessary regulatory approvals, could become
technologically obsolete, be difficult to manufacture on a large scale, be
uneconomical, fail to achieve market acceptance, be precluded from
commercialization by proprietary rights of third parties or experience
substantial competition in the marketplace.
- --------------------------------------------------------------------------------
7
<PAGE> 10
RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus. See "Important Factors Regarding Forward-Looking Statements".
In addition to the other information included or incorporated by reference
in this Prospectus, the following risk factors should be considered carefully in
evaluating the Company and its business before purchasing the Securities offered
hereby.
UNCERTAINTIES RELATED TO CLINICAL TRIALS
Before obtaining regulatory approvals for the commercial sale of each of
its product candidates under development, Alkermes or its collaborators must
demonstrate through preclinical testing and clinical trials that the product
candidate is safe and efficacious. The results from preclinical testing and
early clinical trials may not be predictive of results obtained in subsequent
clinical trials, and there can be no assurance that the Company's or its
collaborators' clinical trials will demonstrate the safety and efficacy of any
product candidates necessary to obtain regulatory approval. A number of
companies in the biotechnology and pharmaceutical industries have suffered
significant setbacks in advanced clinical trials, even after obtaining promising
results in earlier trials. In addition, certain clinical trials are conducted
with patients having the most advanced stages of disease. During the course of
treatment, these patients often die or suffer other adverse medical effects for
reasons that may not be related to the pharmaceutical agent being tested. Such
events can adversely affect the statistical analysis of clinical trial results.
For example, the Company's Cereport clinical trial results for patients with
brain tumor may be adversely affected by the severity and advanced state of
disease in participating patients.
The risk and complexity of clinical trials of the Company's product
candidates is increased by the use of other pharmaceuticals in combination with
ProLease, Cereport, and Medisorb, the Company's drug delivery technologies. Even
if such other pharmaceutical has received approval by the United States Food and
Drug Administration ("FDA") or other regulatory agencies, the outcome of
clinical trials is dependent upon the performance of ProLease, Cereport, or
Medisorb in combination with the pharmaceutical agent.
Moreover, drugs used with the drug delivery systems may not have been
approved for the indication for which the Company is conducting clinical trials.
For example, Alkermes has completed Phase II clinical trials of Cereport
administered in combination with the chemotherapeutic agent carboplatin in
patients with recurrent malignant glioma. Carboplatin has not been approved for
the treatment of this indication. No assurance can be given that the FDA will
not require additional clinical trials to demonstrate the safety and efficacy of
carboplatin in the treatment of brain tumor.
In March 1997, the Company announced that the third intravenous Phase II
clinical trial, Study ALK01-017, did not meet its primary endpoint of time to
tumor progression as measured by changes in tumor volume on MRI. In March 1998,
Alkermes began a Phase III clinical trial of Cereport and carboplatin in newly
diagnosed patients with brain tumor. There can be no assurance that any results
of such Phase III clinical trial will support regulatory approval of Cereport.
The completion of clinical trials of the Company's product candidates may
be delayed by many factors and there can be no assurance that delays or
terminations will not occur. One such factor is the rate of enrollment of
patients, which generally varies throughout the course of a clinical trial and
which depends on the size of the patient population, the number of clinical
trial sites, the proximity of patients to clinical trial sites, the eligibility
criteria for the trial and the existence of competitive clinical trials. Neither
the Company nor its collaborators can control the rate at which patients present
themselves for enrollment, and there can be no assurance that the rate of
patient enrollment will be consistent with the Company's expectations or be
sufficient to enable clinical trials of the
8
<PAGE> 11
Company's product candidates to be completed in a timely manner. Any significant
delays in, or termination of, clinical trials of the Company's product
candidates would have a material adverse effect on the Company's business,
financial condition and results of operations.
There can be no assurance that Alkermes or its collaborators will be
permitted by regulatory authorities to undertake additional clinical trials for
any of its technologies, or that if such trials are conducted, any of the
Company's product candidates will prove to be safe and efficacious or will
receive regulatory approvals. Any delays in or termination of the Company's or
its collaborator's clinical trial efforts would have a material adverse effect
on the Company's business, financial condition and results of operations.
HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
Alkermes has had net operating losses since its inception in 1987, and has
a substantial accumulated deficit. The Company's losses have resulted
principally from costs incurred in research and development, including clinical
trials, the purchase of in-process research and development, and from general
and administrative costs associated with the Company's operations. These costs
have exceeded the Company's revenues, which to date have been generated almost
entirely from Clinical Partners, collaboration and development agreements,
research grants, and interest income. Alkermes expects to incur substantial
additional and increasing operating expenses over the next several years as its
research and development and clinical trial activities accelerate and as
manufacturing scale-up occurs. To the extent that the Company is unable to
obtain third-party funding for such expenses, the Company expects that such
increased expenses will result in increased losses from operations. Alkermes
does not expect to generate significant revenues from the sale of products, if
any, for several years. The Company's future profitability depends in part on
the Company and its collaborators obtaining regulatory approval for products,
entering into agreements for product development and commercialization and
developing the capacity, or entering into agreements, for the manufacture, and
marketing of any products. There can be no assurance that Alkermes or its
collaborators will obtain required regulatory approvals, or successfully
develop, commercialize, manufacture, and market product candidates or that the
Company will ever achieve significant product revenues or profitability.
EARLY STAGE OF DEVELOPMENT; TECHNOLOGICAL UNCERTAINTY
All of the Company's product candidates are in research or development. No
significant revenues have been generated from product sales. In order to achieve
profitability, Alkermes must successfully develop, commercialize, manufacture
and market its products, either alone or in collaboration with others. Any
products resulting from the Company's research and development programs may not
be commercially available for several years, if at all.
The development of new pharmaceutical products is highly uncertain and
subject to a number of significant risks. Potential products that appear to be
promising at early stages of development may not reach the market for a number
of reasons. Such reasons include the possibilities that the potential products
will be found ineffective or cause harmful side effects during preclinical
testing or clinical trials, fail to receive necessary regulatory approvals, be
difficult to manufacture on a large scale, be uneconomical, fail to achieve
market acceptance, or be precluded from commercialization by proprietary rights
of third parties.
The Company's product candidates require significant additional research
and development efforts. The Company's principal drug delivery systems,
ProLease, Cereport, and Medisorb, which have not yet been proven safe and
effective in humans, target unsolved drug delivery problems. No assurance can be
given that any of the Company's development programs will be successfully
completed, that required regulatory approvals will be obtained on a timely
basis, if at all, or that any products for which approval is obtained will be
commercially successful. If any of the Company's development programs is not
successfully completed, required regulatory approvals are not obtained, or
products for which approvals are obtained are not commercially successful, the
Company's business, financial condition and results of operations would be
materially adversely affected.
9
<PAGE> 12
NEED FOR ADDITIONAL FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL
Alkermes will require substantial additional funding in order to continue
its research and product development programs and preclinical testing and
clinical trials of its product candidates, for operating expenses, for the
pursuit of regulatory approvals for its product candidates, and for establishing
manufacturing and marketing capabilities. The Company's future capital
requirements will depend on many factors, including continued scientific
progress in its research and development programs, the magnitude of these
programs, progress with preclinical testing and clinical trials, the time and
costs involved in obtaining regulatory approvals, the costs involved in filing,
prosecuting and enforcing patent claims, competing technological and market
developments, the establishment of additional collaborative arrangements, the
cost of manufacturing facilities and of commercialization activities and
arrangements, and the cost of product in-licensing and any possible
acquisitions. The Company has historically maintained cash reserves and other
liquid assets, that, together with amounts projected to be received from the
Company's collaborators, and interest income earned, were adequate to satisfy
its capital and operating requirements for a two-year period; however, there can
be no assurance that these funds will continue to be maintained at such level or
be sufficient to satisfy the Company's capital and operating requirements.
Alkermes intends to seek additional funding through arrangements with
corporate collaborators and through public or private sales of the Company's
securities, including equity securities. In addition, the Company has obtained
equipment, bank, and other loans and may continue to pursue opportunities to
obtain additional debt financing in the future. There can be no assurance,
however, that additional equity or debt funding will be available on reasonable
terms, if at all. Any additional equity financing would be dilutive to the
Company's shareholders. If adequate funds are not available, Alkermes may be
required to curtail significantly one or more of its research and development
programs and/or obtain funds through arrangements with collaborative partners or
others that may require Alkermes to relinquish rights to certain of its
technologies or product candidates.
The Company's research and development of Cereport has been funded by
Clinical Partners pursuant to a Product Development Agreement, dated as of March
6, 1992, between Alkermes and Clinical Partners (the "Product Development
Agreement"). Such funding, which ended as of June 30, 1996, was not sufficient
to complete clinical trials and obtain regulatory approval of Cereport. As a
result, Alkermes has used and intends to continue to use its own resources to
develop Cereport. The Company has the option to purchase the limited partnership
interests in Clinical Partners for cash or stock (the "Purchase Option"). The
Purchase Option will terminate in the event the Company ceases funding the
development of Cereport. If the Company elects to exercise its Purchase Option
it will be required to make a substantial cash payment. The Company would be
required to seek additional capital for such a payment and there is no assurance
that it would be able to obtain such capital on attractive terms or at all. If
Alkermes does not exercise its Purchase Option it may not recoup any investment
made by it in the development of Cereport. See "-- Assignment of Cereport
Technology; Effect of Exercise of Clinical Partners Purchase Option."
DEPENDENCE ON COLLABORATORS; POTENTIAL CONFLICTS OF INTEREST
The Company's strategy for research, development and commercialization of
its product candidates is to rely, in part, upon various corporate collaborators
and licensors and will in some cases be dependent upon these outside parties to
conduct preclinical testing and clinical trials, and to provide adequate funding
for the Company's development programs. The Company has collaborative
arrangements with Genentech, Johnson & Johnson and Schering-Plough, with respect
to its ProLease technology, with Clinical Partners and ALZA with respect to its
Cereport technology, and with Janssen with respect to its Medisorb technology.
The collaboration and license agreements may be terminated in some cases at the
discretion of the Company's collaborators with only limited notice to the
Company.
Neither ProLease nor Medisorb is an independently commercializable
technology. Both technologies are dependent on therapeutic products from third
parties, which may require licensing, collaboration or other arrangements. There
can be no assurance that the Company will be able to negotiate acceptable
additional collaborative arrangements that the Company deems necessary to
develop or commercialize its product candidates.
10
<PAGE> 13
Even if the Company is able to negotiate acceptable new collaborative
arrangements, there can be no assurance that such arrangements or the Company's
existing collaborations will be completed or will be successful or that the
Company will realize any revenues pursuant to such arrangements.
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 of 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.
In addition, Alkermes' 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.
LIMITED MANUFACTURING EXPERIENCE; RELIANCE ON THIRD-PARTY MANUFACTURING
Alkermes has completed construction of an in-house pilot production
facility which has been validated by the Company for manufacturing in accordance
with Good Manufacturing Practices ("GMP") regulations promulgated by the FDA.
The facility is being used to manufacture product candidates incorporating its
ProLease sustained-release delivery system for clinical trials. Construction of
a commercial scale production facility for the Company's ProLease sustained
release delivery system began in February 1998. In connection with its March
1996 acquisition of certain Medisorb assets and technology, Alkermes acquired a
14,000 square foot manufacturing facility in Wilmington, Ohio at which it is
manufacturing a Medisorb product candidate for Janssen for clinical trials. In
August 1997, Alkermes began construction of a 20,000 square foot addition to
this manufacturing facility for commercial scale production of the Janssen
product candidate. Alkermes has no other experience, however, in manufacturing
or in conducting the testing programs required to obtain regulatory approvals.
The manufacture of ProLease and Medisorb products on a commercial scale would
require significant start-up expenses and expansion of facilities and personnel,
and no assurance can be given that Alkermes can develop such manufacturing
capability on a timely basis, if at all.
The manufacture of the Company's products for clinical trials and
commercial purposes is subject to GMP and other federal regulations. The Company
has never operated an FDA-approved manufacturing facility, and there can be no
assurance that it will obtain necessary approvals for commercial manufacturing.
Alkermes relies on a third party to manufacture Cereport for use in
clinical trials and expects to rely on such third party for commercial sales, if
any. There can be no assurance that this manufacturer will continue to meet the
Company's requirements for quality, quantity and timeliness, or that Alkermes
would be able to find alternative manufacturers, if necessary.
If Alkermes is not able to develop manufacturing capacity and experience or
to continue to contract for manufacturing capabilities on acceptable terms, its
ability to conduct preclinical testing and clinical trials will be compromised,
delays in obtaining regulatory approvals may result, and, if such approvals are
obtained, commercial
11
<PAGE> 14
sales may be delayed. Such delays would materially adversely affect the
Company's competitive position and its business, financial condition, and
results of operations.
ASSIGNMENT OF CEREPORT TECHNOLOGY; EFFECT OF EXERCISE OF CLINICAL PARTNERS
PURCHASE OPTION
Alkermes has transferred to Clinical Partners substantially all of its
technology and commercial rights relating to Cereport technology. Under the
Product Development Agreement with Clinical Partners, Alkermes performs research
and development with respect to such technology on behalf of Clinical Partners.
There can be no assurance that disputes will not arise with Clinical Partners
over the ownership of rights to any technology that may be developed by Alkermes
pursuant to such agreement. In addition, there can be no assurance that
conflicts of interest between the Company and Clinical Partners will not arise
in relation to rights to ownership of the technology or termination of research
or marketing programs.
The Purchase Option will terminate in the event the Company ceases funding
the development of Cereport. There can be no assurance that the Purchase Option
will not terminate because the Company fails to exercise the Purchase Option or
otherwise. If the Purchase Option terminates, the Company will have no rights to
the Cereport technology or products developed on behalf of Clinical Partners in
the United States and Canada.
If the Company exercises the Purchase Option, it will be required to make a
substantial cash payment or to issue shares of Common Stock. A payment in cash
could have a material adverse effect on the Company's capital resources. A
payment in shares of Common Stock could result in a substantial decrease in the
percentage ownership of the Company by its then-existing shareholders and could
negatively affect the market price of the Common Stock. The exercise of the
Purchase Option may require Alkermes to record a significant charge to earnings
for the purchase of in-process research and development. If Alkermes acquires
rights to the Cereport technology pursuant to the Purchase Option, the Company
will have continuing obligations to pay royalties pursuant to the Product
Development Agreement.
INTENSE COMPETITION
Alkermes faces and expects to continue to face intense competition in the
development and marketing of its product candidates from academic institutions,
government agencies, research institutions, biotechnology and pharmaceutical
companies, including its collaborators, and drug delivery companies. Competition
may arise from other drug delivery technologies, methods of preventing or
reducing the incidence of disease, including vaccines, and new small-molecule or
other classes of therapeutic agents that do not require the assistance of a drug
delivery system. There can be no assurance that developments by others will not
render the Company's product candidates or technologies obsolete or
noncompetitive or that the Company's collaborators will not choose to use
competing drug delivery methods. In addition, if Alkermes receives regulatory
approvals for products, manufacturing efficiency and marketing capabilities are
likely to be significant competitive factors. At the present time, Alkermes has
no sales force or marketing or commercial manufacturing experience. In addition,
many of the Company's competitors and potential competitors have substantially
greater capital resources, manufacturing and marketing experience, research and
development resources, and production facilities than does Alkermes. Many of
these competitors also have significantly greater experience than does Alkermes
in undertaking preclinical testing and clinical trials of new pharmaceutical
products and obtaining FDA and other regulatory approvals.
With respect to Cereport, the Company believes that there are currently no
products approved by the FDA or other regulatory authorities for increasing the
permeability of the blood-brain barrier. There are however many novel
experimental therapies being tested in the United States and Europe. With
respect to ProLease and Medisorb, the Company is aware that there are other
companies developing sustained-release delivery systems for pharmaceutical
products. In addition, other companies are developing new chemical entities
which, if developed successfully, could compete against sustained-release
formulations of products of the Company's collaborators. These chemical entities
are being designed to have different mechanisms of action or improved safety and
efficacy. In addition, Alkermes' collaborators may develop, either alone or with
others, products that compete with the development and marketing of the
Company's product candidates.
12
<PAGE> 15
There can be no assurance that the Company will be able to compete
successfully with such companies. The existence of products developed by the
Company's competitors, or other products or treatments of which the Company is
not aware, or products or treatments that may be developed in the future, may
adversely affect the marketability of products developed by the Company.
RAPID AND SUBSTANTIAL TECHNOLOGICAL CHANGE
The biotechnology and pharmaceutical industries are subject to rapid and
substantial technological change. There can be no assurance that the Company's
competitors will not succeed in developing products based on technologies
similar to its own or completely new technologies, which are more effective than
any that are being developed by the Company, or which render the Company's
technologies or product candidates obsolete and noncompetitive. The development
of such products could have a material adverse effect on the Company's business,
financial condition and results of operations.
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS
The Company's success will be dependent, in part, on obtaining patent
protection for its product candidates and those of its collaborators,
maintaining trade secret protection and operating without infringing upon the
proprietary rights of others.
The Company is aware of several United States patents issued to third
parties containing claims which could be construed to cover some of the product
candidates of the Company, its collaborators or Clinical Partners utilizing the
ProLease, Cereport and Medisorb delivery systems. In one case, the Company has
received a letter from the owner of a patent asking the Company to compare the
Company's Medisorb technology disclosed in a published international patent
application with such owner's patented technology. There can be no assurance
that the claims of these issued United States patents or claims that may issue
from foreign counterparts of United States applications, are not infringed by
the proposed manufacture, use, offer for sale, sale or importation of these
products by the Company or its collaborators. There can be no assurance that a
third party will not file an infringement action, or that the Company would
prevail in any such action. There can be no assurance that the cost of defending
an infringement action would not be substantial and would not have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company is also aware of patent applications filed by third
parties in the United States and in various foreign countries which may cover
some of the Company's product candidates utilizing its ProLease, Cereport or
Medisorb delivery systems. Patents may issue from these applications which could
preclude the Company from manufacturing, using, offering for sale or selling
some of its ProLease, Cereport or Medisorb product candidates. Furthermore,
there can be no assurance that any licenses under such patents would be made
available on commercially viable terms, if at all. Failure to obtain any
required license could prevent the Company from commercializing one or more of
its products.
The patent positions of pharmaceutical, biopharmaceutical and biotechnology
firms, including Alkermes, are generally uncertain and involve complex legal and
factual questions. In addition, there can be no assurance that the Company's or
its licensors' current patent applications will be allowed or that the claims of
any patents issued to Alkermes or its licensors (in connection with either the
Company's product candidates or Clinical Partners' product candidate, or both)
will be sufficiently broad to protect the Company's or Clinical Partners'
technology or to provide Alkermes or Clinical Partners with any competitive
advantages. Moreover, no assurance can be given that patents issued to Alkermes
(in connection with either the Company's product candidates or Clinical
Partners' product candidate, or both), or its respective licensors, if any, will
not be contested, narrowed, invalidated or circumvented. In addition, if
Alkermes or Clinical Partners brings a patent infringement action or otherwise
brings an action to protect its own proprietary rights against third parties or
is required to defend against a charge of patent infringement, substantial costs
could be incurred.
In the future, Alkermes may be required to obtain additional licenses to
patents or other proprietary rights of third parties. There can be no assurance
that any such licenses will be available on acceptable terms, if at all,
13
<PAGE> 16
and failure to obtain such licenses could result in delays in marketing the
Company's products or the inability to proceed with the development, manufacture
or sale of product candidates requiring such licenses.
The Company also relies upon unpatented trade secrets and improvements,
unpatented know-how and continuing technological innovation to develop and
maintain its competitive position which it seeks to protect, in part, by
confidentiality agreements with its corporate partners, 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 will not otherwise become known or be independently
discovered by competitors.
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL
The Company's research and preclinical testing and clinical trials of its
product candidates are, and the manufacturing and marketing of its products will
be, subject to extensive and rigorous regulation by numerous governmental
authorities in the United States and in other countries where the Company
intends to test and market its product candidates.
Prior to marketing, any product candidate developed by Alkermes or its
collaborators must undergo an extensive regulatory approval process, which
includes preclinical testing and clinical trials of such product candidate to
demonstrate safety and efficacy. This regulatory process can require many years
and the expenditure of substantial resources. Data obtained from preclinical
testing and clinical trials are subject to varying interpretations, which can
delay, limit or prevent FDA approval. In addition, changes in FDA approval
policies or requirements may occur or new regulations may be promulgated which
may result in delay or failure to receive FDA approval. Similar delays or
failures may be encountered in foreign countries. Delays and costs in obtaining
regulatory approvals would have a material adverse effect on the Company's
business, financial condition and results of operations.
There can be no assurance that Cereport used in conjunction with any
pharmaceuticals, ProLease or Medisorb formulations or any other product
candidate developed by Alkermes or its collaborators will receive manufacturing
and marketing approval in the United States or any foreign country on a timely
basis, if at all. In the case of Cereport, the Company must obtain FDA approval
for Cereport for use in conjunction with a pharmaceutical agent. The Company is
in clinical trials with Cereport for use in conjunction with carboplatin in the
treatment of brain tumor. Carboplatin has not been approved for this specific
use and there can be no assurance that it or any other pharmaceutical agent to
be used with Cereport will receive regulatory approval. In the case of ProLease
and Medisorb, the Company or its collaborators must obtain FDA approval for each
formulation even if the pharmaceutical included in the formulation has received
FDA approval as a standalone product. There can be no assurance that any such
formulation will receive FDA approval. If any product were approved, there can
be no assurance that any such product would be capable of being produced in
commercial quantities at reasonable costs and successfully marketed. In
addition, if regulatory approval of any product is granted, it may entail
limitations on the uses for which the product may be marketed. Even if
regulatory approval is obtained, any marketed drug and its manufacturer are
subject to continual review and any discovery of previously unrecognized
problems with a product or manufacturer could result in restrictions on the
product, including withdrawal of the product from the market.
UNCERTAINTY OF PHARMACEUTICAL PRICING AND REIMBURSEMENT
The Company's business may be materially adversely affected by the
continuing efforts of government and third-party payors to contain or reduce the
costs of health care through various means. For example, in certain foreign
markets, pricing or profitability of prescription pharmaceuticals is subject to
government control. In the United States, there have been, and the Company
expects that there will continue to be, a number of federal and state proposals
to implement similar government control. In addition, an increasing emphasis on
managed care in the United States has and will continue to put pressure on
pharmaceutical pricing. Such initiatives and proposals, if adopted, could
decrease the price that the Company receives for any products it may develop and
sell in the future and thereby have a material adverse effect on the Company's
business, financial condition and results of operations.
14
<PAGE> 17
Further, to the extent that such proposals or initiatives have a material
adverse effect on other pharmaceutical companies that are collaborators or
prospective collaborators for certain of the Company's potential products, the
Company's ability to commercialize its potential products may be adversely
affected.
The Company's ability to commercialize pharmaceutical products may depend
in part on the extent to which reimbursement for the costs of such products and
related treatments will be available from government health administration
authorities, private health insurers, and other third-party payors. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products, and third-party payors are increasingly challenging the prices charged
for medical products and services. There can be no assurance that any
third-party insurance coverage will be available to patients for any products
developed by the Company. Government and other third-party payors are
increasingly attempting to contain health care costs by limiting both coverage
and the level of reimbursement for new therapeutic products, and by refusing, in
some cases, to provide coverage for uses of approved products for disease
indications for which the FDA has not granted marketing approval. If adequate
coverage and reimbursement levels are not provided by government and third-party
payors for the Company's products, the market acceptance of these products would
be adversely affected.
NO MARKETING OR SALES EXPERIENCE
Alkermes currently has no experience in marketing or selling pharmaceutical
products. In order to achieve commercial success for any product candidate
approved by the FDA, Alkermes must either develop a marketing and sales force or
enter into arrangements with third parties to market and sell its products.
There can be no assurance that Alkermes will successfully develop such
experience or that it will be able to enter into marketing and sales agreements
with others on acceptable terms, if at all. If the Company develops its own
marketing and sales capability, it will compete with other companies that
currently have experienced and well funded marketing and sales operations. To
the extent that the Company enters into co-promotion or other sales and
marketing arrangements with other companies, any revenues to be received by
Alkermes will be dependent on the efforts of others and there can be no
assurance that such efforts will be successful.
PRODUCT LIABILITY EXPOSURE
The use of the Company's product candidates in clinical trials and the sale
of any resulting products may expose Alkermes to liability claims resulting from
the use of such product candidates or products. These claims might be made
directly by consumers or by pharmaceutical companies or others selling such
products. Alkermes has obtained product liability insurance for coverage for
claims arising from the use of its products in clinical trials in the amount of
$5 million per occurrence and $5 million in the aggregate. There can be no
assurance that such insurance will be sufficient to satisfy any liabilities that
may arise. The Company's existing coverage will not be adequate as the Company's
product development activities progress. There can be no assurance that adequate
insurance coverage will be available in the future at an acceptable cost, if at
all. An inability to obtain sufficient insurance coverage at an acceptable cost
or to otherwise protect against potential product liability claims could prevent
or limit the commercialization of any products by the Company. In addition,
there can be no assurance that any product liability claims will not have a
material adverse effect on the business, financial condition and results of
operations of Alkermes.
RESTRICTIVE LOAN COVENANTS
The Company's loan agreements contain certain restrictive financial
covenants that require the Company to maintain minimum levels of working
capital, net worth and liquid assets. Under the terms of one loan agreement, the
Company is required to maintain an unencumbered balance of cash and permitted
investments of at least $15 million and a ratio of unencumbered cash and
permitted investments to indebtedness of 2.0 to 1.0. The second loan agreement
requires the Company to maintain a net worth of not less than $20.0 million, a
maximum ratio of total liabilities to net worth of 0.5 to 1.0, a minimum current
ratio of 2.0 to 1.0 and a minimum unencumbered balance of cash and permitted
investments equal to the greater of (i) $20.0 million, (ii) the Company's
projected cash loss over the next 14 months and (iii) an amount equal to the
Company's cash loss for the previous six months multiplied
15
<PAGE> 18
by 2.33. Upon the breach of any of these financial covenants or the occurrence
of any other event of default under this second loan agreement, the Company will
be required to deposit an amount equal to the then outstanding principal balance
of the loan plus three months interest into a restricted account at the bank. In
addition, the bank will have the right to liquidate such account and apply the
proceeds to repayment of the loan if the Company's unencumbered cash and
investment balance falls below $5.0 million. Upon the breach of any of these
covenants or the occurrence of any other event of default under the loan
agreements, the Company's business, financial condition and results of
operations could be materially adversely affected.
FUTURE SALES OF COMMON STOCK BY CERTAIN SHAREHOLDERS; POTENTIAL ADVERSE EFFECT
ON MARKET PRICE OF COMMON STOCK
As part of its compensation policy, the Company issues stock options to its
directors, officers, employees and consultants and restricted stock awards to
certain officers, employees and consultants. In addition, the Company issued
warrants to the limited partners of Clinical Partners. The issuance of Common
Stock upon exercise of such stock options and warrants and the vesting of
awards, as well as future sales of such Common Stock or of shares of Common
Stock by existing shareholders, or the perception that such sales could occur,
could adversely affect the market price of the Common Stock. The foregoing
shares will be freely tradeable upon issuance.
ALZA acquired 2,000,000 shares of Common Stock pursuant to a Stock Purchase
Agreement dated as of February 13, 1997 (the "Stock Purchase Agreement"). All of
such shares have been registered for resale pursuant to a registration statement
dated as of April 25, 1997. In addition, pursuant to the Stock Purchase
Agreement, ALZA has the right to include any of the shares in an underwritten
public offering of Common Stock by Alkermes, subject to customary underwriter
cutback provisions. This right could be exercised by ALZA in the event any
holders of the Preferred Stock or the Debentures convert such securities to
Common Stock and exercise their right to have such Common Stock registered in an
underwritten public offering. The sale by ALZA or the perception that ALZA could
sell all of the shares or a large amount of the shares, could adversely affect
the market price of the Common Stock.
Alkermes has issued to Genentech a Convertible Promissory Note (the
"Note"), dated January 31, 1995, in the principal amount of $3.5 million. The
Note provides that Alkermes has the option to convert the outstanding balance of
the Note, together with accrued and unpaid interest thereon, into shares of
Common Stock. Under certain circumstances, Genentech also has the right to
convert the Note into shares of Common Stock and to demand that the Common Stock
be registered. The Company's issuance of Common Stock, whether or not
registered, upon exercise by Alkermes or Genentech of its conversion rights, the
perception that such conversion could occur, the sale of such shares by
Genentech, or the perception that such sale could occur, could adversely affect
the market price of the Common Stock.
In addition, in July 1995, Alkermes received certain prepaid royalties from
Schering-Plough pursuant to their amended Development and License Agreement.
Schering-Plough is entitled to terminate such agreement under certain
circumstances, in which event Alkermes will be required to repay the prepaid
royalties with interest, either in cash or in Common Stock, at the Company's
election. Any Common Stock issued to Schering-Plough must be freely resalable.
The Company's issuance of Common Stock to Schering-Plough in repayment of the
prepaid royalties, the perception that it may do so, the sale of such shares by
Schering-Plough, or the perception that such sale could occur could adversely
affect the market price of the Common Stock.
VOLATILITY OF PREFERRED STOCK AND COMMON STOCK PRICE
The market prices for securities of biotechnology and pharmaceutical
companies, including Alkermes, have historically been highly volatile, and the
market has from time to time experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular
companies. Factors such as fluctuations in the Company's operating results,
announcements of technological innovations or new therapeutic products by the
Company or others, clinical trial results, developments concerning agreements
with collaborators, governmental regulation, developments in patent or other
proprietary rights, public concern as to the safety of drugs developed
16
<PAGE> 19
by the Company or others, future sales of substantial amounts of Common Stock by
existing shareholders and general market conditions can have an adverse effect
on the market price of the Common Stock and, in turn, the market price of the
Preferred Stock. In particular, the realization of any of the risks described in
these "Risk Factors" could have a dramatic and adverse impact on the market
price of the Preferred Stock and Common Stock.
ANTI-TAKEOVER PROVISIONS
The Pennsylvania Business Corporation Law of 1988, as amended (the "1988
BCL"), contains certain provisions which could delay or impede the removal of
incumbent directors and could make more difficult a merger, tender offer or
proxy contests involving the Company, even if such transaction would be
beneficial to the interests of the shareholders, or could discourage a third
party from attempting to acquire control of the Company. For example, the Board
of Directors may, in considering the best interests of the Company or the
effects of any action, consider the interests of shareholders, employees,
customers, creditors and the community where the Company is located, as well as
long-term and short-term interests of the Company. Moreover, when a
shareholder's voting power reaches certain thresholds, among other consequences,
its voting power is removed, its ability to enter into certain business
transactions with the Company is limited, it may be required to pay fair value
to certain existing shareholders, and it will be required to disgorge any
profits in the sale, if any, of the Company's securities within certain time
periods.
The Company's Second Amended and Restated Articles of Incorporation, as
amended (the "Restated Articles"), also contain certain provisions which could
have a similar effect. Under the Restated Articles, the Board of Directors may,
without shareholder approval, establish and issue from authorized and
undesignated shares, classes and series of stock having such voting rights,
preferences, limitations and special rights as the Board of Directors may
determine. The Preferred Stock being offered hereby was established pursuant to
such provisions. The Company has no current plans to establish and issue any
other class or series of its capital stock.
MARKET FOR PREFERRED STOCK AND DEBENTURES
The Preferred Stock is a new issue of securities for which there is
currently no public market. There can be no assurance that a liquid trading
market in the Preferred Stock will develop. In addition, if the Preferred Stock
is exchanged for Debentures, the Company is not obligated to list the
Debentures, and there can be no assurances that a market in the Debentures will
develop. See "Description of Preferred Stock" and "Description of Debentures."
NO COMMON STOCK DIVIDENDS
Alkermes has not paid cash dividends on the Common Stock and does not
expect to do so in the foreseeable future.
UNCERTAINTY OF PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS ON PREFERRED STOCK
Under Pennsylvania law, the Company may not make any distributions to
shareholders if, after giving effect to such distribution, the Company (i) would
be unable to pay its debts as they become due in the usual course of its
business or (ii) the total assets of the Company would be less than the sum of
its total liabilities plus (unless otherwise provided in the Restated Articles)
the amount that would be needed, if the Company were to be dissolved at the time
as of which the distribution is measured, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution. Under Pennsylvania law, a distribution would include
dividends payable to holders of Preferred Stock, redemption of the Preferred
Stock and exchange of the Preferred Stock for the Debentures. The Company's
ability to pay dividends and make other distributions in the future will depend
upon its financial results, liquidity and financial condition. There can be no
assurance that the Company will be able to pay the quarterly installments of the
cumulative annual dividend on the Preferred Stock or make any other
distributions. See "Description of Preferred Stock."
17
<PAGE> 20
TAX CONSEQUENCES OF EXCHANGE FOR DEBENTURES
An exchange of Preferred Stock for Debentures will be a taxable event for
federal income tax purposes which may result in tax liability to the holder
without any corresponding receipt of cash by the holder.
YEAR 2000 ISSUES
The Company and the companies with which it does business use software
systems and embedded technology in the conduct of their operations. Many
software systems and much technology in use today are unable to distinguish
between the year 2000 and the year 1900 because they use a two-digit shorthand
for calendar dates. If the Company does not identify and correct such shorthand
prior to January 1, 2000, its operations could be disrupted. The Company's
operations could also be disrupted if the companies with which the Company does
business similarly do not identify and correct such shorthand, and such failure
adversely affects their ability to do business with the Company.
To address these issues, the Company has undertaken a three-step
comprehensive project. The first step is to identify all of the Company's
software and embedded technology as well as the software and embedded technology
of all companies with which it does business that would affect the Company. The
second step is to determine whether any of the Company's software and
technology, and any of the software and technology of the companies with which
it does business, use the two-digit shorthand. The third step is to correct or
replace all such software and technology, and then to test the corrected or
replacement software and technology. The Company has completed the first step of
the project, expects to complete the second step by the end of calendar year
1998, and will commence the third step promptly upon completion of the second
step. This project is being conducted by the Company using internal resources.
The Company cannot estimate the cost of completion of the project until the
Company completes the second step, and there can be no assurance that the cost
of completion will not be material or that the use of the Company's internal
resources to complete the project will not adversely affect other aspects of the
Company's business.
18
<PAGE> 21
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Securities offered hereby.
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------- Nine Months Ended
1993 1994 1995 1996 1997 December 31, 1997
---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges and
Preferred Stock
Dividends(1)............. -- -- -- -- -- --
</TABLE>
- ---------------
(1) For the fiscal years ended March 31, 1993, 1994, 1995, 1996 and 1997 and
for the nine months ended December 31, 1997, earnings were insufficient to
cover fixed charges by $39,686,000, $16,239,000, $10,519,000, $11,971,000,
$16,414,000 and $5,948,000, respectively. There were no Preferred Stock
dividends declared or paid by the Company during any of the fiscal years in
the five year period ended March 31, 1997 nor in the nine months ended
December 31, 1997. For these reasons, no ratios are provided.
DIVIDEND POLICY
The Company has not paid any dividends on its Common Stock since its
inception and does not anticipate paying any dividends on its Common Stock in
the foreseeable future. For a discussion of dividends payable on the Preferred
Stock, see "Description of Preferred Stock -- Dividends."
19
<PAGE> 22
DESCRIPTION OF PREFERRED STOCK
The following is a summary of the terms of the Preferred Stock offered
hereby. This summary is not intended to be complete and is subject to and
qualified in its entirety by reference to the Statement with Respect to Shares
(the "Preferred Stock Statement") filed with the Secretary of State of the
Commonwealth of Pennsylvania, which constitutes part of the Restated Articles,
and setting forth the rights, preferences and limitations of the Preferred
Stock. Whenever particular Sections or defined terms of the Preferred Stock
Statement are referred to herein, such Sections or defined terms are
incorporated by reference herein.
The Board of Directors has the authority, from time to time and without
further action by the shareholders, to divide its unissued capital stock into
one or more classes and one or more series within any class and to make
determinations of the designation and number of shares of any class or series
and determinations of the voting rights, preferences, limitations and special
rights, if any, of the shares of any class or series. The rights, preferences,
limitations and special rights of different classes of capital stock may differ
with respect to dividend rates, amounts payable on liquidation, voting rights,
conversion rights, redemption provisions, sinking fund provisions and other
matters. The Preferred Stock offered hereby has been created out of the
undesignated, unissued capital stock of the Company.
The Preferred Stock is not subject to any sinking fund or other obligation
of the Company to redeem or retire the Preferred Stock. Unless earlier
converted, exchanged or redeemed by the Company, the Preferred Stock has a
perpetual maturity. Any Preferred Stock converted, exchanged or redeemed or
otherwise acquired by the Company will, upon cancellation of such shares, have
the status of authorized but unissued shares of Preferred Stock. (Section 6)
DIVIDENDS
Holders of the Preferred Stock are entitled to receive, when, as and if
declared by the Board of Directors, out of the funds of the Company legally
available therefor, cash dividends at an annual rate of $3.25 per share of
Preferred Stock, payable in equal quarterly installments on March 1, June 1,
September 1 and December 1, commencing June 1, 1998 (and, in the case of any
accrued but unpaid dividends, at such additional times and for such interim
periods, if any, as determined by the Board of Directors). Dividends on the
Preferred Stock are cumulative from the date of original issuance, and are
payable to holders of record as they appear on the stock books of the Company on
such record dates, which shall be not more than 60 days nor less than 10 days
preceding the payment dates, as shall be fixed by the Board of Directors.
(Section 3(a)) Holders of shares of Preferred Stock called for redemption on a
redemption date falling between a dividend payment record date and the dividend
payment date shall, in lieu of receiving such dividend on the dividend date
fixed therefor, receive such dividend payment together with all other accrued
and unpaid dividends on the date fixed for redemption (unless such holders
convert such shares in accordance with the Preferred Stock Statement). Dividends
payable on the Preferred Stock for any period greater or less than a full
dividend period will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Accrued but unpaid dividends will not bear interest.
(Section 3(b))
If dividends are not paid in full (or a sum sufficient for such payment is
not set aside) on the Preferred Stock and any other class or series of stock
ranking on a parity as to dividends with the Preferred Stock, all dividends
declared upon shares of Preferred Stock and such other stock will be declared
pro rata so that in all cases the amount of dividends declared per share on the
Preferred Stock and such other stock bear to each other the same ratio that
accrued and unpaid dividends per share on the shares of the Preferred Stock and
such other stock bear to each other. (Section 3(c)) Except as set forth above,
unless full cumulative dividends, if any, accrued on all outstanding shares of
Preferred Stock shall have been paid or set aside for payment, no other stock of
the Company ranking on a parity with the Preferred Stock as to dividends or upon
liquidation, dissolution or winding up shall be redeemed, purchased or otherwise
acquired. (Section 3(d)) Unless full cumulative dividends, if any, accrued on
all outstanding shares of Preferred Stock and any other stock of the Company
ranking on a parity with the Preferred Stock as to dividends shall have been
paid or set apart for payment, (i) no dividends (other than dividends or
distributions paid in shares of, or options, warrants or rights to subscribe for
or purchase shares of, Common Stock
20
<PAGE> 23
or other stock ranking junior to the Preferred Stock as to dividends and upon
liquidation, dissolution or winding up) shall be declared or paid or set apart
for payment on the Common Stock or any other stock of the Company ranking junior
to the Preferred Stock as to dividends or upon liquidation, dissolution or
winding up nor (ii) shall any other such stock of the Company ranking junior to
the Preferred Stock as to dividends or upon liquidation, dissolution or winding
up be redeemed, purchased or otherwise acquired. (Section 3(e))
Under Pennsylvania law, the Company may not make any distributions to
shareholders if, after giving effect to such distribution, the Company (i) would
be unable to pay its debts as they become due in the usual course of its
business or (ii) the total assets of the Company would be less than the sum of
its total liabilities plus (unless otherwise provided in the Restated Articles)
the amount that would be needed, if the Company were to be dissolved at the time
as of which the distribution is measured, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution. Under Pennsylvania law, a distribution would include
dividends payable to holders of Preferred Stock, redemption of the Preferred
Stock and exchange of the Preferred Stock for the Debentures. The Company's
ability to pay dividends and make any other distributions in the future will
depend upon its financial results, liquidity and financial condition.
CONVERSION RIGHTS
General.
Each share of Preferred Stock is convertible at the option of the holder at
any time into such number of shares of Common Stock determined by dividing the
liquidation preference set forth on the cover of this Prospectus by the
conversion price. The conversion price shall initially be $50 divided by the
conversion rate of 1.6878, subject to adjustment as described below. No
adjustment will be made on conversion of any share of Preferred Stock for
dividends accrued or unpaid thereon or for dividends on any Common Stock issued.
The Company is not required to issue fractional shares of Common Stock upon
conversion of Preferred Stock and, in lieu thereof, will pay a cash adjustment
based upon the market price of the Common Stock on the last Business Day
(determined as provided in the Preferred Stock Statement) prior to the date of
conversion. (Section 7(c)) In the case of Preferred Stock called for redemption,
conversion rights will expire at the close of business on the next business day
preceding the date fixed for redemption, unless the Company defaults in payment
of the redemption price. (Section 7(b))
The right of conversion attaching to each share of Preferred Stock may be
exercised by the holder by delivering the certificate representing such share of
Preferred Stock at the specified office of the transfer agent, accompanied by a
duly signed and completed notice of conversion, or if the Preferred Stock is
held in global form, according to the procedures set forth below under "Form,
Denomination and Registration." The conversion date shall be the date on which
the certificate representing such share of Preferred Stock and the duly signed
and completed notice of conversion have been delivered to the transfer agent.
(Section 7(b)) A holder delivering a certificate representing such share of
Preferred Stock for conversion will not be required to pay any taxes or duties
payable in respect of the issue or delivery of Common Stock on conversion, but
will be required to pay any tax or duty which may be payable in respect of any
transfer involved in the issue or delivery of the Common Stock in a name other
than the holder of the Preferred Stock. Certificates representing shares of
Common Stock will not be issued or delivered unless all taxes and duties, if
any, payable by the holder have been paid. (Section 7(f))
Conversion Price Adjustments -- General
The conversion price is subject to adjustment upon certain events,
including (i) the issuance of Common Stock as a dividend or distribution on
Common Stock; (ii) certain subdivisions and combinations of the Common Stock;
(iii) the issuance to all holders of Common Stock of certain rights or warrants
to purchase Common Stock at less than the current market price of the Common
Stock; (iv) the dividend or other distribution to all holders of Common Stock of
shares of capital stock of the Company (other than Common Stock) or evidences of
indebtedness of the Company or assets (including securities, but excluding those
rights, warrants, dividends and distributions referred to above or paid
exclusively in cash); (v) dividends or other distributions consisting
exclusively of cash (excluding any cash portion of distributions referred to in
clause (iv)) to all holders of Common Stock to the extent
21
<PAGE> 24
that such distributions, combined together with (A) all other such all-cash
distributions made within the preceding 12 months in respect of which no
adjustment has been made plus (B) any cash and the fair market value of other
consideration payable in respect of any tender offers by the Company or any of
its subsidiaries for Common Stock concluded within the preceding 12 months in
respect of which no adjustment has been made, exceeds 10% of the Company's
market capitalization (being the product of the then current market price of the
Common Stock times the number of shares of Common Stock outstanding) on the
record date for such distribution; (vi) the purchase of Common Stock pursuant to
a tender offer made by the Company or any of its subsidiaries to the extent that
the same involves an aggregate consideration that, together with (X) any cash
and the fair market value of any other consideration payable in any other tender
offer by the Company or any of its subsidiaries for Common Stock expiring within
the 12 months preceding such tender offer in respect of which no adjustment has
been made plus (Y) the aggregate amount of any such all-cash distributions
referred to in clause (v) above to all holders of Common Stock within the 12
months preceding the expiration of such tender offer in respect of which no
adjustments have been made, exceeds 10% of the Company's market capitalization
on the expiration of such tender offer; (vii) payment in respect of a tender
offer or exchange offer by a person other than the Company or any subsidiary of
the Company in which, as of the closing of the offer, the Board of Directors is
not recommending rejection of the offer; and (viii) the issuance of Common Stock
or securities convertible into, or exchangeable for, Common Stock at a price per
share (or having a conversion or exchange price per share) that is less than 95%
of the then current market price of the Common Stock (but excluding, among other
things, issuances: (a) pursuant to any bona fide plan for the benefit of
employees, directors or consultants of the Company now or hereafter in effect;
(b) to acquire all or any portion of a business in an arm's-length transaction
between the Company and an unaffiliated third party including, if applicable,
issuances upon exercise of options or warrants assumed in connection with such
an acquisition; (c) in a bona fide public offering pursuant to a firm commitment
underwriting or sales at the market pursuant to a continuous offering stock
program; (d) pursuant to the exercise of warrants, rights (including, without
limitation, earnout rights) or options, or upon the conversion of convertible
securities, which are issued and outstanding on the date hereof, or which may be
issued in the future at a fair value and with an exercise price or conversion
price at least equal to the current market price of the Common Stock at the time
of issuance of such warrant, right, option or convertible security; and (e)
pursuant to a dividend reinvestment plan or other plan hereafter adopted for the
reinvestment of dividends or interest provided that such Common Stock is issued
at a price at least equal to 95% of the current market price of the Common Stock
at the time of issuance). The Company is entitled, in lieu of making certain
adjustments under clause (v) above, to provide that, subject to satisfying
certain conditions, upon conversion of the Preferred Stock, the holders of the
Preferred Stock will receive, in addition to the Common Stock issuable upon
conversion of such Preferred Stock, the amount of such distribution referred to
in clause (v). The adjustment referred to in clause (vii) above will only be
made if the tender offer or exchange offer is for an amount which increases that
person's ownership of Common Stock to more than 25% of the total shares of
Common Stock outstanding, and only if the cash and value of any other
consideration included in such payment per share of Common Stock exceeds the
current market price per share of Common Stock on the business day next
succeeding the last date on which tenders or exchanges may be made pursuant to
such tender or exchange. The adjustment referred to in clause (vii) above will
not be made, however, if, as of the closing of the offer, the offering documents
with respect to such offer disclose a plan or an intention to cause the Company
to engage in any consolidation with, merger into, or transfer of all or
substantially all of its properties to any other corporation organized under the
laws of the United States or any political subdivision thereof or therein,
provided that each share of Preferred Stock remains outstanding, is unaffected
or is converted into or exchanged for convertible exchangeable preferred stock
of the successor corporation having voting rights, preferences, limitations and
special rights substantially similar (but no less favorable) to the Preferred
Stock. (Sections 7(d)(i) through (viii))
The Preferred Stock Statement provides that if the Company implements a
shareholder rights plan, such rights plan must provide that upon conversion of
the Preferred Stock the holders will receive, in addition to the Common Stock
issuable upon such conversion, such rights, whether or not such rights have
separated from the Common Stock at the time of such conversion. (Section
7(d)(iv))
The Company from time to time may, to the extent permitted by law, reduce
the conversion price of the Preferred Stock by any amount for any period of at
least 20 days, in which case the Company shall give at least 15 days' notice of
such decrease, if the Board of Directors has made a determination that such
decrease would be
22
<PAGE> 25
in the best interests of the Company, which determination shall be conclusive.
The Company may, at its option, make such reductions in the conversion price, in
addition to those set forth above, as the Board of Directors deems advisable to
avoid or diminish any income tax to holders of Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. (Section 7(d)(x))
Conversion Price Adjustment -- Merger, Consolidation or Sale of Assets of the
Company.
If any transaction shall occur (including, without limitation (a) any
recapitalization or reclassification of shares of Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination of Common Stock), (b)
any consolidation of the Company with, or merger of the Company into, any other
person, or any merger of another person into the Company (other than a merger
that does not result in a reclassification, conversion, exchange or cancellation
of Common Stock), (c) any sale, transfer or lease of all or substantially all of
the assets of the Company or (d) any compulsory share exchange) pursuant to
which either shares of Common Stock shall be converted into the right to receive
other securities, cash or other property, or, in the case of a sale or transfer
of all or substantially all of the assets of the Company, the holders of Common
Stock shall be entitled to receive other securities, cash or other property,
then appropriate provision shall be made so that the holder of each share of
Preferred Stock then outstanding shall have the right thereafter to convert such
Preferred Stock only into:
(x) in the case of any such transaction that does not constitute a Common
Stock Fundamental Change (as defined) and subject to funds being legally
available for such purpose under applicable law at the time of such
conversion, the kind and amount of the securities, cash or other property
that would have been receivable upon such recapitalization,
reclassification, consolidation, merger, sale, transfer or share exchange
by a holder of the number of shares of Common Stock issuable upon
conversion of such Preferred Stock immediately prior to such
recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange, after giving effect, in the case of any Non-Stock
Fundamental Change (as defined), to any adjustment in the conversion price
in accordance with clause (i) of the following paragraph, and
(y) in the case of any such transaction that constitutes a Common Stock
Fundamental Change, common stock of the kind received by holders of Common
Stock as a result of such Common Stock Fundamental Change in an amount
determined in accordance with clause (ii) of the following paragraph.
The company formed by such consolidation or resulting from such merger or that
acquires such assets or that acquires the Company's shares, as the case may be,
shall make provisions in its certificate or articles of incorporation or other
constituent document to establish such right. Such certificate or articles of
incorporation or other constituent document shall provide for adjustments that,
for events subsequent to the effective date of such certificate or articles of
incorporation or other constituent document, shall be as nearly equivalent as
may be practicable to the relevant adjustments provided for in the preceding
paragraphs and in this paragraph.
Notwithstanding any other provisions in the preceding paragraphs to the
contrary, if any Fundamental Change (as defined) occurs, then the conversion
price in effect will be adjusted immediately after such Fundamental Change as
follows:
(i) in the case of a Non-Stock Fundamental Change, the conversion
price of the Preferred Stock immediately following such Non-Stock
Fundamental Change shall be the lower of (A) the conversion price in effect
immediately prior to such Non-Stock Fundamental Change, but after giving
effect to any other prior adjustments effected pursuant to the preceding
paragraphs, and (B) the product of (1) the greater of the Applicable Price
(as defined) and the then applicable Reference Market Price (as defined)
and (2) a fraction, the numerator of which is $50 and the denominator of
which is (x) the amount of the redemption price for one share of Preferred
Stock if the redemption date were the date of such Non-Stock Fundamental
Change (or the date of the period commencing on the first date of original
issuance of the Preferred Stock
23
<PAGE> 26
and through February 28, 1999 or the twelve-month periods commencing March
1, 1999 and March 1, 2000, the product of 106.50%, 105.85% and 105.20%,
respectively, times $50) plus (y) any then-accrued and unpaid distributions
on one share of Preferred Stock; and
(ii) in the case of a Common Stock Fundamental Change, the conversion
price of the Preferred Stock immediately following such Common Stock
Fundamental Change shall be the conversion price in effect immediately
prior to such Common Stock Fundamental Change, but after giving effect to
any other prior adjustments effected pursuant to the preceding paragraphs,
multiplied by a fraction, the numerator of which is the Purchaser Stock
Price (as defined) and the denominator of which is the Applicable Price;
provided, however, that in the event of a Common Stock Fundamental Change
in which (A) 100% of the value of the consideration received by a holder of
Common Stock is common stock of the successor, acquiror or other third
party (and cash, if any, paid with respect to any fractional interests in
such common stock resulting from such Common Stock Fundamental Change) and
(B) all of the Common Stock shall have been exchanged for, converted into
or acquired for, common stock of the successor, acquiror or other third
party (and any cash with respect to fractional interests), the conversion
price of the Preferred Stock immediately following such Common Stock
Fundamental Change shall be the conversion price in effect immediately
prior to such Common Stock Fundamental Change multiplied by a fraction, the
numerator of which is one (1) and the denominator of which is the number of
shares of common stock of the successor, acquiror or other third party
received by a holder of one share of Company Common Stock as a result of
such Common Stock Fundamental Change.
Depending upon whether a Fundamental Change is a Non-Stock Fundamental
Change or a Common Stock Fundamental Change, a holder may receive significantly
different consideration upon conversion. In the event of a Non-Stock Fundamental
Change, the holder has the right to convert Preferred Stock into the kind and
amount of the shares of stock and other securities or property or assets
(including cash), except as otherwise provided above, as is determined by the
number of shares of Common Stock receivable upon conversion at the conversion
price as adjusted in accordance with clause (i) of the preceding paragraph.
However, in the event of a Common Stock Fundamental Change in which less than
100% of the value of the consideration received by a holder of Common Stock is
common stock of the successor, acquiror or other third party, a holder of
Preferred Stock who converts such Preferred Stock following the Common Stock
Fundamental Change will receive consideration in the form of such common stock
only, whereas a holder who converted such Preferred Stock prior to the Common
Stock Fundamental Change would have received consideration in the form of such
common stock as well as any other securities or assets (which may include cash)
issuable upon conversion of such Preferred Stock immediately prior to such
Common Stock Fundamental Change.
The term "Applicable Price" means (i) in the event of a Non-Stock
Fundamental Change in which the holders of Common Stock receive only cash, the
amount of cash received by a holder of one share of Common Stock and (ii) in the
event of any other Fundamental Change, the average of the daily Closing Price
(determined as provided in the Preferred Stock Statement) for one share of
Common Stock during the 10 Trading Days (as defined in the Preferred Stock
Statement) immediately prior to the record date for the determination of the
holders of Common Stock entitled to receive cash, securities, property or other
assets in connection with such Fundamental Change or, if there is no such record
date, prior to the date upon which the holders of Common Stock shall have the
right to receive such cash, securities, property or other assets.
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Common
Stock consists of common stock that, for the 10 Trading Days immediately prior
to such Fundamental Change, has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on The Nasdaq National Market, provided, however, that a Fundamental
Change shall not be a Common Stock Fundamental Change unless either (i) the
Company continues to exist after the occurrence of such Fundamental Change and
the outstanding Preferred Stock continues to exist as outstanding Preferred
Stock, or (ii) not later than the occurrence of such Fundamental Change, the
outstanding Preferred Stock is converted into
24
<PAGE> 27
or exchanged for shares of convertible preferred stock, which convertible
preferred stock has voting rights, preferences, limitations or special rights
substantially similar (but no less favorable) to those of the Preferred Stock.
The term "Fundamental Change" means the occurrence of any transaction or
event or series of transactions or events pursuant to which all or substantially
all of the Common Stock shall be exchanged for, converted into, acquired for or
shall constitute solely the right to receive cash, securities, property or other
assets (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); provided, however, in the case of any such series of transactions or
events, for purposes of adjustment of the conversion price, such Fundamental
Change shall be deemed to have occurred when substantially all of the Common
Stock shall have been exchanged for, converted into or acquired for, or shall
constitute solely the right to receive, such cash, securities, property or other
assets, but the adjustment shall be based upon the consideration that the
holders of the Common Stock received in the transaction or event as a result of
which more than 50% of the Common Stock shall have been exchanged for, converted
into or acquired for, or shall constitute solely the right to receive, such
cash, securities, property or other assets.
The term "Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the daily Closing Price for one share of the
common stock received by holders of the Common Stock in such Common Stock
Fundamental Change during the 10 Trading Days immediately prior to the date
fixed for the determination of the holders of the Common Stock entitled to
receive such common stock or, if there is no such date, prior to the date upon
which the holders of the Common Stock shall have the right to receive such
common stock.
The term "Reference Market Price" shall initially mean $15 2/3 (which is an
amount equal to 66 2/3% of the reported last sale price for Company's Common
Stock on The Nasdaq National Market on February 27, 1998) and, in the event of
any adjustment to the conversion price other than as a result of a Fundamental
Change, the Reference Market Price shall also be adjusted so that the ratio of
the Reference Market Price to the conversion price after giving effect to any
such adjustment shall always be the same as the ratio of the initial Reference
Market Price to the initial conversion price.
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then in
effect; provided that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the conversion price will not be adjusted for the
issuance of Common Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase any of the foregoing.
The 1988 BCL contains certain provisions which could delay or impede the
removal of incumbent directors and could make more difficult a merger, tender
offer or proxy contest involving the Company, even if such transaction would be
beneficial to the interests of the Company's shareholders, or could discourage a
third party from attempting to acquire control of the Company.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, before any distribution of assets is made to holders
of Common Stock or any other stock of the Company ranking junior to the shares
of Preferred Stock upon liquidation, dissolution or winding up, the holders of
Preferred Stock shall receive a liquidation preference of $50 per share and
shall be entitled to receive all accrued and unpaid dividends through the date
of distribution, and the holders of any class or series of preferred stock
ranking on a parity with the Preferred Stock as to liquidation, dissolution or
winding up shall be entitled to receive the full respective liquidation
preferences (including any premium) to which they are entitled and shall receive
all accrued and unpaid dividends with respect to their respective shares through
and including the date of distribution. If, upon such a
25
<PAGE> 28
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the assets of the Company are insufficient to pay in full the amounts described
above as payable with respect to the Preferred Stock and any class or series of
preferred stock of the Company ranking on a parity with the Preferred Stock as
to liquidation, dissolution or winding up, the holders of the Preferred Stock
and of such other class or series of preferred stock will share ratably in any
such distributions of assets of the Company first in proportion to their
respective liquidation preferences until such preferences are paid in full, and
then in proportion to their respective amounts of accrued but unpaid dividends.
After payment of any such liquidation preference and accrued dividends, the
shares of Preferred Stock will not be entitled to any further participation in
any distribution of assets by the Company. Neither the sale of all or
substantially all of the assets of the Company, nor the merger or consolidation
of the Company into or with any other corporation, nor any liquidation,
dissolution, winding up or reorganization of the Company immediately followed by
reincorporation of another corporation, will be deemed to be a liquidation,
dissolution or winding up of the Company.
OPTIONAL REDEMPTION
The Preferred Stock will not be redeemable prior to March 6, 2001. At any
time on or after that date the shares of Preferred Stock may be redeemed at the
Company's option, out of funds legally available therefor, on at least 20 but
not more than 60 days notice, as a whole or from time to time in part, at the
following redemption prices per share, plus in each case, an amount equal to
accrued and unpaid dividends, if any, up to but excluding the date fixed for
redemption, whether or not earned or declared. (Section 5(a))
If redeemed during the 12-month period beginning March 1 (beginning March
6, 2001 and ending on February 28, 2002, in the case of the first such period):
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2001 $52.275
2002 51.950
2003 51.625
2004 51.300
2005 50.975
2006 50.650
2007 50.325
</TABLE>
and $50 at March 1, 2008 and thereafter.
If fewer than all of the shares of Preferred Stock are to be redeemed, the
shares to be redeemed shall be selected by lot or pro rata or in some other
equitable manner determined by the Company in its sole discretion. On and after
the date fixed for redemption, provided that the redemption price (including any
accrued and unpaid dividends to but excluding the date fixed for redemption) has
been duly paid or provided for, dividends shall cease to accrue on the Preferred
Stock called for redemption, such shares shall no longer be deemed to be
outstanding and all rights of the holders of such shares as shareholders of the
Company shall cease, except the right to receive the monies payable upon such
redemption, without interest thereon, upon surrender of the certificates
evidencing such shares. (Section 5(c))
EXCHANGE PROVISIONS
The Preferred Stock is exchangeable in whole, but not in part, at the
option of the Company, for Debentures on any dividend payment date beginning on
March 1, 1999 at the rate of $50 principal amount of Debentures for each share
of Preferred Stock outstanding at the time of exchange; provided that the
Debentures will be issuable in denominations of $1,000 and integral multiples
thereof. See "Description of Debentures." If the exchange results in an amount
of Debentures that is not an integral multiple of $1,000, the amount in excess
of the closest integral multiple of $1,000 will be paid in cash by the Company.
The Company will mail written notice of
26
<PAGE> 29
its intention to exchange to each holder of record of the Preferred Stock not
less than 30 nor more than 60 days prior to the date fixed for exchange.
Upon the date fixed for exchange of Preferred Stock for Debentures (the
"Exchange Date"), the rights of holders of Preferred Stock as shareholders of
the Company shall cease and their shares of Preferred Stock no longer will be
deemed outstanding and will represent only the right to receive the Debentures
and any accrued and unpaid dividends, without interest thereon. (Section 10(c))
If full cumulative dividends on the Preferred Stock have not been paid to the
Exchange Date, or funds set aside to provide for payment in full of such
dividends, the Company may not exercise its option to exchange the Preferred
Stock for the Debentures. (Section 10(f)) The exchange of Preferred Stock for
Debentures will be a taxable event and, therefore, may result in tax liability
for the holder exchanging such stock without any correlative cash payment to
such holder.
VOTING RIGHTS
The holders of the Preferred Stock have no voting rights except as
described below or as required by law. In exercising any such vote, each
outstanding share of Preferred Stock will be entitled to one vote, excluding
shares held by the Company or any affiliate of the Company, which shares shall
have no voting rights. (Section 9(a))
Whenever dividends on the Preferred Stock or on any outstanding shares of
preferred stock ranking on a parity as to dividends with the Preferred Stock
have not been paid in an aggregate amount equal to at least six quarterly
dividends on such shares (whether or not consecutive), the number of members of
the Board of Directors will be increased by two, and the holders of the
Preferred Stock, voting separately as a class, with the holders of preferred
stock ranking on parity as to dividends with the Preferred Stock on which like
voting rights have been conferred and are exercisable, without regard to series,
will be entitled to elect such two additional directors at any meeting of
shareholders at which directors are to be elected held during the period such
dividends remain in arrears. Such voting rights will terminate when all such
accrued and unpaid dividends have been declared and paid or set apart for
payment. The terms of office of all directors so elected will terminate
immediately upon the termination of such voting rights. (Section 9(b))
In addition, so long as any Preferred Stock is outstanding, the Company may
not, without the affirmative vote or consent of the holders of at least a
majority (unless a higher percentage shall then be required by applicable law)
of all outstanding shares of Preferred Stock, voting separately as a class with
the holders of preferred stock ranking on parity as to dividends with the
Preferred Stock on which like voting rights have been conferred and are
exercisable, without regard to series, (i) amend, alter or repeal any provision
of the Company's Restated Articles (including, without limitation, the Preferred
Stock Statement) or Bylaws so as to affect adversely the relative rights,
preferences, qualifications, limitations or restrictions of the Preferred Stock
or (ii) create, authorize or issue, or reclassify any authorized stock of the
Company into, or increase the authorized amount of, or create, authorize or
issue any obligation or security convertible into or evidencing the right to
purchase, any shares of any series or class of stock that ranks senior to or on
a parity with the Preferred Stock as to dividends or distributions of assets
upon liquidation, dissolution or winding up of the stock. In addition, so long
as any Preferred Stock is outstanding, the Company may not, without the
affirmative vote or consent of the holders of at least a majority (unless a
higher percentage shall then be required by applicable law) of all outstanding
shares of Preferred Stock, voting separately as a class with the holders of
preferred stock ranking on parity as to dividends with the Preferred Stock on
which like voting rights have been conferred and are exercisable, without regard
to series, enter into a share exchange that affects the Preferred Stock,
consolidate with or merge into another entity, or permit another entity to
consolidate with or merge into the Company, unless in each such case each share
of Preferred Stock remains outstanding and unaffected or is converted into or
exchanged for convertible preferred stock of the surviving entity having voting
rights, preferences, limitations or special rights thereof substantially similar
(but no less favorable) to that of a share of Preferred Stock (except for
changes that do not affect the holders of the Preferred Stock adversely).
(Section 9(c))
27
<PAGE> 30
FORM, DENOMINATION AND REGISTRATION
Global Preferred Stock; Book-Entry Form. Preferred Stock offered hereby is
evidenced by a global certificate (the "Global Certificate") which has been
deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in the name of Cede & Co. ("Cede") as DTC's nominee. Except as set
forth below, the Global Certificate may be transferred, in whole or in part,
only to another nominee of DTC or to a successor of DTC or its nominee.
Holders may hold their interests in the Global Certificate directly through
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 rules and will be settled in clearing house 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 Certificate to such persons may be limited.
Holders may beneficially own interests in the Global Certificate 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 Certificate, Cede for all purposes will be considered the sole
holder of the Global Certificate. Except as provided below, owners of beneficial
interests in the Global Certificate will not be entitled to have certificates
registered in their names, will not receive or be entitled to receive physical
delivery of certificates in definitive form, and will not be considered the
holders thereof.
Payment of dividends on and the redemption price of the Global Certificate
will be made to Cede, the nominee for DTC, as the registered owner of the Global
Certificate 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 Certificate or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company has been informed by DTC that, with respect to any payment of
dividends on or the redemption price of the Global Certificate, 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
Preferred Stock represented by the Global Certificate 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
Preferred Stock represented by the Global Certificate 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 Preferred Stock represented by the Global
Certificate 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 transfer agent (or any registrar, paying agent
or conversion agent under the Preferred Stock Statement) will have any
responsibility for the performance by DTC or its Participants or Indirect
Participants of their respective obligations under the rules and procedures
governing their operations. DTC has advised the Company that it will take any
action permitted to be taken by a holder of Preferred Stock (including, without
limitation, the presentation of Preferred Stock for exchange as described below)
only at the direction of one or more Participants to whose account with DTC
interests in the Global Certificate are credited and only in respect of the
amount of shares of the Preferred Stock represented by the Global Certificate as
to which such Participant or Participants has or have given such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section
28
<PAGE> 31
17A of the Exchange Act. DTC was created to hold securities for its Participants
and to facilitate the clearance and settlement of securities transactions
between Participants through electronic book-entry changes to accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other organizations
such as the Initial Purchasers. Certain of such Participants (or their
representatives), together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through, or maintain a custodial relationship with, a
Participant, either directly or indirectly.
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the Company
will cause Preferred Stock to be issued in definitive form in exchange for the
Global Certificate.
Restrictions on Transfer; Legends. The Preferred Stock is subject to
certain transfer restrictions and certificates evidencing the Preferred Stock
bear a legend to such effect. Such transfer restrictions and restrictive legends
will be removed upon the resale of any Preferred Stock pursuant to this
Prospectus and the Registration Statement of which it is a part.
TRANSFER AGENT AND REGISTRAR
BankBoston, N.A. is the transfer agent and registrar for the Preferred
Stock.
29
<PAGE> 32
DESCRIPTION OF DEBENTURES
If the Company elects to issue Debentures in exchange for the Preferred
Stock, the Debentures will be issued under an Indenture, dated as of March 1,
1998 (the "Indenture"), between the Company and State Street Bank and Trust
Company, as trustee (together with any successor trustee, the "Trustee"), at a
rate of $50 principal amount of Debentures for each share of Preferred Stock so
exchanged. The following descriptions of certain provisions of the Indenture and
the Debentures are intended as summaries only and are qualified in their
entirety by reference to the Indenture and the Debentures, including the
definitions therein of certain terms. Copies of the proposed form of Indenture
and form of Debenture are available from the Company upon request. Whenever
particular sections and defined terms of the Indenture or the Debentures are
referred to herein, such sections and defined terms are to be incorporated by
reference herein. As used in this Description of Debentures, the "Company"
refers to Alkermes, Inc., and does not, unless the context otherwise indicates,
include any of its subsidiaries.
The Debentures will be general, unsecured, subordinated obligations of the
Company, limited to an aggregate principal amount equal to the aggregate
liquidation value of the Preferred Stock then outstanding (excluding accrued and
unpaid dividends payable upon liquidation) and will mature on the tenth year
anniversary of the Exchange Date, unless earlier converted by a holder thereof
or redeemed at the option of the Company.
The Debentures will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000.
(Section 2.3) No service charge will be made for any registration of transfer or
exchange of the Debentures, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
with any such transaction. (Section 2.5)
Principal of, premium, if any, and interest on the Debentures will be
payable, and the transfer of Debentures will be registrable, at the office of
the Company maintained by the Company for such purposes in New York, New York,
which shall initially be an office or agency of the Trustee in New York, New
York. (Section 2.5)
The Debentures, if issued upon exchange of the Preferred Stock, will be
issued in the same form as the Preferred Stock that such Debentures replace. Any
Global Certificates will be replaced with one or more Global Debentures in the
same manner as set forth under "Description of Preferred Stock -- Form,
Denomination and Registration." Under certain limited circumstances, Debentures
may be issued in certificated form in exchange for a Global Debenture.
The Indenture does not contain any restrictions on the payment of dividends
or the repurchase of securities of the Company or any financial covenants.
INTEREST
The Debentures will bear interest at the rate of 6 1/2% per annum from the
date of issuance, or from the most recent interest payment date to which
interest has been paid or provided for, payable semiannually on March 1 and
September 1 of each year to the person in whose name the Debenture (or any
predecessor Debenture) is registered at the close of business on the preceding
February 15 and August 15, respectively. Interest will be computed on the basis
of a 360-day year consisting of twelve 30-day months. Interest may, at the
Company's option, be paid by check mailed to such holders, provided that a
holder of Debentures with an aggregate principal amount in excess of $2,000,000
will be paid by wire transfer in immediately available funds at the election of
such holder.
CONVERSION RIGHTS
Each Debenture will be converted at the option of the holder at any time on
or prior to maturity, subject to prior redemption, into such number of shares of
Common Stock determined by dividing the principal amount of such Debenture by
the conversion price. The conversion price shall initially be $50 divided by the
conversion rate of 1.6878, subject to adjustment as described below. Except as
otherwise set forth herein, the conversion rights of
30
<PAGE> 33
holders of Debentures will be identical to the conversion rights granted to them
as holders of the Preferred Stock. See "Description of Preferred Stock --
Conversion Rights." (Section 15.1) If Debentures are converted after a record
date for the payment of interest and prior to (but excluding) the next
succeeding interest payment date, such Debentures, other than Debentures called
for redemption, must be accompanied by funds equal to the interest payable on
such succeeding interest payment date on the principal amount so converted. The
Company is not required to issue fractional shares of Common Stock upon
conversion of Debentures, and, in lieu thereof, will pay a cash adjustment based
upon the market price of the Common Stock on the last business day prior to the
date of conversion. (Section 15.3) In the case of Debentures called for
redemption, conversion rights will expire at the close of business on the
business day preceding the date fixed for redemption, unless the Company
defaults in payment of the redemption price. (Section 15.1)
The right of conversion attaching to any Debenture may be exercised by the
holder by delivering the Debenture at the specified office of a conversion
agent, accompanied by a duly signed and completed notice of conversion, together
with any funds that may be required as described in the preceding paragraph. The
conversion date shall be the date on which the Debenture, the duly signed and
completed notice of conversion and any funds that may be required as described
in the preceding paragraph shall have been so delivered. (Section 15.2) A holder
delivering a Debenture for conversion will not be required to pay any taxes or
duties payable in respect of the issue or delivery of Common Stock on
conversion, but will be required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue or delivery of the Common Stock in
a name other than the holder of the Debenture. Certificates representing shares
of Common Stock will not be issued or delivered unless all taxes and duties, if
any, payable by the holder have been paid. (Section 15.7)
SUBORDINATION
The indebtedness evidenced by the Debentures is subordinated to the extent
provided in the Indenture to the prior payment in full of all Senior
Indebtedness (as defined). (Section 4.1) Upon any distribution of assets of the
Company upon any dissolution, winding up, liquidation or reorganization, the
payment of the principal of, or premium, if any, and interest on the Debentures
is to be subordinated to the extent provided in the Indenture in right of
payment to the prior payment in full of all Senior Indebtedness (except that
holders of Debentures may receive securities that are subordinated at least to
the same extent as the Debentures are subordinated to Senior Indebtedness and
any securities issued in exchange for Senior Indebtedness).
In the event of the acceleration of the maturity of any Debentures as a
result of an Event of Default (as defined), the holders of all Senior
Indebtedness will first be entitled to receive payment in full in cash of all
amounts due or to become due thereon before the holders of the Debentures will
be entitled to receive any payment for the principal of or premium, if any,
interest on, or other obligations in respect of, the Debentures (except that
holders of Debentures may receive securities that are subordinated at least to
the same extent as the Debentures are subordinated to Senior Indebtedness and
any securities issued in exchange for Senior Indebtedness). The Indenture will
further require that the Company will promptly notify holders of Senior
Indebtedness if payment of the Debentures is accelerated because of an Event of
Default.
The Company also may not make any payment for the principal of or premium,
if any, interest on, or other obligations in respect of, the Debentures (except
that holders of Debentures may receive securities that are subordinated at least
to the same extent as the Debentures are subordinated to Senior Indebtedness and
any securities issued in exchange for Senior Indebtedness) if (i) a default in
the payment of the principal of, premium, if any, interest, rent or other
obligations in respect of Senior Indebtedness occurs and is continuing beyond
any applicable period of grace or (ii) any other default occurs and is
continuing with respect to Designated Senior Indebtedness (as defined) that
permits holders of the Designated Senior Indebtedness as to which such default
relates to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Company or other person permitted
to give such notice under the Indenture. Payments on the Indenture may and shall
be resumed (a) in the case of a payment default, upon the date on which such
default is cured or waived or ceases to exist and (b) in case of any other
default, the earlier of the date on which such other default is cured or waived
or ceases to exist or 179 days after the date on which the applicable Payment
Blockage Notice is received, unless the
31
<PAGE> 34
maturity of any Senior Indebtedness is accelerated. No new period of payment
blockage may be commenced under clause (ii) above unless and until (i) 365 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice and (ii) all scheduled payments of principal, premium, if any, and
interest on the Debentures that have come due have been paid in full in cash. No
default (other than a payment default) that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice.
By reason of the subordination provisions described above, in the event of
the Company's bankruptcy, dissolution or reorganization, holders of Senior
Indebtedness may receive more, ratably, and holders of the Debentures may
receive less, ratably, than the other creditors of the Company. Such
subordination will not prevent the occurrence of any Event of Default under the
Indenture.
"Senior Indebtedness" means the principal of, premium, if any, and interest
on, rent under, and any other amounts payable on or in or in respect of
Indebtedness of the Company (including, without limitation, any interest
accruing after the filing of a petition by or against the Company under any
bankruptcy law, whether or not allowed as a claim after such filing in any
proceeding under such bankruptcy law), whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by the Company (including all deferrals, renewals, extensions or
refundings of, or amendments, modifications or supplements to the foregoing);
provided, however, that Senior Indebtedness does not include (v) Indebtedness
evidenced by the Debentures, (w) any liability for federal, state local or other
taxes owed or owing by the Company, (x) Indebtedness of the Company to any
subsidiary of the Company, (y) any trade payables of the Company incurred in the
ordinary course of business, and (z) any indebtedness in which the instrument
creating or evidencing the same or the assumption or thereof (or related
agreements or documents to which the Company is a party) expressly provides that
such Indebtedness shall not be senior in right of payment to, or is pari passu
with, or is subordinated or junior to, the Debentures.
"Indebtedness" means, with respect to any person, all obligations, whether
or not contingent, of such person (i) (a) for borrowed money, (b) evidenced by a
note, debenture, bond or other written instrument, (c) under a lease required to
be capitalized on the balance sheet of the lessee under generally accepted
accounting principles or under any lease or related document (including a
purchase agreement) that provides that the Company is contractually obligated to
purchase or cause a third party to purchase and thereby guarantee a minimum
residual value of the lease property to the lessor and the obligations of the
Company under such lease or related document to purchase or to cause a third
party to purchase such leased property, (d) in respect of letters of credit,
bank guarantees or bankers' acceptances (including reimbursement obligations
with respect to any of the foregoing), (e) with respect to Indebtedness secured
by a mortgage, pledge, lien, encumbrance, charge or adverse claim affecting
title in an encumbrance to which the property or assets of such person are
subject, whether or not the obligation secured thereby shall have been assumed
by or shall otherwise be such person's legal liability, (f) in respect of the
balance of deferred and unpaid purchase price of any property or assets, (g)
under interest rate or currency swap agreements, cap, floor and collar
agreements, spot and forward contracts and similar agreements and arrangements;
(ii) with respect to any obligation of others of the type described in the
preceding clause (i) or under clause (iii) below assumed by or guaranteed in any
manner by such person or in effect guaranteed by such person through an
agreement to purchase (including, without limitation, "take or pay" and similar
arrangements), contingent or otherwise (and the obligations of such person under
any such assumptions, guarantees or other such arrangements); and (iii) any and
all Indebtedness constituting deferrals, renewals, extensions, refinancings and
refundings of, or amendments, modifications or supplements to, any of the
foregoing.
"Designated Senior Indebtedness" means any particular Senior Indebtedness
in which the instrument creating or evidencing the same or the assumption or
guarantee thereof (or related agreements or documents to which the Company is a
party) expressly provides that such Senior Indebtedness shall be "Designated
Senior Indebtedness" for purposes of the Indenture (provided that such
instrument, agreement or other document may place limitations and conditions on
the right of such Senior Indebtedness to exercise the rights of Designated
Senior Indebtedness).
32
<PAGE> 35
In the event that, notwithstanding for foregoing, the Trustee or any holder
of Debentures receives any payment or distribution of assets of the Company of
any kind in contravention of any of the terms of the Indenture, whether in cash,
property or securities, including, without limitation, by way of set-off or
otherwise, in respect of the Debentures before all Senior Indebtedness is paid
in full, then such payment or distribution will be held by the recipient in
trust for the benefit of the holders of Senior Indebtedness of the Company, and
will be immediately paid over or delivered to the holders of Senior Indebtedness
of the Company or their representative or representatives to the extent
necessary to make payment in full of all Senior Indebtedness of the Company
remaining unpaid, after giving effect to any concurrent payment or distribution,
or provision therefor, to or for the holders of Senior Indebtedness of the
Company. (Section 4.2)
As of December 31, 1997, the Company had approximately $15.6 million of
indebtedness outstanding that would have constituted Senior Indebtedness. The
Indenture will not limit the amount of additional indebtedness, including Senior
Indebtedness, which the Company can create, incur, assume or guarantee, nor will
the Indenture limit the amount of indebtedness which any subsidiary of the
Company can create, incur, assume or guarantee.
OPTIONAL REDEMPTION
The Debentures are not redeemable at the option of the Company prior to
March 6, 2001. At any time on or after that date, the Debentures may be redeemed
at the Company's option on at least 20 but not more than 60 days notice, as a
whole or from time to time in part, at the following prices (expressed in
percentages of the principal amount), together with accrued interest to, but
excluding, the date fixed for redemption; provided that if a redemption date is
an interest payment date, the semi-annual payment of interest becoming due on
such date shall be payable to the holders of record as of the relevant record
date.
If redeemed during the 12-month period beginning March 1 (beginning March
6, 2001 and ending on February 28, 2002, in the case of the first such period).
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2001 104.55%
2002 103.90
2003 103.25
2004 102.60
2005 101.95
2006 101.30
2007 100.65
</TABLE>
and 100% at March 1, 2008 and thereafter.
If fewer than all the Debentures are to be redeemed, the Trustee will
select the Debentures to be redeemed in principal amounts of $1,000 or multiples
thereof by lot or, in its discretion, on a pro rata basis. If any Debenture is
to be redeemed in part only, a new Debenture or Debentures in principal amount
equal to the unredeemed principal portion thereof will be issued. If a portion
of a holder's Debentures is selected for partial redemption and such holder
converts a portion of such Debentures, such converted portion shall be deemed to
be taken from the portion selected for redemption.
No sinking fund is provided for the Debentures.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default is defined in the Indenture as being: (i) a default in
payment of the principal of, or premium, if any, on the Debentures (whether or
not such payment is prohibited by the subordination provisions of the
Indenture); (ii) default for 30 days in payment of any installment of interest
on the Debentures (whether or not
33
<PAGE> 36
such payment is prohibited by the subordination provisions of the Indenture);
(iii) default by the Company for 45 days after notice given in accordance with
the Indenture in the observance or performance of any other covenants in the
Indenture; (iv) failure of the Company to make any payment at maturity,
including any applicable grace period, in respect of Indebtedness in an amount
of in excess of $5,000,000 and continuance of such failure for 30 days after
notice given in accordance with the Indenture; (v) default by the Company with
respect to any Indebtedness, which default results in the acceleration of
Indebtedness in an aggregate amount of in excess of $5,000,000 without such
Indebtedness having been discharged or such acceleration having been rescinded
or annulled for 30 days after notice given in accordance with the Indenture; or
(vi) certain events involving bankruptcy, insolvency or reorganization of the
Company. (Section 7.1)
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default, give to the registered holders of the Debentures notice
of all uncured defaults known to it, but the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the best interest to such registered holders, except in the
case of a default in the payment of the principal of, or premium, if any, or
interest on, any of the Debentures when due or in the payment of any redemption
obligation. (Section 7.8)
The Indenture provides that if an Event of Default shall have occurred and
be continuing, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Debentures then outstanding may declare the principal of
and premium, if any, on the Debentures to be due and payable immediately, but if
the Company shall cure all defaults (except the nonpayment of interest on,
premium, if any, and principal of any Debentures which shall have become due by
acceleration) and certain other conditions are met, such declaration may be
canceled and past defaults may be waived by the holders of a majority in
principal amount of Debentures then outstanding. If an Event of Default
resulting from certain events of bankruptcy, insolvency or reorganization were
to occur, all unpaid principal of and accrued interest on the outstanding
Debentures will become due and payable immediately without any declaration or
other act on the part of the Trustee or any holders of Debentures, subject to
certain limitations. (Section 7.1)
The Indenture provides that the holders of a majority in principal amount
of the outstanding Debentures may 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, subject to certain limitations
specified in the Indenture. (Section 7.7) Before proceeding to exercise any
right or power under the Indenture at the direction of such holders, the Trustee
shall be entitled to receive from such holders reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it in
complying with any such direction. The right of a holder to institute a
proceeding with respect to the Indenture is subject to certain conditions
precedent, including the written notice by such holder of an Event of Default
and an offer to indemnify to the Trustee, along with the written request by the
holders of not less than 25% in aggregate principal amount of the outstanding
Debentures, that such a proceeding be instituted, but the holder has an absolute
right to institute suit for the enforcement of payment of the principal of, and
premium, if any, and interest on, such holder's Debentures when due and to
convert such Debentures. (Section 7.4)
The holders of not less than a majority in aggregate principal amount of
the outstanding Debentures may on behalf of the holders of all Debentures waive
any past defaults, except (i) a default in payment of the principal of, or
premium, if any, or interest on, any Debenture when due, (ii) a failure by the
Company to convert any Debentures into Common Stock or (iii) in respect of
certain provisions of the Indenture which cannot be modified or amended without
the consent of the holder of each outstanding Debenture affected thereby.
The Company will be 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.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company may not consolidate with or merge
with or into another person or sell, lease, convey or transfer all or
substantially all of its assets (computed on a consolidated basis), whether
34
<PAGE> 37
in a single transaction or a series of related transactions, to another person
or group of affiliated persons, unless (i) either (a) the Company is the
surviving entity or (b) the resulting, surviving or transferee entity is a
corporation organized under the laws of the United States, any state thereof or
the District of Columbia and expressly assumes by written agreement all of the
obligations of the Company in connection with the Debentures and the Indenture;
(ii) no default or Event of Default shall exist or shall occur immediately after
giving effect on a pro forma basis to such transaction; and (iii) certain other
conditions are satisfied.
MODIFICATIONS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in principal amount
of the Debentures at the time outstanding, to modify the Indenture or any
supplemental indenture or the rights of the holders of the Debenture, except
that no such modification shall (i) extend the fixed maturity of any Debenture,
reduce the rate or extend the time for payment of interest thereon, reduce the
principal amount thereof or premium, if any, thereon, reduce any amount payable
upon redemption thereof, impair or adversely affect the right of a holder to
institute suit for the payment thereof, change the currency in which the
Debentures are payable, or impair or change in any respect adverse to the holder
of the Debentures the right to convert the Debentures into Common Stock subject
to the terms set forth in the Indenture or modify the provisions of the
Indenture with respect to the subordination of the Debentures in a manner
adverse to the holders of the Debentures, without the consent of the holder of
each Debenture so affected, or (ii) reduce the aforesaid percentage of
Debentures, without the consent of the holders of all of the Debentures then
outstanding.
GOVERNING LAW
The Indenture will be governed by, and construed in accordance with, the
laws of the State of New York. (Section 16.4)
CONCERNING THE TRUSTEE
State Street Bank and Trust Company, the Trustee under the Indenture, has
been appointed by the Company as the initial paying agent, conversion agent,
registrar and custodian with regard to the Debentures. An affiliate of the
Trustee is the transfer agent for the Company's Common Stock. The Company may
maintain deposit accounts and conduct other banking transactions with the
Trustee or its affiliates in the ordinary course of business, and the Trustee
and its affiliates may from time to time in the future provide banking and other
services to the Company in the ordinary course of their business.
During the existence of an Event of Default, the Trustee will exercise such
rights and powers vested in it under the Indenture and use the same degree and
care and skill in its exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs. (Section 8.1) The
Indenture contains limitations of the rights of the Trustee, should it become a
creditor of the Company, to obtain payment of claims in certain cases or to
realize on certain property received by it in respect of any such claim or
otherwise. (Section 8.13)
35
<PAGE> 38
SELLING SHAREHOLDERS
The Preferred Stock was originally issued by the Company in transactions
exempt from the registration requirements of the Securities Act to persons
believed by the Initial Purchasers to be QIBs, institutional accredited
investors or sophisticated investors. The Selling Shareholders (which term
includes their transferees, pledgees, donees and their successors) may from time
to time offer and sell pursuant to this Prospectus any or all of the Preferred
Stock, the Debentures, if issued in exchange for the Preferred Stock, and the
shares of Common Stock initially issued or issuable upon conversion of the
Preferred Stock or the Debentures, if issued, (the "Conversion Shares").
The following table sets forth information, with respect to the Selling
Shareholders and the respective amount of shares of Preferred Stock beneficially
owned by each such Selling Shareholder and that may be sold, the principal
amount of Debentures which would be beneficially owned by each Selling
Shareholder if the Debentures were exchanged for the Preferred Stock, and the
number of Conversion Shares that may be sold, by the Selling Shareholders
pursuant to this Prospectus. Except as set forth below, none of the Selling
Shareholders 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 Shareholders may offer all or a portion of the
Preferred Stock, the Debentures, if issued, and the Conversion Shares pursuant
to this Prospectus, no estimate can be given as to the amount of shares of
Preferred Stock, the Debentures, if issued or the Conversion Shares that will be
held by the Selling Shareholders upon termination of any such sale. The
following table is based upon information furnished to the Company by DTC and
the Selling Shareholders.
<TABLE>
<CAPTION>
NUMBER OF PRINCIPAL
SHARES OF AMOUNT OF
PREFERRED STOCK DEBENTURES NUMBER OF
BENEFICIALLY BENEFICIALLY CONVERSION
OWNED AND PERCENT OF OWNED AND SHARES
THAT MAY OUTSTANDING THAT MAY THAT MAY
NAME (1) BE SOLD PREFERRED STOCK BE SOLD BE SOLD(2)
- -------- ---------------- --------------- ------------- ----------
<S> <C> <C> <C> <C>
BancAmerica Robertson Stephens 76,150 3.31% $ 3,807,500 128,525
The Bank of New York 47,500 2.07 2,375,000 80,170
Bankers Trust Company 44,000 1.91 2,200,000 74,263
Bear, Stearns Securities Corp. 295,000 12.83 14,750,000 497,901
Boston Safe Deposit and Trust Company 334,100 14.53 16,705,000 563,893
Brown Brothers Harriman & Co. 140,000 6.09 7,000,000 236,292
BT Alex. Brown Incorporated 30,000 1.30 1,500,000 50,634
Chase Manhattan Bank 100,000 4.35 5,000,000 168,780
Chase Manhattan Bank Trust Co.
of California 20,000 * 1,000,000 33,756
Credit Suisse First Boston Corporation 50 * 2,500 84
DB Clearing Services (Deutsche
Morgan Grenfell) 155,000 6.74 7,750,000 261,609
Fiduciary Trust Company International 20,000 * 1,000,000 33,756
Fleet Bank of Massachusetts, N.A. 500 * 25,000 843
The First National Bank of Maryland 2,500 * 125,000 4,219
Goldman, Sachs & Co. 289,100 12.57 14,455,000 487,942
Mercantile Safe Deposit & Trust 60,000 2.61 3,000,000 101,268
Merrill Lynch Professional Clearing Corp. 39,500 1.72 1,975,000 66,668
Merrill Lynch, Pierce Fenner
& Smith Safekeeping 10,000 * 500,000 16,878
Morgan Stanley & Co. Incorporated 50,000 2.17 2,500,000 84,390
Morgan Stanley Trust Company 35,000 1.52 1,750,000 59,073
</TABLE>
36
<PAGE> 39
<TABLE>
<S> <C> <C> <C> <C>
Murphy & Durieu 500 * 25,000 843
NationsBanc Montgomery Securities
LLC/San Francisco 27,500 1.20 1,375,000 46,414
Nomura International Trust Company 18,000 * 900,000 30,380
The Northern Trust Company 26,400 1.15 1,320,000 44,557
PNC Bank, National Association 21,300 * 1,065,000 35,950
Smith Barney Inc. 25,000 1.09 1,250,000 42,195
SBC Warburg Dillon Read Inc. 140,000 6.09 7,000,000 236,292
SSB Custodian 289,900 12.60 14,495,000 489,293
Wachovia Bank, N.A. 3,000 * 150,000 5,063
--------- ------------ ---------
Total 2,300,000 $115,000,000 3,881,931(3)
========= ============ =========
</TABLE>
- --------------
* Less than 1%.
(1) The information set forth herein is as of March 31, 1998 and will be
updated as required. Certain of the holders share investment power with
their respective investment advisors.
(2) Assumes conversion of the full amount of Preferred Stock held by such
holder at the initial conversion rate of 1.6878 shares of Common Stock for
each share of Preferred Stock.
(3) No fractional shares of Common Stock will be issued upon conversion of the
Preferred Stock or the Debentures. The total number of Conversion Shares in
this column does not equal the total number of shares of Common Stock being
registered (3,881,940) due to fractional shares.
Information concerning the Selling Shareholders may change from time to
time and will be set forth in supplements to this Prospectus. In addition, the
per share conversion rate and price, and therefore the number of shares of
Conversion Shares, are subject to adjustment under certain circumstances.
Accordingly, the number of shares of Conversion Shares offered hereby may
increase or decrease. As of the date of this Prospectus, the aggregate amount of
shares of Preferred Stock is 2,300,000, the aggregate principal amount of
Debentures, if issued, is $115,000,000 and the number of shares of Conversion
Shares is approximately 3,881,940 shares.
It is not possible to predict the number of shares of Preferred Stock, the
amount of Debentures, if issued, or the number of shares of Conversion Shares
that will be sold hereby. Consequently, it is not possible to predict the number
of shares of Preferred Stock, the amount of Debentures, if issued, or the number
of shares of Conversion Shares that will be owned by the Selling Shareholders
following completion of this offering.
37
<PAGE> 40
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds of the sale of the
Securities offered hereby. The Securities may be sold from time to time to
purchasers directly by the Selling Shareholders. Alternatively, the Selling
Shareholders may from time to time offer the Securities through underwriters,
brokers, dealers or agents who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Shareholders
and/or the purchasers of the Securities for whom they may act as agent. The
Selling Shareholders and any such underwriters, brokers, dealers or agents who
participate in the distribution of the Securities may be deemed to be
"underwriters", and any profits on the sale of the Securities by them and any
discounts, commissions or concessions received by any such underwriters,
brokers, dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. To the extent the Selling Shareholders may
be deemed to be underwriters, the Selling Shareholders may be subject to certain
statutory liabilities of the Securities Act, including, but not limited to,
Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange
Act.
The Securities offered hereby may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
Securities may be sold by one or more of the following methods without
limitation: (i) to underwriters who will acquire Securities for their own
account and resell them in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale (any public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time); (ii)
a block trade in which the broker or dealer so engaged will attempt to sell the
Securities as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (iii) purchases by a broker or dealer
as principal and resale by such broker or dealer for its own account pursuant to
this Prospectus; (iv) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; (v) an exchange distribution in accordance with
the rules of such exchange; (vi) face-to-face transactions between sellers and
purchasers without a broker or dealer; (vii) through the writing of options; and
(viii) other legally available means. At any time a particular offering of
Securities is made, a revised Prospectus or Prospectus Supplement, if required,
will be distributed including the name or names of any underwriters, brokers,
dealers or agents, any discounts, commissions and other items constituting
compensation from the Selling Shareholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers. Such revised Prospectus or
Prospectus Supplement and, if necessary, a post-effective amendment to the
registration statement of which this Prospectus is a part, will be filed with
the Commission to reflect the disclosure of additional information with respect
to the distribution of the Securities. In addition, the Securities may be sold
in private transactions to QIBs in compliance with Rule 144A or under Rule 144
rather than pursuant to this Prospectus.
There is no assurance that any Selling Shareholder will sell any or all of
the Securities offered by it hereunder or that any such Selling Shareholder will
not transfer, devise or gift such Securities by other means not described
herein.
Underwriters participating in any offering made pursuant to this Prospectus
(as amended or supplemented from time to time) may receive underwriting
discounts and commissions, and discounts or concessions may be allowed or
reallowed or paid to dealers, and brokers or agents participating in such
transaction may receive brokerage or agent's commissions or fees.
The Selling Shareholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M, which may limit the timing of purchases and sales of any of the Securities by
the Selling Shareholders and any other such person. Furthermore, Regulation M
may prohibit persons engaged in the distribution of the Securities from
simultaneously engaging in market making activities with respect to the
particular Securities for a period of up to five business days (or such other
applicable period as Regulation M may provide) prior to the commencement of such
distribution. All of the foregoing may affect the marketability of the
Securities and the ability of any person or entity to engage in market-making
activities with respect to the Securities.
38
<PAGE> 41
In order to comply with the securities laws of certain states, if
applicable, the Securities will be sold in such jurisdictions, if required, only
through registered or licensed brokers or dealers.
Pursuant to the Registration Rights Agreement entered into in connection
with the offer and sale of the Preferred Stock by the Company, each of the
Company and the Selling Shareholders will be indemnified by the other against
certain liabilities, including certain liabilities under the Securities Act, or
will be entitled to contribution in connection therewith.
The Company has agreed to pay substantially all of the expenses incidental
to the registration, offering and sale of the Securities to the public other
than commissions, fees and discounts of underwriters, brokers, dealers and
agents.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania.
Morris Cheston, Jr., Secretary of Alkermes and of Alkermes Controlled
Therapeutics, Inc., Alkermes Controlled Therapeutics Inc. II, and ADC II, all of
which are wholly owned subsidiaries of Alkermes, and Martha J. Hays, Secretary
of Alkermes Investments, Inc., a wholly owned subsidiary of Alkermes, are
partners in the law firm of Ballard Spahr Andrews & Ingersoll, LLP.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended March
31, 1997 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and has been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
39
<PAGE> 42
No dealer, sales representative, or any other person has been authorized to
give any information or to make any representations in connection with this
offering 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 Shareholder. This Prospectus does not
constitute an offer to sell or a solicitation of any offer to buy any securities
other than the securities to which it relates or an offer to, or a solicitation
of, any person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create an implication that there has been no
change in the affairs of the Company or that information contained herein is
correct as of any time subsequent to the date hereof.
-----------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
AVAILABLE INFORMATION.................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................... 3
SUMMARY ................................................................ 4
THE OFFERING............................................................. 5
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS................... 7
RISK FACTORS............................................................. 8
USE OF PROCEEDS.......................................................... 19
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS......... 19
DIVIDEND POLICY.......................................................... 19
DESCRIPTION OF PREFERRED STOCK........................................... 20
DESCRIPTION OF DEBENTURES................................................ 30
SELLING SHAREHOLDERS..................................................... 36
PLAN OF DISTRIBUTION..................................................... 38
LEGAL MATTERS............................................................ 39
EXPERTS ................................................................ 39
</TABLE>
40
<PAGE> 43
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the amounts of expenses attributed to the
issuance of the Securities offered pursuant to this Registration Statement which
shall be borne by the Company. All of the expenses listed below, except the
Securities and Exchange Commission Registration Fee, represent estimates only.
<TABLE>
<CAPTION>
Estimated
---------
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 33,925.00
Nasdaq Listing Fee.......................................... 32,500.00
Printing and Engraving Expenses............................. 110,000.00
Accounting Fees and Expenses................................ 75,000.00
Legal Fees and Expenses..................................... 120,000.00
Transfer Agent Fees and Expenses............................ 10,000.00
Miscellaneous Fees and Expenses............................. 18,575.00
-----------
Total.............................................. $400,000.00
</TABLE>
Item 15. Indemnification of Directors and Officers.
The Pennsylvania Business Corporation law of 1988 authorizes the Company to
grant indemnities to directors and officers in terms sufficiently broad to
permit indemnification of such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933. In addition, the Company has also obtained Directors'
and Officers' Liability Insurance in the amount of $5,000,000 which insures its
officers and directors against certain liabilities such persons may incur in
their capacities as officers or directors of the Company.
Article 5 of the Company's Amended and Restated By-Laws provides as
follows:
INDEMNIFICATION OF DIRECTORS, OFFICERS AND O HER PERSONS
5.1 INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS. The
Corporation shall indemnify any director, officer, employee or agent of the
Corporation or any of its subsidiaries who was or is an "authorized
representative" of the Corporation (which shall mean, for the purpose of this
Article, a director or officer of the Corporation, or a person serving at the
request of the Corporation as a director, officer, partner, fiducia y or trustee
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise) and who was or is a "party" (which shall include for
purposes of this Article the giving of testimony or similar involvement) or is
threatened to be made a party to any "proceeding" (which shall mean for purposes
of this Article any threatened, pending or completed action, suit, appeal or
other proceeding of any nature, whether civil, criminal, administrative or
investigative, whether formal or informal, and whether brought by or in the
right of the Corporation, its shareholders or otherwise) by reason of the fact
that such person was or is an authorized representative of the Corporation to
the fullest extent permitted by law, including without limitation
indemnification against expenses (which shall include for purposes of this
Article attorneys' fees and disbursements), damages, punitive damages,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such proceeding unless the
act or failure to act giving rise to the claim is finally determined by a court
to have constituted willful misconduct or recklessness. If an authorized
representative is not entitled to indemnification in respect of a portion of any
liabilities to which such person may be subject, the
II-1
<PAGE> 44
Corporation shall nonetheless indemnify such person to the maximum extent for
the remaining portion of the liabilities.
5.2 ADVANCEMENT OF EXPENSES. The Corporation shall pay the expenses
(including attorneys' fees and disbursements) actually and reasonably incurred
in defending a proceeding on behalf of any person entitled to indemnification
under Section 5.1 in advance of the final disposition of such proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article and may pay such
expenses in advance on behalf of any employee or agent on receipt of a similar
undertaking. The financial ability of such authorized representative to make
such repayment shall not be prerequisite to the making of an advance.
5.3 EMPLOYEE BENEFIT PLANS. For purposes of this Article, the Corporation
shall be deemed to have requested an officer, director, employee or agent to
serve s fiduciary with respect to an employee benefit plan where the performance
by such person of duties to the Corporation also imposes duties on, or otherwise
involves services by, such person as a fiduciary with respect to the plan;
excise taxes assessed on an authorized representative with respect to any
transaction with an employee benefit plan shall be deemed "fines"; and action
taken or omitted by such person with respect to an employee benefit plan in the
performance of duties for a purpose reasonably believed to be in the interest of
the participants and beneficiaries of the plan shall be deemed to be for a
purpose which is not opposed to the best interests of the Corporation.
5.4 SECURITY FOR INDEMNIFICATION OBLIGATIONS. To further effect, satisfy or
secure the indemnification obligations provided herein or otherwise, the
Corporation may maintain insurance, obtain a letter of credit, act as
self-insurer, create a reserve, trust, escrow, cash ollateral or other fund or
account, enter into indemnification agreements, pledge or grant a security
interest in any assets or properties of the Corporation, or use any other
mechanism or arrangement whatsoever in such amounts, at such costs, and upon
such other terms and conditions as the Board of Directors shall deem
appropriate.
5.5 RELIANCE UPON PROVISIONS. Each person who shall act as an authorized
representative of the Corporation shall b deemed to be doing so in reliance upon
the rights of indemnification provided by this Article.
5.6 AMENDMENT OR REPEAL. All rights of indemnification under this Article
shall be deemed a contract between the Corporation and the person entitled to
indemnification under this Article pursuant to which the Corporation and each
such person intend to be legally bound. Any repeal, amendment or modification
hereof shall be prospective only and shall no limit, but may expand, any rights
or obligations in respect of any proceeding whether commenced prior to or after
such change to the extent such proceeding pertains to actions or failures to act
occurring prior to such change.
5.7 SCOPE OF ARTICLE. The indemnification, as authorized by this Article,
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any statu e,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in an official capacity and as to action in any other capacity while
holding such office. The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article shall continue as to a person who has
ceased to be an officer, director, employee or agent in respect of matters
arising prior to such time, and shall inure to the benefit of the heirs,
executors and administrators of such person.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit
Number Description
- ------ -----------
4.1 Specimen of Preferred Stock Certificate of Alkermes, Inc.
4.2 Specimen of Common Stock Certificate of Alkermes, Inc. (Incorporated
by reference to Exhibit 4 to the Registrant's Registration Statement
on Form S-1 as amended (File No. 33-40250)).
II-2
<PAGE> 45
4.3 Second Amended and Restated Articles of Incorporation of Alkermes,
Inc. effective July 23, 1991. (Incorporated by reference to Exhibit
4.1(a) to the Registrant's Report on Form 10-Q for the quarter ended
June 30, 1991).
4.4 Amendment to Second Amended and Restated Articles of Incorporation, as
filed with the Pennsylvania Secretary of State on November 1, 1991.
(Incorporated by reference to Exhibit 4.1(c) to the Registrant's
Report on Form 10-Q for the quarter ended September 30, 1991).
4.5 Amendment to the Second Amended and Restated Articles of
Incorporation, as amended, as filed with the Pennsylvania Secretary of
State on February 12, 1993. (Incorporated by reference to Exhibit
4.1(d) to the Registrant's Report on Form 10-Q for the quarter ended
December 31, 1992).
4.6 Amendment to Second Amended and Restated Articles of Incorporation, as
filed with the Pennsylvania Secretary of State on February 26, 1998.
4.7 Indenture, dated as of March 1, 1998, between Alkermes, Inc. and State
Street Bank and Trust Company, as Trustee.
5 Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
12 Statement Re Computation of Earnings to Fixed Charges and Preferred
Stock Dividends.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Ballard Spahr Andrews & Ingersoll, LLP (contained in
Exhibit 5.1).
24 Power of Attorney (included on signature page).
25 Form T-1, Statement of Eligibility and Qualification of State Street
Bank and Trust Company.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") 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 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which any offers or sales are being
made, a post-effective amendment to the 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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
II-3
<PAGE> 46
(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 a 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.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offering therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 47
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 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 Cambridge, Commonwealth of Massachusetts, on
April 15, 1998.
ALKERMES, INC.
/s/ Richard F. Pops
By: __________________________________
Richard F. Pops
Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Richard F. Pops and Michael J. Landine
and each or any one of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effect amendments) to this registration statement, and to file
the same, with all 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
perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or his or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael A. Wall
____________________________________ Director and Chairman of the Board April 15, 1998
Michael A. Wall
/s/ Richard F. Pops
____________________________________ Director and Chief Executive April 15, 1998
Richard F. Pops Officer (Principal Executive Officer)
/s/ Robert A. Breyer
____________________________________ Director, President and Chief April 15, 1998
Robert A. Breyer Operating Officer
/s/ Michael J. Landine
____________________________________ Senior Vice President, Chief April 15, 1998
Michael J. Landine Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Robert S. Langer
____________________________________ Director April 15, 1998
Robert S. Langer
/s/ Alexander Rich
____________________________________ Director April 15, 1998
Alexander Rich
</TABLE>
II-5
<PAGE> 48
<TABLE>
<S> <C> <C>
/s/ Paul Schimmel
____________________________________ Director April 15, 1998
Paul Schimmel
/s/ Floyd Bloom
____________________________________ Director April 15, 1998
Floyd Bloom
/s/ John K. Clarke
____________________________________ Director April 15, 1998
John K. Clarke
</TABLE>
II-6
<PAGE> 49
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
4.1 Specimen of Preferred Stock Certificate of Alkermes, Inc.
4.6 Amendment to Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of State
on February 26, 1998
4.7 Indenture, dated as of March 1, 1998, between Alkermes, Inc. and
State Street Bank and Trust Company, as Trustee
5 Opinion of Ballard Spahr Andrews & Ingersoll, LLP as to the
legality of the securities to be offered
12 Statement Re Computation of Earnings to Fixed Charges and
Preferred Stock Dividends
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included as
part of Exhibit 5)
25 Form T-1, Statement of Eligibility and Qualification of State
Street Bank and Trust Company
<PAGE> 1
EXHIBIT 4.1
Certificate No. No. Shares
- -------------------- ----------------
Class: Preferred Stock
Series: $3.25 Convertible Exchangeable Preferred Stock CUSIP No.
---------
ALKERMES, INC.
Incorporated under the laws of the Commonwealth of Pennsylvania
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF $3.25 CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK, PAR VALUE $.01 PER SHARE, OF
ALKERMES, INC.
transferrable on the books of the Company by the holder hereof, in person or by
his attorney, upon surrender of this Certificate properly endorsed. This
Certificate and the shares represented hereby are issued and shall be held
subject to the provisions of the Restated Articles of Incorporation, as amended,
of the Company (copies of which are on file with the Transfer Agent and
Registrar), to all of which the holder by acceptance hereof assents. This
Certificate is not valid unless countersigned and registered by the Transfer
Agent and Registrar.
The Company will furnish to any shareholder upon request and without charge
a full statement of the designations, voting rights, preferences, limitations
and special rights of the shares of each class and series of stock authorized to
be issued and the authority of the Board of Directors to fix and determine the
designations, voting rights, preferences, limitations and special rights of the
classes and series of shares of the Company. Such request may be made to the
Secretary of Alkermes, Inc. or to the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the said Company has caused this Certificate to be
signed by, or with the facsimile signatures of, its duly authorized officers,
and its seal, or a facsimile thereof, to be hereunto affixed.
Dated:
-----------------------
- ----------------------------- ---------------------------
Secretary Chief Executive Officer
COUNTERSIGNED AND REGISTERED:
BANKBOSTON, N.A.
Transfer Agent and Registrar
By:
-----------
Keep this Certificate in a safe place. If it is lost, stolen or destroyed
the Company will require a bond of indemnity as a condition to the issuance
of a replacement certificate.
[SEAL]
<PAGE> 2
ALKERMES, INC.
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS,
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY
EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT, WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED HEREBY, RESELL
OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE
UPON CONVERSION OF SUCH SECURITY WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO BANKBOSTON, N.A., AS THE TRANSFER AGENT, A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE SECURITY EVIDENCED HEREBY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM SUCH TRANSFER AGENT), (D) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (E) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF
SUCH TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE
SECURITY EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE 2(E) ABOVE), IT WILL FURNISH TO BANKBOSTON, N.A., AS TRANSFER AGENT, A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE SECURITY EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF SUCH SECURITY (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(E) ABOVE),
THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE
TRANSFER AGENT. IF THE PROPOSED TRANSFEREE IS A PURCHASER WHO IS NOT A U.S.
PERSON OR AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO BANKBOSTON, N.A., AS THE TRANSFER AGENT, SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER
OF THE TRANSFER OF THE SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE 2(E) ABOVE
OR UPON THE EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE SECURITY
EVIDENCED HEREBY.
<PAGE> 3
CONVERSION NOTICE
To: BankBoston, N.A.
The undersigned registered owner of the Preferred Stock hereby irrevocably
exercises the option to convert the Preferred Stock, or the portion hereof below
designated, into shares of Common Stock in accordance with the terms of the
Preferred Stock Statement, and directs that the shares issuable and deliverable
upon such conversion, together with any check in payment for fractional shares
and any Preferred Stock representing any unconverted amount of shares hereof, be
issued and delivered to the registered holder hereof unless a different name has
been indicated below. If shares or any portion of the Preferred Stock 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.
Dated:
-------------------------
--------------------
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule
17AD-15 if shares of Common Stock are to
be issued, or Preferred Stock to be
delivered, other than to and in the name
of the registered holder.
- --------------------
Signature Guarantee
Fill in for registration of shares if to
be issued, and Preferred Stock if to be
delivered, other than to and in the name
of the registered holder:
- ------------------------------------------
(Name)
- ------------------------------------------
(Street Address)
- ------------------------------------------
(City, State and Zip Code)
Please print name and address
Number of shares to be
converted (if less than all):
--------
-------------------------------------
Social Security or Other Taxpayer
Identification Number
NOTICE: The signature on the conversion notice, or the assignment must
correspond with the name as written upon the face of the Preferred Stock in
every particular without alteration or enlargement or any change whatever."
<PAGE> 4
For value received _______________________________ hereby sell(s),
assign(s) and transfer(s) unto ___________________________ (Please insert social
security or Taxpayer Identification Number of assignee) the Preferred Stock, and
hereby irrevocably constitutes and appoints ___________________________ attorney
to transfer the said Preferred Stock on the books of the Company, with full
power of substitution in the premises.
In connection with any transfer of the Preferred Stock within the United
States or to, or for the account or benefit of, U.S. Persons occurring within
two years of the original issuance of such Preferred Stock (unless such
Preferred Stock is being transferred pursuant to a registration statement that
has been declared effective under the Securities Act), the undersigned confirms
that such Preferred Stock is being transferred:
|_| To Alkermes, Inc. or a subsidiary thereof; or
|_| Pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
|_| To an Institutional Accredited Investor pursuant to and in compliance
with the Securities Act of 1933, as amended; or
|_| Pursuant to and in compliance with Rule 144 under the Securities Act
of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such
Preferred Stock is not being transferred to an "affiliate" of the Company as
defined in Rule 144 under the Securities Act of 1933, as amended (an
"Affiliate").
|_| The transferee is an Affiliate of the Company.
Dated:
--------------------------
- ---------------------------------
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule
17AD-15 if shares of Common Stock are to
be issued, or Preferred Stock to be
delivered, other than to and in the name
of the registered holder.
- ---------------------------------
Signature Guarantee
NOTICE: The signature on the conversion notice, or the assignment must
correspond with the name as written upon the face of the Preferred Stock in
every particular without alteration or enlargement or any change whatever.
<PAGE> 1
EXHIBIT 4.6
<PAGE> 2
Microfilm Number Filed with the Department of State on
-------------- --------
Entity Number
----------------- ----------------------------------------------
Secretary of the Commonwealth
STATEMENT WITH RESPECT TO SHARES-DOMESTIC BUSINESS CORPORATION
DSCB:15-1522(Rev 90)
In compliance with the requirements of 15 Pa.C.S.ss. 1522(b) (relating to
statement with respect to shares), the undersigned corporation, desiring to
state the designation and voting rights, preferences, limitations, and special
rights, if any, of a class or series of its shares, hereby states that:
1. The name of the corporation is: ALKERMES, INC.
--------------------------------------------
- --------------------------------------------------------------------------------
2. (CHECK AND COMPLETE ONE OF THE FOLLOWING):
The resolution amending the Articles under 15 Pa.C.S.ss. 1522(b)
----- (relating to divisions and determinations by the board) set forth
in full, is as follows:
X The resolution amending the Articles under 15 Pa.C.S.ss.1522(b)
----- is set forth in full in Exhibit A attached hereto and made a part
hereof.
3. The aggregate number of shares of such class or series established and
designated by (a) such resolution, (b) all prior statements, if any, filed
under 15 Pa.D.S. ss. 1522 or corresponding provisions of prior law with
respect thereto, and (c) an other provision of the Articles is
2,300,000 shares.
------------------------------
4. The resolution was adopted by the Board of Directors or an authorized
committee thereof on: FEBRUARY 26, 1998 .
-----------------
5. (CHECK, AND IF APPROPRIATE COMPLETE, ONE OF THE FOLLOWING):
X The resolution shall be effective upon the filing of this
----- statement with respect to shares in the Department of State.
The resolution shall be effective on: at .
----- -------- ---------------
Date Hour
IN TESTIMONY WHEREOF, the undersigned corporation has caused this statement
to be signed by a duly authorized officer thereof this 27TH day of FEBRUARY,
1998. ---- ---------
--
ALKERMES, INC.
----------------------------------------
(Name of Corporation)
By: /s/ Morris Cheston, Jr.
-------------------------------------
(Signature)
Title: Secretary
---------------------------------
<PAGE> 3
ALKERMES, INC.
EXHIBIT A TO STATEMENT WITH RESPECT TO SHARES
RESOLUTIONS ESTABLISHING $3.25 CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK
($.01 Par Value)
(Cumulative Dividend, Liquidation Preference $50 per Share)
------------------------
RESOLVED, that pursuant to authority expressly granted to and vested in the
Board of Directors of Alkermes, Inc. (the "Company"), a Pennsylvania
corporation, by the provisions of the Second Amended and Restated Articles of
Incorporation, as amended, of the Company (the "Articles of Incorporation"),
there is hereby established a series of the preferred stock, par value $.01 per
share, which shall consist of 2,300,000 of the 3,000,000 unissued shares of the
preferred stock class of the Company, and which shall have the following
designation and voting rights, preferences, limitations and special rights:
1. NUMBER OF SHARES AND DESIGNATION. 2,300,000 shares of the preferred
stock, par value $.01 per share, of the Company are hereby constituted as a
series of the preferred stock designated as $3.25 Convertible Exchangeable
Preferred Stock (the "Preferred Stock").
2. DEFINITIONS. For purposes of the Preferred Stock, in addition to those
terms otherwise defined herein, the following terms shall have the meanings
indicated:
"Affiliate" of any specified person shall mean any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control," when used with respect to any specified person means the power to
direct or cause the direction of the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Applicable Price" shall have the meaning specified in Section 7(j).
"Board of Directors" shall mean the Board of Directors of the Company or a
committee of such Board duly authorized to act for it hereunder.
"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 Transfer Agent.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which the banking institutions in The City of New York,
New York or Boston, Massachusetts are authorized or obligated by law or
executive order to close or be closed.
"Commission" shall mean the Securities and Exchange Commission.
<PAGE> 4
"Common Stock" shall mean the class of capital stock of the Company
designated as Common Stock, par value $.01 per share, at the date hereof.
Subject to the provisions of Section 7(e), shares issuable on conversion of the
Preferred Stock shall include only shares of such class 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.
"Common Stock Fundamental Change" shall have the meaning specified in
Section 7(j).
"Company" shall mean Alkermes, Inc., a Pennsylvania corporation, and, shall
include its successors and assigns.
"Conversion Price" shall have the meaning specified in Section 7(a).
"Custodian" shall mean Boston EquiServe, L.P., as custodian with respect to
the Global Certificate, or any successor entity thereto.
"Debentures" shall mean the Company's 6 1/2% Convertible Subordinated
Debentures, issued under an Indenture, dated as of March 1, 1998, between the
Company and State Street Bank and Trust Company, as trustee (the "Indenture").
"Depositary" means, with respect to the Preferred Stock issuable or issued
in the form of a Global Certificate, the person specified in Section 13 as the
Depositary with respect to the Preferred Stock, until a successor shall have
been appointed and become such pursuant to the applicable provisions of this
Statement, and thereafter, "Depositary" shall mean or include such successor.
The foregoing sentence shall likewise apply to any subsequent successor or
successors.
"Dividend Payment Date" shall have the meaning specified in Section 3(a).
"Dividend Payment Record Date" shall have the meaning specified in Section
3(a).
"Dividend Periods" shall mean quarterly dividend periods commencing on the
first day of March, June, September and December of each year and ending on and
including the day preceding the first day of the next succeeding Dividend Period
(other than the initial Dividend Period which shall commence on the Issue Date
and end on and include May 31, 1998).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Exchange Date" shall have the meaning specified in Section 10(b).
"Fundamental Change" shall have the meaning specified in Section 7(j).
"Global Certificate" shall have the meaning specified in Section 13(a).
2
<PAGE> 5
"holder," "holder of shares of Preferred Stock," or "holder of the
Preferred Stock," as applied to any share of Preferred Stock, or other similar
terms (but excluding the term "beneficial holder"), shall mean any person in
whose name at the time a particular share of Preferred Stock is registered on
the Company's stock records, which shall include the books of the Transfer Agent
in respect of the Company and any stock transfer books of the Company.
"Institutional Accredited Investor" means an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Issue Date" shall mean the first date on which shares of the Preferred
Stock are issued.
"Officers' Certificate", when used with respect to the Company, shall mean
a certificate signed by (a) one of the President, the Chief Executive Officer,
Executive or Senior Vice President or any Vice President (whether or not
designated by a number or numbers or word added before or after the title "Vice
President") and (b) by one of the Treasurer or any Assistant Treasurer,
Secretary or any Assistant Secretary or Controller of the Company, which is
delivered to the Transfer Agent.
"Non-Stock Fundamental Change" shall have the meaning specified in Section
7(j).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Purchaser Stock Price" shall have the meaning specified in Section 7(j).
"person" shall mean a corporation, an association, a partnership, an
individual, a joint venture, a joint stock company, a trust, a limited liability
company, an unincorporated organization or a government or an agency or a
political subdivision thereof.
"Reference Market Price" shall have the meaning specified in Section 7(j).
"Restricted Preferred Stock" shall have the meaning specified in Section
13(c).
"Rule 144A" means Rule 144A as promulgated under the Securities Act, or any
successor rule.
"Rule 144(k)" means Rule 144(k) as promulgated under the Securities Act, or
any successor rule.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"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.
"Trading Day" has the meaning specified in Section 7(d)(ix).
"Transfer Agent" means Boston EquiServe, L.P. or such other agent or agents
of the Company as may be designated by the Board of Directors of the Company as
the transfer agent for the Preferred Stock.
3
<PAGE> 6
"U.S. Person" shall have the meaning set forth in Regulation S of the
Securities Act.
The definitions of certain other terms are specified in Section 7.
3. DIVIDENDS. (a) Holders of the Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors, out of the funds of the
Company legally available therefor, cash dividends at the annual rate of $3.25
per share of Preferred Stock, payable in equal quarterly installments on March
1, June 1, September 1 and December 1 (each a "Dividend Payment Date"),
commencing June 1, 1998 (and, in the case of any accrued but unpaid dividends,
at such additional times and for such interim periods, if any, as determined by
the Board of Directors). If June 1, 1998 or any other Dividend Payment Date
shall be on a day other than a Business Day, then the Dividend Payment Date
shall be on the next succeeding Business Day. Dividends on the Preferred Stock
will be cumulative from the Issue Date, whether or not in any Dividend Period or
Periods there shall be funds of the Company legally available for the payment of
such dividends and whether or not such dividends are declared, and will be
payable to holders of record as they appear on the stock books of the Company on
such record dates (each such date, a "Dividend Payment Record Date"), which
shall be not more than 60 days nor less than 10 days preceding the Dividend
Payment Dates thereof, as shall be fixed by the Board of Directors. Dividends on
the Preferred Stock shall accrue (whether or not declared) on a daily basis from
the Issue Date, and accrued dividends for each Dividend Period shall accumulate
to the extent not paid on the Dividend Payment Date first following the Dividend
Period for which they accrue. As used herein, the term "accrued" with respect to
dividends includes both accrued and accumulated dividends.
(b) The amount of dividends payable per share for each full Dividend
Period for the Preferred Stock shall be computed by dividing the annual dividend
rate by four (rounded down to the nearest one one-hundredth (1/100) of one
cent). The amount of dividends payable for the initial Dividend Period on the
Preferred Stock, or any other period shorter or longer than a full Dividend
Period on the Preferred Stock shall be computed on the basis of a 360-day year
consisting of twelve 30-day months. Holders of shares of Preferred Stock called
for redemption on a redemption date falling between the close of business on a
Dividend Payment Record Date and the opening of business on the corresponding
Dividend Payment Date shall, in lieu of receiving such dividend on the Dividend
Payment Date fixed therefor, receive such dividend payment together with all
other accrued and unpaid dividends on the date fixed for redemption (unless such
holders convert such shares in accordance with Section 7 hereof). Holders of
shares of Preferred Stock shall not be entitled to any dividends, whether
payable in cash, property or stock, in excess of cumulative dividends, as herein
provided. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Preferred Stock which may be
in arrears.
(c) So long as any shares of Preferred Stock are outstanding, no
dividends, except as described in the next succeeding sentence, shall be
declared or paid or set apart for payment on any class or series of stock of the
Company ranking, as to dividends, on a parity with the Preferred Stock, for any
period unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Preferred Stock for all Dividend Periods
terminating on or prior to the applicable Dividend Payment Date, or setting
apart for payment, of such dividends on such parity stock. When dividends are
not paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, upon the shares of Preferred Stock and any other class or series of
stock ranking on a parity as to dividends with Preferred Stock, all dividends
declared upon shares of Preferred Stock and all dividends declared upon such
other stock shall be declared pro rata so that the amounts of dividends per
share declared on the Preferred Stock and such other stock shall in all
4
<PAGE> 7
cases bear to each other the same ratio that accrued dividends per share on the
shares of Preferred Stock and on such other stock bear to each other.
(d) So long as any shares of the Preferred Stock are outstanding, no other
stock of the Company ranking on a parity with the Preferred Stock as to
dividends or upon liquidation, dissolution or winding up shall be redeemed,
purchased or otherwise acquired for any consideration (or any monies be paid to
or made available for a sinking fund or otherwise for the purchase or redemption
of any shares of any such stock) by the Company (except for repurchases from
employees and consultants) unless (i) the full cumulative dividends, if any,
accrued on all outstanding shares of Preferred Stock shall have been paid or set
apart for payment for all past Dividend Periods and (ii) sufficient funds shall
have been set apart for the payment of the dividend for the current Dividend
Period with respect to the Preferred Stock.
(e) So long as any shares of the Preferred Stock are outstanding, no
dividends (other than dividends or distributions paid in shares of, or options,
warrants or rights to subscribe for or purchase shares of, Common Stock or other
stock ranking junior to the Preferred Stock, as to dividends and upon
liquidation, dissolution or winding up) shall be declared or paid or set apart
for payment and no other distribution shall be declared or made or set apart for
payment, in each case upon the Common Stock or any other stock of the Company
ranking junior to the Preferred Stock as to dividends or upon liquidation,
dissolution or winding up, nor shall any Common Stock nor any other such stock
of the Company ranking junior to the Preferred Stock as to dividends or upon
liquidation, dissolution or winding up be redeemed, purchased or otherwise
acquired for any consideration (or any monies be paid to or made available for a
sinking fund or otherwise for the purchase or redemption of any shares of any
such stock) by the Company (except by conversion into or exchange for stock of
the Company ranking junior to the Preferred Stock as to dividends and upon
liquidation, dissolution or winding up) unless, in each case (i) the full
cumulative dividends, if any, accrued on all outstanding shares of Preferred
Stock and any other stock of the Company ranking on a parity with the Preferred
Stock as to dividends shall have been paid or set apart for payment for all past
Dividend Periods and all past dividend periods with respect to such other stock
and (ii) sufficient funds shall have been set apart for the payment of the
dividend for the current Dividend Period with respect to the Preferred Stock and
for the current dividend period with respect to any other stock of the company
ranking on a parity with the Preferred Stock as to dividends.
4. LIQUIDATION PREFERENCE. (a) In the event of any voluntary or
involuntary dissolution, liquidation or winding up of the Company (for the
purposes of this Section 4, a "Liquidation"), before any distribution of assets
shall be made to the holders of Common Stock or the holders of any other stock
of the Company that ranks junior to the Preferred Stock upon Liquidation, the
holder of each share of Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Company available for distribution to its
shareholders, an amount equal to liquidation preference of $50 per share plus
all dividends accrued and unpaid on such share up to the date of distribution of
the assets of the Company to the holders of Preferred Stock, and the holders of
any class or series of preferred stock ranking on a parity with the Preferred
Stock as to Liquidation shall be entitled to receive the full respective
liquidation preferences (including any premium) to which they are entitled and
shall receive all accrued and unpaid dividends with respect to their respective
shares through and including the date of distribution.
(b) If upon any Liquidation of the Company, the assets available for
distribution to the holders of Preferred Stock and any other stock of the
Company ranking on a parity with the Preferred Stock upon Liquidation which
shall then be outstanding shall be insufficient to pay the holders of all
outstanding shares of Preferred Stock and all other such parity stock the full
amounts (including all dividends accrued and unpaid) of the liquidating
distribution to which they shall be entitled, then the holders of each series
5
<PAGE> 8
of such stock will share ratably in any such distribution of assets first in
proportion to their respective liquidation preferences until such preferences
are paid in full, and then in proportion to their respective amounts of accrued
but unpaid dividends. After payment of any such liquidating preference and
accrued dividends, the holders of shares of the Preferred Stock will not be
entitled to any further participation in any distribution of assets by the
Company.
(c) For purposes of this Section 4, a Liquidation shall not include (i)
any consolidation or merger of the Company with or into any other corporation,
(ii) any liquidation, dissolution, winding up or reorganization of the Company
immediately followed by reincorporation of another corporation or (iii) a sale
or other disposition of all or substantially all of the Company's assets to
another corporation unless in connection therewith the Liquidation of the
Company is specifically approved.
(d) The holder of any shares of Preferred Stock shall not be entitled to
receive any payment owed for such shares under this Section 4 until such holder
shall cause to be delivered to the Company (i) the certificate(s) representing
such shares of Preferred Stock and (ii) transfer instrument(s) satisfactory to
the Company and sufficient to transfer such shares of Preferred Stock to the
Company free of any adverse interest. No interest shall accrue on any payment
upon Liquidation after the due date thereof.
5. REDEMPTION AT THE OPTION OF THE COMPANY. (a) Preferred Stock may not
be redeemed by the Company prior to March 6, 2001, on or after which the
Company, at its option, may redeem the shares of Preferred Stock, in whole or in
part, out of funds legally available therefor, at any time or from time to time,
subject to the notice provisions and provisions for partial redemption described
below, during the period beginning on March 1 of the years shown below
(beginning on March 6, 2001 and ending on February 28, 2002, in the case of the
first such period), at the following redemption prices per share plus an amount
equal to accrued and unpaid dividends, if any, to (but excluding) the date fixed
for redemption, whether or not earned or declared:
<TABLE>
<CAPTION>
YEAR PRICE
------ --------
<S> <C>
2001 $52.275
2002 51.950
2003 51.625
2004 51.300
2005 50.975
2006 50.650
2007 50.325
</TABLE>
and $50 at March 1, 2008 and thereafter; PROVIDED that, if the applicable
redemption date is a Dividend Payment Date, the quarterly payment of dividends
becoming due on such date shall be payable to the holders of such shares of
Preferred Stock registered as such on the relevant record date subject to the
terms and provisions of Section 3.
No sinking fund, mandatory redemption or other similar provision shall
apply to the Preferred Stock.
(b) In case the Company shall desire to exercise the right to redeem the
shares of Preferred Stock, in whole or in part, pursuant to Section 5(a), it
shall fix a date for redemption, and it, or at its request (which must be
received by the Transfer Agent at least ten (10) Business Days prior to the date
6
<PAGE> 9
the Transfer Agent is requested to give notice as described below unless a
shorter period is agreed to by the Transfer Agent), the Transfer Agent in the
name of and at the expense of the Company, shall mail or cause to be mailed a
notice of such redemption at least twenty (20) and not more than sixty (60) days
prior the date fixed for redemption to the holders of the shares of Preferred
Stock so to be redeemed at their last addresses as the same appear on the
Company's stock records (PROVIDED that if the Company shall give such notice, it
shall also give such notice, and notice of the shares of Preferred Stock to be
redeemed, to the Transfer Agent). Such mailing shall be by first class mail. The
notice if mailed in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the holder receives such notice. In any
case, failure to give such notice by mail or any defect in the notice to the
holder of any share of Preferred Stock designated for redemption shall not
affect the validity of the proceedings for the redemption of any other share of
Preferred Stock.
Each such notice of redemption shall specify the number of shares of
Preferred Stock to be redeemed, the date fixed for redemption, the redemption
price at which such shares of Preferred Stock are to be redeemed, the place or
places of payment, that payment will be made upon presentation and surrender of
certificate or certificates representing such shares of Preferred Stock, that
dividends accrued to (but excluding) the date fixed for redemption will be paid
as specified in said notice, and that on and after said date dividends thereon
or on the portion thereof to be redeemed will cease to accrue. Such notice shall
also state the current Conversion Price and the date on which the right to
convert such shares of Preferred Stock into Common Stock will expire.
On or prior to the redemption date specified in the notice of redemption
given as provided in this Section 5(b), the Company will deposit with a bank or
trust company having an office or agency in the Borough of Manhattan, City of
New York and having a combined capital and surplus of at least $50,000,000 (the
"Deposit Bank") an amount of money sufficient to redeem on the redemption date
all the shares of Preferred Stock so called for redemption (other than those
theretofore surrendered for conversion into Common Stock) at the appropriate
redemption price, together with accrued dividends to (but excluding) the date
fixed for redemption; PROVIDED that if such payment is made on the redemption
date it must be received by the Deposit Bank by 10:00 a.m. New York City time,
on such date. If any shares of Preferred Stock called for redemption are
converted pursuant hereto, any money deposited with the Deposit Bank or so
segregated and held in trust for the redemption of such shares of Preferred
Stock shall be paid to the Company upon its request, or, if then held by the
Company shall be discharged from such trust. The Company shall be entitled to
make any deposit of funds contemplated by this Section 5 under arrangements
designed to permit such funds to generate interest or other income for the
Company, and the Company shall be entitled to receive all interest and other
income earned by any funds while they shall be deposited as contemplated by this
Section 5, PROVIDED that the Company shall maintain on deposit funds sufficient
to satisfy all payments which the deposit arrangement shall have been
established to satisfy. If the conditions precedent to the disbursement of any
funds deposited by the Company pursuant to this Section 5 shall not have been
satisfied within two years after the establishment of such funds, then (i) such
funds shall be returned to the Company upon its request; (ii) after such return,
such funds shall be free of any trust which shall have been impressed upon them;
(iii) the person entitled to the payment for which such funds shall have been
originally intended shall have the right to look only to the Company for such
payment, subject to applicable escheat laws; and (iv) the trustee which shall
have held such funds shall be relieved of any responsibility for such funds upon
the return of such funds to the Company.
If fewer than all the outstanding shares of Preferred Stock are to be
redeemed, shares to be redeemed shall be selected by the Company from
outstanding shares of Preferred Stock not previously called for redemption by
lot or pro rata (as near as may be) or by any other equitable method determined
by the Company in its sole discretion.
7
<PAGE> 10
(c) If notice of redemption has been given as above provided, on and after
the fixed for redemption date (unless the Company shall default in the payment
of the redemption price, together with accrued and unpaid dividends to (but
excluding) said date), dividends on such shares of Preferred Stock so called for
redemption shall cease to accrue and such shares of Preferred Stock shall be
deemed no longer outstanding and the holders thereof shall have no right in
respect of such shares of Preferred Stock except the right to receive the
redemption price thereof and accrued and unpaid dividends to (but excluding) the
date fixed for redemption, without interest thereon. On presentation and
surrender of certificate or certificates representing such shares of Preferred
Stock at a place of payment in said notice specified, such shares of Preferred
Stock to be redeemed shall be redeemed by the Company at the applicable
redemption price, together with dividends accrued thereon to (but excluding) the
date fixed for redemption; PROVIDED that, if the applicable redemption date is a
Dividend Payment Date, the quarterly payment of dividends becoming due on such
date shall be payable to the holders of such shares of Preferred Stock
registered as such on the relevant record date subject to the terms and
provisions of Section 3.
If fewer than all the shares of Preferred Stock represented by any
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
(d) In connection with any redemption of Preferred Stock, the Company may
arrange for the purchase and conversion of any Preferred Stock by an agreement
with one or more investment bankers or other purchasers to purchase such
Preferred Stock by paying to the Deposit Bank in trust for the holders of
Preferred Stock, on or before the date fixed for redemption, an amount not less
than the applicable redemption price, together with dividends accrued to (but
excluding) the date fixed for redemption, of such Preferred Stock.
Notwithstanding anything to the contrary contained in this Section 5, the
obligation of the Company to pay the redemption price of such Preferred Stock,
together with dividends accrued to (but excluding) the date fixed for
redemption, shall be deemed to be satisfied and discharged to the extent such
amount is so paid by such purchasers. If such an agreement is entered into, a
copy of which will be filed with the Deposit Bank prior to the date fixed for
redemption, any certificate representing the Preferred Stock so converted not
duly surrendered for conversion by the holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such holders and (notwithstanding anything to the contrary
contained in Section 7) surrendered by such purchasers for conversion, all as of
immediately prior to the close of business on the date fixed for redemption (and
the right to convert any such Preferred Stock shall be deemed to have been
extended through such time), subject to payment of the above amount as
aforesaid. At the direction of the Company, the Deposit Bank shall hold and
dispose of any such amount paid to it in the same manner as it would monies
deposited with it by the Company for the redemption of Preferred Stock.
6. SHARES TO BE RETIRED. Any share of Preferred Stock converted, redeemed
or otherwise acquired by the Company shall be retired and canceled and shall
upon cancellation be restored to the status of authorized but unissued shares of
preferred stock, subject to reissuance by the Board of Directors as shares of
preferred stock of one or more series.
7. CONVERSION. Holders of shares of Preferred Stock shall have the right
to convert all or a portion of such shares (including fractions of such shares)
into shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this Section 7,
a holder of shares of Preferred Stock shall have the right, at his option, at
any time after the Issue Date (except that, with respect to shares of Preferred
Stock which shall be called for redemption, such right shall terminate at
8
<PAGE> 11
the close of business on the next Business Day preceding the date fixed for
redemption of such shares of Preferred Stock unless the Company shall default in
payment due upon redemption thereof) to convert any of such shares (or a portion
thereof) into that number of fully paid and non-assessable shares of Common
Stock (as such shares shall then be constituted) obtained by dividing $50.00 by
the Conversion Price, as adjusted in accordance with this Section 7, by
surrender of certificate or certificates representing such share of Preferred
Stock so to be converted in the manner provided in Section 7(b). As used herein,
the initial "Conversion Price" shall mean the dollar amount obtained by dividing
$50.00 by 1.6878. If a part of a share of Preferred Stock is converted, then the
Company will convert such share into the appropriate number of shares of Common
Stock (subject to Section 7(c)) and issue a certificate representing a
fractional share of Preferred Stock evidencing the remaining interest of such
holder. A holder of the Preferred Stock is not entitled to any rights of a
holder of Common Stock until such holder has converted his Preferred Stock to
Common Stock, and only to the extent such Preferred Stock is deemed to have been
converted to Common Stock under this Section 7.
(b) In order to exercise the conversion right, the holder of the Preferred
Stock to be converted shall surrender certificate or certificates (with the
Conversion Notice, the form of which is set forth in Section 14(a), on the
reverse of the certificate or certificates duly completed) representing the
number of shares to be so converted, duly endorsed, at an office or agency of
the Transfer Agent in the Borough of Manhattan, City of New York, and shall give
written notice of conversion to the office or agency that the holder elects to
convert such number of shares of Preferred Stock specified in said notice. Such
notice shall also state the name or names (with address) in which the
certificate or certificates for shares of Common Stock which shall be of Common
Stock issuable on such conversion shall be issued, and shall be accompanied by
transfer taxes, if required pursuant to Section 7(f). Each such share of
Preferred Stock surrendered for conversion shall, unless the shares of Common
Stock issuable on conversion are to be issued in the same name in which such
share of Preferred Stock is registered, be duly endorsed by, or be accompanied
by instruments of transfer in form satisfactory to the Company duly executed by,
the holder or his duly authorized attorney.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, the Company shall issue and shall deliver to such
holder or, if shares of Common Stock issuable on conversion are to be issued in
a name other than that in which such share of Preferred Stock to be converted is
registered (as if such transfer were a transfer of the share of Preferred Stock
so converted), to such other person, at the office or agency of the Transfer
Agent in the Borough of Manhattan, City of New York, certificate or certificates
representing the number of shares of Common Stock issuable upon the conversion
of such share of Preferred Stock or a portion thereof in accordance with the
provisions of this Section 7 and a check or cash in respect of any fractional
interest in respect of a share of Common Stock arising upon such conversion, as
provided in Section 7(c) (which payment, if any, shall be paid no later than
five Business Days after satisfaction of the requirements for conversion set
forth above).
Each conversion shall be deemed to have been effected on the date on which
the requirements set forth above in this Section 7(b) have been satisfied as to
such share of Preferred Stock so converted, and the person in whose name any
certificate or certificates for the shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become on said date the holder of
record of the shares represented thereby; PROVIDED, HOWEVER, that if any such
surrender occurs on any date when the stock transfer books of the Company shall
be closed, the conversion shall be effected on the next succeeding day on which
such stock transfer books are open, and the person in whose name the
certificates are to be issued shall be the record holder thereof for all
purposes, but such conversion shall be at the Conversion Price in effect on the
date upon which certificate or certificates representing such
9
<PAGE> 12
shares of Preferred Stock shall be surrendered. All shares of Common Stock
delivered upon conversion of the Preferred Stock will, upon delivery, be duly
authorized, validly issued and fully paid and nonassessable.
In the case of any share of Preferred Stock which is converted after any
record date with respect to the payment of a dividend on the Preferred Stock and
prior to the close of business on the Business Day prior to the next succeeding
Dividend Payment Date, the dividend due on such Dividend Payment Date shall be
payable on such Dividend Payment Date to the holder of record of such share as
of such preceding record date notwithstanding such conversion; PROVIDED that
shares of Preferred Stock surrendered for conversion during the period between
the close of business on any record date with respect to the payment of a
dividend on the Preferred Stock and prior to the close of business on the
Business Day prior to the next succeeding Dividend Payment Date must (except in
the case of shares of Preferred Stock which have been called for redemption and
a notice of redemption has been sent to the holders of Preferred Stock pursuant
to Section 5(b)) be accompanied by payment in funds acceptable to the Company of
an amount equal to the dividend payable on such Dividend Payment Date on the
shares of Preferred Stock being surrendered for conversion. The Transfer Agent
shall not be required to accept for conversion any shares of Preferred Stock not
accompanied by any payment required by the preceding sentence. Except as
provided in this paragraph, no payment or adjustment shall be made upon any
conversion on account of any dividends accrued on shares of Preferred Stock
surrendered for conversion or on account of any dividends on the Common Stock
issued upon conversion.
(c) In connection with the conversion of any shares of Preferred Stock, a
portion of such shares may be converted; however no fractional shares of Common
Stock or scrip representing fractional shares shall be issued upon conversion of
the Preferred Stock. If any fractional share of stock otherwise would be
issuable upon the conversion of the Preferred Stock, the Company shall make an
adjustment therefor in cash at the current market value thereof to the holder of
the Preferred Stock. The current market value of a share of Common Stock shall
be the Closing Price on the first Trading Day immediately preceding the day on
which the Preferred Stock (or a specified portion thereof) are deemed to have
been converted and such Closing Price shall be determined as provided in Section
7(d)(ix). If more than one share (or fraction thereof) shall be surrendered for
conversion at one time by the same holder, the number of full shares of Common
Stock issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares of Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time to time by the
Company as follows:
(i) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock, the Conversion Price in effect at the opening of business on
the date following the date fixed for the determination of 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 Record Date (as defined in Section 7(d)(ix)) 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 Record Date. If any dividend
or distribution of the type described in this Section 7(d)(i) is declared
but not so paid or made, the Conversion Price shall again be adjusted to
the Conversion Price which would then be in effect if such dividend or
distribution had not been declared.
10
<PAGE> 13
(ii) In case the Company shall issue rights or warrants to all holders of
its outstanding shares of Common Stock entitling them (for a period
expiring within forty-five (45) days after the date fixed for the
determination of shareholders entitled to receive such rights or warrants)
to subscribe for or purchase shares of Common Stock at a price per share
less than the Current Market Price (as defined in Section 7(d)(ix)) on the
Record Date fixed for the determination of shareholders entitled to receive
such rights or warrants, the Conversion Price shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion Price
in effect at the opening of business on the date after such Record Date by
a fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the Record Date plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at such Current Market Price, and of which
the denominator shall be the number of shares of Common Stock outstanding
on the close of business on the Record Date plus the total number of
additional shares of Common Stock so offered for subscription or purchase.
Such adjustment shall become effective immediately after the opening of
business on the day following the Record Date fixed for determination of
shareholders entitled to receive such rights or warrants. To the extent
that shares of Common Stock are not delivered pursuant to such rights or
warrants, upon the expiration or termination of such rights or warrants the
Conversion Price shall be readjusted to the Conversion Price which would
then be in effect had the adjustments made upon the issuance of such rights
or warrants been made on the basis of delivery of only the number of shares
of Common Stock actually delivered. In the event that such rights or
warrants are not so issued, the Conversion Price shall again be adjusted to
be the Conversion Price which would then be in effect if such date fixed
for the determination of shareholders entitled to receive such rights or
warrants had not been fixed. In determining whether any rights or warrants
entitle the holders to subscribe for or purchase shares of Common Stock at
less than such Current Market Price, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into
account any consideration received for such rights or warrants, the value
of such consideration, if other than cash, to be determined by the Board of
Directors.
(iii) In case the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(iv) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of capital stock of the
Company (other than any dividends or distributions to which Section 7(d)(i)
applies) or evidences of its indebtedness, cash or other assets (including
securities, but excluding (1) any rights or warrants referred to in Section
7(d)(ii) or (2) dividends and distributions paid exclusively in cash (the
foregoing hereinafter in this Section 7(d)(iv) called the "Securities")),
then, in each such case, the Conversion Price shall be reduced so that the
same shall be equal to the price determined by multiplying the Conversion
Price in effect immediately prior to the close of business on the Record
Date (as defined in Section 7(d)(ix)) with respect to such distribution by
a fraction of which the numerator shall be the Current Market Price
(determined as provided in
11
<PAGE> 14
Section 7(d)(ix)) on such date less the fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and
described in a Board Resolution) on such date of the portion of the
Securities so distributed applicable to one share of Common Stock and the
denominator shall be such Current Market Price, such reduction to become
effective immediately prior to the opening of business on the day following
the Record Date; PROVIDED, HOWEVER, that in the event the then fair market
value (as so determined) of the portion of the Securities so distributed
applicable to one share of Common Stock is equal to or greater than the
Current Market Price on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each holder of the
Preferred Stock shall have the right to receive upon conversion of the
Preferred Stock (or any portion thereof) the amount of Securities such
holder would have received had such holder converted such Preferred Stock
(or portion thereof) immediately prior to such Record Date. In the event
that such dividend or distribution is not so paid or made, the Conversion
Price shall again be adjusted to be the Conversion Price which would then
be in effect if such dividend or distribution had not been declared. If the
Board of Directors determines the fair market value of any distribution for
purposes of this Section 7(d)(iv) by reference to the actual or when issued
trading market for any securities comprising all or part of such
distribution, it must in doing so consider the prices in such market over
the same period (the "Reference Period") used in computing the Current
Market Price pursuant to Section 7(d)(ix) to the extent possible, unless
the Board of Directors in a board resolution determines in good faith that
determining the fair market value during the Reference Period would not be
in the best interest of the holder of the Preferred Stock.
In the event that the Company implements a shareholders' rights plan (a
"Rights Plan"), such Rights Plan shall provide that upon conversion of the
Preferred Stock the holders will receive, in addition to the Common Stock
issuable upon such conversion, the rights under such Rights Plan
(notwithstanding the occurrence of an event causing such rights to separate
from the Common Stock at or prior to the time of conversion). Any
distribution of rights or warrants pursuant to the Rights Plan complying
with the requirements set forth in the immediately preceding sentence of
this paragraph shall not constitute a distribution of rights or warrants
for purposes of this Section 7(d).
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of
the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a
specified event or events ("Trigger Event"): (i) are deemed to be
transferred with such shares of Common Stock; (ii) are not exercisable; and
(iii) are also issued in respect of future issuances of Common Stock, shall
be deemed not to have been distributed for purposes of this Section
7(d)(iv) (and no adjustment to the Conversion Price under this Section
7(d)(iv) will be required) until the occurrence of the earliest Trigger
Event. If such right or warrant is subject to subsequent events, upon the
occurrence of which such right or warrant shall become exercisable to
purchase different securities, evidences of indebtedness or other assets or
entitle the holder to purchase a different number or amount of the
foregoing or to purchase any of the foregoing at a different purchase
price, then the occurrence of each such event shall be deemed to be the
date of issuance and record date with respect to a new right or warrant
(and a termination or expiration of the existing right or warrant 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 or other event (of the type described in the preceding sentence) with
respect thereto, that resulted in an adjustment to the Conversion Price
under this Section 7(d)(iv), (1) in the case of any such rights or warrants
which shall all have been redeemed or repurchased without exercise by any
holders
12
<PAGE> 15
thereof, the Conversion Price shall be readjusted upon such final
redemption or repurchase to give effect to such distribution or Trigger
Event, as the case may be, as though it were a cash distribution, equal to
the per share redemption or repurchase price received by a holder of Common
Stock with respect to such rights or warrants (assuming such holder had
retained such rights or warrants), made to all holders of Common Stock as
of the date of such redemption or repurchase, and (2) in the case of such
rights or warrants all of which shall have expired or been terminated
without exercise, the Conversion Price shall be readjusted as if such
rights and warrants had never been issued.
For purposes of this Section 7(d)(iv) and Sections 7(d)(i) and (ii), any
dividend or distribution to which this Section 7(d)(iv) is applicable that
also includes shares of Common Stock to which 7(d)(i) applies, or rights or
warrants to subscribe for or purchase shares of Common Stock to which
Section 7(d)(ii) applies (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets, shares
of capital stock, rights or warrants other than such shares of Common Stock
to which Section 7(d)(i) applies or rights or warrants to which Section
7(d)(ii) applies (and any Conversion Price reduction required by this
Section 7(d)(iv) with respect to such dividend or distribution shall then
be made) immediately followed by (2) a dividend or distribution of such
shares of Common Stock or such rights or warrants (and any further
Conversion Price reduction required by Sections 7(d)(i) and (ii) with
respect to such dividend or distribution shall then be made, except (A) the
Record Date of such dividend or distribution shall be substituted as "the
date fixed for the determination of shareholders entitled to receive such
dividend or other distribution", "Record Date fixed for such determination"
and "Record Date" within the meaning of Section 7(d)(i) and as "the date
fixed for the determination of shareholders entitled to receive such rights
or warrants", "the Record Date fixed for the determination of the
shareholders entitled to receive such rights or warrants" and "such Record
Date" within the meaning of Section 7(d)(ii), and (B) any shares of Common
Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such
determination" within the meaning of Section 7(d)(i).
(v) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock cash (excluding any cash that is distributed
upon a merger or consolidation to which Section 7(e) applies or as part of
a distribution referred to in Section 7(d)(iv)), in an aggregate amount
that, combined together with (1) the aggregate amount of any other such
distributions to all holders of its Common Stock made exclusively in cash
within the twelve (12) months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant to this
Section 7(d)(v) has been made, and (2) the aggregate of any cash plus the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) of
consideration payable in respect of any tender offer by the Company or any
of its subsidiaries for all or any portion of the Common Stock concluded
within the twelve (12) months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant to Section
7(d)(vi) has been made, exceeds 10.0% of the product of the Current Market
Price (determined as provided in Section 7(d)(ix)) on the Record Date with
respect to such distribution times the number of shares of Common Stock
outstanding on such date, then, and in each such case, immediately after
the close of business on such date, the Conversion Price shall be reduced
so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close of business on
such Record Date by a fraction (i) the numerator of which shall be equal to
the Current Market Price on the Record Date less an amount equal to the
quotient of (x) the excess of such combined amount over such 10.0% and (y)
the number of shares of Common Stock outstanding on the
13
<PAGE> 16
Record Date and (ii) the denominator of which shall be equal to the Current
Market Price on such date, provided, however, that in the event the portion
of the cash so distributed applicable to one share of Common Stock is equal
to or greater than the Current Market Price of the Common Stock on the
Record Date, in lieu of the foregoing adjustment, adequate provision shall
be made so that each holder of the Preferred Stock shall have the right to
receive upon conversion of shares of Preferred Stock the amount of cash
such holder would have received had such holder converted such shares
immediately prior to such Record Date. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared. Any cash distribution to
all holders of Common Stock as to which the Company makes the election
permitted by Section 7(d)(xv) and as to which the Company has complied with
the requirements of such Section shall be treated as not having been made
for all purposes of this Section 7(d)(v).
(vi) In case a tender offer made by the Company or any of Subsidiary for
all or any portion of the Common Stock shall expire and such tender offer
(as amended upon the expiration thereof) shall require the payment to
shareholders (based on the acceptance (up to any maximum specified in the
terms of the tender offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described
in a Board Resolution) that combined together with (1) the aggregate of the
cash plus the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a Board
Resolution), as of the expiration of such tender offer, of consideration
payable in respect of any other tender offers, by the Company or any of its
subsidiaries for all or any portion of the Common Stock expiring within the
twelve (12) months preceding the expiration of such tender offer and in
respect of which no adjustment pursuant to this Section 7(d)(vi) has been
made and (2) the aggregate amount of any distributions to all holders of
the Company's Common Stock made exclusively in cash within twelve (12)
months preceding the expiration of such tender offer and in respect of
which no adjustment pursuant to Section 7(d)(v) has been made, exceeds
10.0% of the product of the Current Market Price (determined as provided in
Section 7(d)(ix)) as of the last time (the "Expiration Time") tenders could
have been made pursuant to such tender offer (as it may be amended) times
the number of shares of Common Stock outstanding (including any tendered
shares) on the Expiration Time, then, and in each such case, immediately
prior to the opening of business on the day after the date of the
Expiration Time, the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to close of business on the date of the Expiration
Time by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding (including any tendered shares) on the Expiration
Time multiplied by the Current Market Price of the Common Stock on the
Trading Day next succeeding the Expiration Time and the denominator shall
be the sum of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to shareholders based on the acceptance (up
to any maximum specified in the terms of the tender offer) of all shares
validly tendered and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the
"Purchased Shares") and (y) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) on the Expiration Time and
the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction (if any) to become effective
immediately prior to the opening of business on the day following the
Expiration Time. In the event that the Company is obligated to purchase
shares pursuant to any such tender offer, but the Company is permanently
prevented by applicable law from
14
<PAGE> 17
effecting any such purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such tender offer had not been made. If the
application of this Section 7(d)(vi) to any tender offer would result in an
increase in the Conversion Price, no adjustment shall be made for such
tender offer under this Section 7(d)(vi). Any cash distribution to all
holders of Common Stock as to which the Company has made the election
permitted by Section 7(d)(xv) and as to which the Company has complied with
the requirements of such Section shall be treated as not having been made
for all purposes of this Section 7(d)(vi).
(vii) In case of a tender or exchange offer made by a person other than the
Company or any Subsidiary for an amount which increases the offeror's
ownership of Common Stock to more than 25% of the Common Stock outstanding
and shall involve the payment by such person of consideration per share of
Common Stock having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive, and described in a
resolution of the Board of Directors at the last time (the "Tender
Expiration Time") tenders or exchanges may be made pursuant to such tender
or exchange offer (as it shall have been amended)) that exceeds the Current
Market Price of the Common Stock on the Trading Day next succeeding the
Tender Expiration Time, and in which, as of the Tender Expiration Time the
Board of Directors is not recommending rejection of the offer, the
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the Tender Expiration Time by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding (including any tendered or
exchanged shares) on the Tender Expiration Time multiplied by the Current
Market Price of the Common Stock on the Trading Day next succeeding the
Tender Expiration Time and the denominator shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate consideration
payable to shareholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares
validly tendered or exchanged and not withdrawn as of the Tender Expiration
Time (the shares deemed so accepted, up to any such maximum, being referred
to as the "Tender Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Tender Purchased Shares) on
the Tender Expiration Time and the Current Market Price of the Common Stock
on the Trading Day next succeeding the Tender Expiration Time, such
reduction to become effective immediately prior to the opening of business
on the day following the Tender Expiration Time. In the event that such
person is obligated to purchase shares pursuant to any such tender or
exchange offer, but such person is permanently prevented by applicable law
from effecting any such purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such tender or exchange offer had not been made.
Notwithstanding the foregoing, the adjustment described in this Section
7(d)(vii) shall not be made if, as of the Tender Expiration Time, the
offering documents with respect to such offer disclose a plan or intention
to cause the Company to engage in any consolidation or merger of the
Company with or into any other corporation or corporations (whether or not
affiliated with the Company), or successive consolidations or mergers in
which the Company or its successor or successors shall be a party or
parties, or any sale, conveyance or lease (or successive sales, conveyances
or leases) of all or substantially all of the property of the Company, to
any other corporation (whether or not affiliated with the Company),
authorized to acquire and operate the same and which shall be organized
under the laws of the United States of America, any state thereof or the
District of Columbia; PROVIDED, HOWEVER, that each share of Preferred Stock
shall remain outstanding, or unaffected or shall be converted into or
exchanged for convertible exchangeable preferred stock of the corporation
(if other than the Company) formed by such consolidation, or into which the
15
<PAGE> 18
Company shall have been merged, or by the corporation which shall have
acquired or leased such property having voting rights, preferences,
limitations and special rights substantially similar (but no less
favorable) to a share of Preferred Stock.
(viii) In case the Company shall issue Common Stock or securities
convertible into, or exchangeable for, Common Stock at a price per share
(or having a conversion or exchange price per share) that is less than 95%
of the then Current Market Price of the Common Stock (but excluding, among
other things, issuances: (a) pursuant to any bona fide plan for the benefit
of employees or directors of or consultants to the Company now or hereafter
in effect; (b) to acquire all or any portion of a business in an
arm's-length transaction between the Company and an unaffiliated third
party including, if applicable, issuances upon exercise of options or
warrants assumed in connection with such an acquisition; (c) in a bona fide
public offering pursuant to a firm commitment underwriting (or a similar
type of offering made pursuant to Rule 144A and/or Regulation S under the
Securities Act) or sales at the market pursuant to a continuous offering
stock program; (d) pursuant to the exercise of warrants, rights (including,
without limitation, earnout rights) or options, or upon the conversion of
convertible securities, which are issued and outstanding on the date
hereof, or which may be issued in the future at fair value and with an
exercise price or conversion price at least equal to the Current Market
Price of the Common Stock at the time of issuance of such warrant, right,
option or convertible security; and (e) pursuant to a dividend reinvestment
plan or other plan hereafter adopted for the reinvestment of dividends or
interest provided that such Common Stock is issued at a price at least
equal to 95% of the Current Market Price of the Common Stock at the time of
such issuance), the Conversion Price shall be adjusted so that the holder
of each Security shall be entitled to receive, upon the conversion thereof,
the number of shares of Common Stock determined by multiplying (i) the
Conversion Price on the day immediately prior to such date of issuance by
(ii) a fraction, the numerator of which shall be the sum of (A) the number
of shares of Common Stock outstanding on such date and (B) the number of
additional shares of Common Stock issued (or into which the convertible
securities may convert), and the denominator of which shall be the sum of
(1) the number of shares of Common Stock outstanding on such date and (2)
the number of shares of Common Stock which the aggregate consideration
receivable by the Company for the total number of shares of Common Stock so
issued (or into which the convertible securities may convert) would
purchase at such Conversion Price on such date. An adjustment made pursuant
to this paragraph (viii) shall be made on the next Business Day following
the date on which any such issuance is made and shall be effective
retroactively immediately after the close of business on such date. For
purposes of this paragraph (viii), the aggregate consideration receivable
by the Company in connection with the issuance of shares of Common Stock or
of securities convertible into shares of Common Stock shall be deemed to be
equal to the sum of the aggregate offering price (before deduction of
underwriting discounts or commissions and expenses payable to third
parties) of all such securities plus the minimum aggregate amount, if any,
payable upon conversion of any such convertible securities into shares of
Common Stock.
(ix) For purposes of this Section 7, the following terms shall have the
meaning indicated:
(1) "Closing Price" with respect to any securities on any day shall
mean the closing sale price regular way on such day or, in case no such
sale takes place on such day, the average of the reported closing bid and
asked prices, regular way, in each case on the Nasdaq National Market or
New York Stock Exchange, as applicable, or, if such security is not listed
or admitted to trading on such National Market or Exchange, on the
principal national security exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not
16
<PAGE> 19
quoted or listed or admitted to trading on any national securities exchange
or quotation system, the average of the closing bid and asked prices of
such security on the over-the-counter market on the day in question as
reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so available, in such
manner as furnished by any New York Stock Exchange member firm selected
from time to time by the Board of Directors for that purpose, or a price
determined in good faith by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution.
(2) "Current Market Price" shall mean the average of the daily Closing
Prices per share of Common Stock for the ten (10) consecutive Trading Days
immediately prior to the date in question; PROVIDED, HOWEVER, that (1) if
the "ex" date (as hereinafter defined) for any event (other than the
issuance or distribution or Fundamental Change requiring such computation)
that requires an adjustment to the Conversion Price pursuant to Section
7(d)(i), (ii), (iii), (iv), (v), (vi), (vii) or (viii) occurs during such
ten (10) consecutive Trading Days, the Closing Price for each Trading Day
prior to the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the same fraction by which the Conversion
Price is so required to be adjusted as a result of such other event, (2) if
the "ex" date for any event (other than the issuance or distribution or
Fundamental Change requiring such computation) that requires an adjustment
to the Conversion Price pursuant to Section 7(d)(i), (ii), (iii), (iv),
(v), (vi), (vii) or (viii) occurs on or after the "ex" date for the
issuance or distribution or Fundamental Change requiring such computation
and prior to the day in question, the Closing Price for each Trading Day on
and after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by which
the Conversion Price is so required to be adjusted as a result of such
other event, and (3) if the "ex" date for the issuance, distribution or
Fundamental Change requiring such computation is prior to the day in
question, after taking into account any adjustment required pursuant to
clause (1) or (2) of this proviso, the Closing Price for each Trading Day
on or after such "ex" date shall be adjusted by adding thereto the amount
of any cash and the fair market value (as determined by the Board of
Directors in a manner consistent with any determination of such value for
purposes of Section 7(d)(iv), (vi) or (vii) whose determination shall be
conclusive and described in a Board Resolution) of the evidences of
indebtedness, shares of capital stock or assets being distributed
applicable to one share of Common Stock as of the close of business on the
day before such "ex" date. For purposes of any computation under Sections
7(d)(vi) or (vii), the Current Market Price of the Common Stock on any date
shall be deemed to be the average of the daily Closing Prices per share of
Common Stock for such day and the next two succeeding Trading Days;
PROVIDED, HOWEVER, that if the "ex" date for any event (other than the
tender offer requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 7(d)(i), (ii), (iii), (iv), (v), (vi),
(vii) or (viii) occurs on or after the Expiration Time or the Tender
Expiration Time, as the case may be, for the tender or exchange offer
requiring such computation and prior to the day in question, the Closing
Price for each Trading Day on and after the "ex" date for such other event
shall be adjusted by multiplying such Closing Price by the reciprocal of
the fraction by which the Conversion Price is so required to be adjusted as
a result of such other event. For purposes of this paragraph, the term "ex"
date, (1) when used with respect to any issuance or distribution or
Fundamental Change, means the first date on which the Common Stock trades
regular way on the relevant exchange or in the relevant market from which
the Closing Price was obtained without the right to receive such issuance
or distribution, (2) when used with respect to any subdivision or
combination of shares of Common Stock, means the first date on which the
Common Stock trades regular way on such exchange or in such market after
the time at which such subdivision or combination becomes effective, and
(3) when used with respect to any tender
17
<PAGE> 20
or exchange offer means the first date on which the Common Stock trades
regular way on such exchange or in such market after the Expiration Time or
Tender Expiration Time, as the case may be, of such offer. Notwithstanding
the foregoing, whenever successive adjustments to the Conversion Price are
called for pursuant to this Section 7(d), such adjustments shall be made to
the Current Market Price as may be necessary or appropriate to effectuate
the intent of this Section 7(d) and to avoid unjust or inequitable results
as determined in good faith by the Board of Directors.
(3) "fair market value" shall mean the amount which a willing buyer
would pay a willing seller in an arm's length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common
Stock have the right to receive any cash, securities or other property or
in which the Common Stock (or other applicable security) is exchanged for
or converted into any combination of cash, securities or other property,
the date fixed for determination of shareholders entitled to receive such
cash, securities or other property (whether such date is fixed by the Board
of Directors or by statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable security is listed
or admitted for trading on the New York Stock Exchange or another national
security exchange, a day on which the New York Stock Exchange or another
national security exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on which trades may
be made thereon or (z) if the applicable security is not so listed,
admitted for trading or quoted, any day other than a Saturday or Sunday or
a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
(x) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 7(d)(i), (ii), (iii), (iv), (v),
(vi), (vii) and (viii), as the Board of Directors considers to be advisable
to avoid or diminish any income tax to holders of Common Stock or rights to
purchase Common stock resulting from any dividend or distribution of stock
(or rights to acquire stock) or from any event treated as such for income
tax purposes.
To the extent permitted by applicable law, the Company from time to
time may reduce the Conversion Price by any amount for any period of time
if the period is at least twenty (20) days, the reduction is irrevocable
during the period and the Board of Directors shall have made a
determination that such reduction would be in the best interests of the
Company, which determination shall be conclusive and described in a Board
Resolution. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall mail to each holder of the Preferred
Stock at his last address appearing on the Company's stock records a notice
of the reduction at least fifteen (15) days prior to the date the reduced
Conversion Price takes effect, and such notice shall state the reduced
Conversion Price and the period during which it will be in effect.
(xi) No adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such
price; PROVIDED, HOWEVER, that any adjustments which by reason of this
Section 7(d)(xi) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
Section 7 shall be made by the Company and shall be made to the nearest
cent or to the nearest one
18
<PAGE> 21
hundredth of a share, as the case may be. No adjustment need be made for a
change in the par value or no par value of the Common Stock.
(xii) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Transfer Agent an Officers'
Certificate setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
Promptly after delivery of such certificate, the Company shall prepare a
notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion
Price to each holder of the Preferred Stock at his last address appearing
on the Company's stock records, within twenty (20) days of the effective
date of such adjustment. Failure to deliver such notice shall not effect
the legality or validity of any such adjustment.
(xiii) In any case in which this Section 7(d) provides that an adjustment
shall become effective immediately after a Record Date for an event, the
Company may defer until the occurrence of such event (i) issuing to the
holder of any share of Preferred Stock converted after such Record Date and
before the occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by such
event over and above the Common Stock issuable upon such conversion before
giving effect to such adjustment and (ii) paying to such holder of
Preferred Stock any amount in cash in lieu of any fraction pursuant to
Section 7(c).
(xiv) For purposes of this Section 7(d), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury
of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The
Company will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Company.
(xv) In lieu of making any adjustment to the Conversion Price pursuant to
Section 7(d)(v), the Company may elect to reserve an amount of cash for
distribution to the holders of the Preferred Stock upon the conversion of
the Preferred Stock so that any such holder converting Preferred Stock will
receive upon such conversion, in addition to the shares of Common Stock and
other items to which such holder is entitled, the full amount of cash which
such holder would have received if such holder had, immediately prior to
the Record Date for such distribution of cash, converted its Preferred
Stock into Common Stock, together with any interest accrued with respect to
such amount, in accordance with this Section 7(d)(xv). The Company may make
such election by providing an Officers' Certificate to the Transfer Agent
to such effect on or prior to the payment date for any such distribution
and depositing with the Deposit Bank (as defined in Section 5(b)) on or
prior to such date an amount of cash equal to the aggregate amount the
holders of the Preferred Stock would have received if such holders had,
immediately prior to the Record Date for such distribution, converted all
of the Preferred Stock into Common Stock, with irrevocable instructions and
authority to the Deposit Bank that such funds be applied in the manner set
forth in this Section 7(d)(xv). The Company shall instruct the Deposit Bank
to invest any such funds so deposited in marketable obligations issued or
fully guaranteed by the United States government with a maturity not more
than three (3) months from the date of issuance. Upon conversion of the
Preferred Stock by a holder, the holder will be entitled to receive, in
addition to the Common Stock issuable upon conversion, an amount of cash
equal to the amount such holder would have received if such holder had,
immediately prior to the Record Date for such distribution, converted its
Preferred Stock into Common Stock, along with such holder's pro
19
<PAGE> 22
rata share of any accrued interest earned as a consequence of the
investment of such funds. Promptly after making an election pursuant to
this Section 7(d)(xv), the Company shall give or shall cause to be given
notice to all holders of the Preferred Stock of such election, which notice
shall state the amount of cash such holders shall be entitled to receive
(excluding interest) upon conversion of the Preferred Stock as a
consequence of the Company having made such election.
(e) In the event that the Company shall be a party to any transaction
(including, without limitation (a) any recapitalization or reclassification of
shares of Common Stock (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination of Common Stock), (b) any consolidation of the Company with, or
merger of the Company into, any other person, or any merger of another person
into the Company (other than a merger that does not result in a
reclassification, conversion, exchange or cancellation of Common Stock), (c) any
sale, transfer or lease of all or substantially all of the assets of the Company
or (d) any compulsory share exchange) pursuant to which either shares of Common
Stock shall be converted into the right to receive other securities, cash or
other property, or, in the case of a sale or transfer of all or substantially
all of the assets of the Company, the holders of Common Stock shall be entitled
to receive other securities, cash or other property, then appropriate provision
shall be made so that the holder of each share of Preferred Stock then
outstanding shall have the right thereafter to convert such Preferred Stock only
into: (x) in the case of any such transaction that does not constitute a Common
Stock Fundamental Change (as defined in Section 7(j)) and subject to funds being
legally available for such purpose under applicable law at the time of such
conversion, the kind and amount of the securities, cash or other property that
would have been receivable upon such recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange by a holder of the
number of shares of Common Stock issuable upon conversion of such share of
Preferred Stock immediately prior to such recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange, after giving effect, in
the case of any Non-Stock Fundamental Change (as defined in Section 7(j)), to
any adjustment in the Conversion Price in accordance with Section 7(i)(i), and
(y) in the case of any such transaction that constitutes a Common Stock
Fundamental Change, common stock of the kind received by holders of Common Stock
as a result of such Common Stock Fundamental Change in an amount determined in
accordance with Section 7(i)(ii). The company formed by such consolidation or
resulting from such merger or that acquires such assets or that acquires the
Company's shares, as the case may be, shall make provisions in its certificate
or articles of incorporation or other constituent document to establish such
right. Such certificate or articles of incorporation or other constituent
document shall provide for adjustments that, for events subsequent to the
effective date of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable to the
relevant adjustments provided for in this Section 7. The above provisions shall
similarly apply to successive transactions of the type described in this Section
7(e).
(f) The issue of stock certificates representing the shares of Common
Stock on conversions of the Preferred Stock shall be made without charge to the
converting holder of the Preferred Stock for any tax in respect of the issue
thereof. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of stock
in any name other than the name in which the shares of Preferred Stock with
respect to which such shares of Common Stock are issued are registered, and the
Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issue thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
20
<PAGE> 23
(g) The Company covenants that all shares of Common Stock which may be
delivered upon conversion of shares of Preferred Stock will upon delivery be
duly and validly issued and fully paid and non-assessable, free of all liens and
charges and not subject to any preemptive rights.
The Company covenants that it will at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock or its issued shares of Common Stock held in its
treasury, or both, a sufficient number of shares of Common Stock for the purpose
of effecting conversions of shares of Preferred Stock not theretofore converted
into Common Stock. For purposes of this reservation of Common Stock, the number
of shares of Common Stock which shall be deliverable upon the conversion of all
outstanding shares of Preferred Stock shall be computed as if at the time of
computation all outstanding shares of Preferred stock were held by a single
holder. The issuance of shares of Common Stock upon conversion of shares of
Preferred Stock is authorized in all respects.
The Company shall from time to time, in accordance with the laws of the
Commonwealth of Pennsylvania, use its best efforts to increase the authorized
number of shares of Common Stock if at any time the number of shares of
authorized and unissued Common Stock shall not be sufficient to permit the
conversion of all the then outstanding shares of Preferred Stock.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Preferred Stock, the Company will take all
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue shares of such Common Stock at
such adjusted Conversion Price.
The Company covenants that if any shares of Common Stock to be provided for
the purpose of conversion of the Preferred Stock hereunder require registration
with or approval of any governmental authority under any Federal or State law
before such shares may be validly issued upon conversion, the Company will in
good faith and as expeditiously as possible endeavor to secure such registration
or approval, as the case may be.
The Company further covenants that if at any time the Common Stock shall be
listed on the Nasdaq National Market or any other national securities exchange
or automated quotation system the Company will, if permitted by the rules of
such exchange or automated quotation system, list and keep listed, so long as
the Common Stock shall be so listed on such exchange or automated quotation
system, all Common Stock issuable upon conversion of the Preferred Stock.
(h) In case:
(i) the Company shall declare a dividend (or any other distribution) on
its Common Stock (that would require an adjustment in the Conversion Price
pursuant to Section 7(d)); or
(ii) the Company shall authorize the granting to the holders of its Common
Stock of rights or warrants to subscribe for or purchase any share of any
class or any other rights or warrants; or
(iii) of any reclassification of the Common Stock of the Company (other
than a subdivision or combination of its outstanding Common Stock, or a
change in par value, or from par value to no par value, or from no par
value to par value), or of any consolidation or merger to which the Company
21
<PAGE> 24
is a party and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the
assets of the Company; or
(iv) of the voluntary or involuntary dissolution, liquidation or winding-
up of the Company;
the Company shall cause to be filed with the Transfer Agent and to be mailed to
each holder of the Preferred Stock at his address appearing on the Company's
stock records, as promptly as possible but in any event at least fifteen days
prior to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined, or (y) the date on which
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occur, and the date
as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of such dividend,
distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
(i) Notwithstanding any other provisions in this Section 7 to the contrary,
if any Fundamental Change (as defined in Section 7(j)) occurs, then the
Conversion Price in effect with be adjusted immediately after such Fundamental
Change as described below. In addition, in the event of a Common Stock
Fundamental Change, shares of Preferred Stock shall thereafter be convertible
solely into common stock of the kind received by holders of Common Stock as the
result of such Common Stock Fundamental Change.
For purposes of calculating any adjustment to be made pursuant to this
Section 7(i) in the event of a Fundamental Change, immediately after such
Fundamental Change (and for such purposes a Fundamental Change shall be deemed
to occur on the earlier of (a) the occurrence of such Fundamental Change and (b)
the date, if any, fixed for determination of shareholders entitled to receive
the cash, securities, property or other assets distributable in such Fundamental
Change to holders of the Common Stock):
(i) in the case of a Non-Stock Fundamental Change, the Conversion Price of
the Preferred Stock immediately following such Non-Stock Fundamental Change
shall be the lower of (A) the Conversion Price in effect immediately prior
to such Non-Stock Fundamental Change, but after giving effect to any other
prior adjustments effected pursuant to this Section 7, and (B) the product
of (1) the greater of the Applicable Price (as defined in Section 7(j)) and
the then applicable Reference Market Price (as defined in Section 7(j)) and
(2) a fraction, the numerator of which is $50 and the denominator of which
is (x) the amount of the redemption price for one share of Preferred Stock
if the redemption date were the date of such Non-Stock Fundamental Change
(or the date of the period commencing on the first date of original
issuance of the Preferred Stock and through February 28, 1999 or the
twelve-month periods commencing March 1, 1999 and March 1, 2000, the
product of 106.50%, 105.85% and 105.20%, respectively, times $50) plus (y)
any then-accrued and unpaid distributions on one share of Preferred Stock;
and
(ii) in the case of a Common Stock Fundamental Change, the Conversion Price
of the Preferred Stock immediately following such Common Stock Fundamental
Change shall be the Conversion Price in effect immediately prior to such
Common Stock Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to this Section 7, multiplied by a fraction,
the numerator of which is the Purchaser Stock Price (as defined in Section
7(j)) and the denominator of which is the Applicable Price; provided,
however, that in the event of a Common Stock Fundamental
22
<PAGE> 25
Change in which (A) 100% of the value of the consideration received by a
holder of Common Stock is common stock of the successor, acquiror or other
third party (and cash, if any, paid with respect to any fractional
interests in such common stock resulting from such Common Stock Fundamental
Change) and (B) all of the Common Stock shall have been exchanged for,
converted into or acquired for, common stock of the successor, acquiror or
other third party (and any cash with respect to fractional interests), the
Conversion Price of the Preferred Stock immediately following such Common
Stock Fundamental Change shall be the Conversion Price in effect
immediately prior to such Common Stock Fundamental Change multiplied by a
fraction, the numerator of which is one (1) and the denominator of which is
the number of shares of common stock of the successor, acquiror or other
third party received by a holder of one share of Common Stock as a result
of such Common Stock Fundamental Change.
(j) The following definitions shall apply to terms used in this Section 7:
(i) The term "Applicable Price" means (i) in the event of a Non-Stock
Fundamental Change in which the holders of Common Stock receive only cash,
the amount of cash received by a holder of one share of Common Stock and
(ii) in the event of any other Fundamental Change, the average of the daily
Closing Price (determined as provided in Section 7(d)(ix)(1)) for one share
of Common Stock during the 10 Trading Days (determined as provided in the
Section 7(d)(ix)(5)) immediately prior to the record date for the
determination of the holders of Common Stock entitled to receive cash,
securities, property or other assets in connection with such Fundamental
Change or, if there is no such record date, prior to the date upon which
the holders of Common Stock shall have the right to receive such cash,
securities, property or other assets. The Closing Price on any Trading Day
may be subject to adjustment as provided in Section 7(d)(ix).
(ii) The term "Common Stock Fundamental Change" means any Fundamental
Change in which more than 50% of the value (as determined in good faith by
the Board of Directors of the Company) of the consideration received by
holders of Common Stock consists of common stock that, for the 10 Trading
Days immediately prior to such Fundamental Change, has been admitted for
listing or admitted for listing subject to notice of issuance on a national
securities exchange or quoted on Nasdaq National Market, provided, however,
that a Fundamental Change shall not be a Common Stock Fundamental Change
unless either (i) the Company continues to exist after the occurrence of
such Fundamental Change and the outstanding Preferred Stock continues to
exist as outstanding Preferred Stock, or (ii) not later than the occurrence
of such Fundamental Change, the outstanding Preferred Stock is converted
into or exchanged for shares of convertible preferred stock, which
convertible preferred stock has voting rights, preferences, limitations or
special rights substantially similar (but no less favorable) to those of
the Preferred Stock.
(iii) The term "Fundamental Change" means the occurrence of any transaction
or event or series of transactions or events pursuant to which all or
substantially all of the Common Stock shall be exchanged for, converted
into, acquired for or shall constitute solely the right to receive cash,
securities, property or other assets (whether by means of an exchange
offer, liquidation, tender, offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise); provided, however, in the
case of any such series of transactions or events, for purposes of
adjustment of the Conversion Price, such Fundamental Change shall be deemed
to have occurred when substantially all of the Common Stock shall have been
exchanged for, converted into or acquired for, or shall constitute solely
the right to receive, such cash, securities, property or other assets, but
the adjustment shall be based upon the consideration that the holders of
the Common Stock received in the transaction or event as a result of which
more than 50% of the Common Stock shall have been
23
<PAGE> 26
exchanged for, converted into or acquired for, or shall constitute solely
the right to receive, such cash, securities, property or other assets.
(iv) The term "Non-Stock Fundamental Change" means any Fundamental Change
other than a Common Stock Fundamental Change.
(v) The term "Purchaser Stock Price" means, with respect to any Common
Stock Fundamental Change, the average of the daily Closing Price for one
share of the common stock received by holders of the Common Stock in such
Common Stock Fundamental Change during the 10 Trading Days immediately
prior to the date fixed for the determination of the holders of the Common
Stock entitled to receive such common stock or, if there is no such date,
prior to the date upon which the holders of the Common Stock shall have the
right to receive such common stock.
(vi) The term "Reference Market Price" shall initially mean $15 2/3 (which
is an amount equal to 66 2/3% of the reported last sale price for Common
Stock on the Nasdaq National Market on February 26, 1998) and, in the event
of any adjustment to the Conversion Price other than as a result of a
Fundamental Change, the Reference Market Price shall also be adjusted so
that the ratio of the Reference Market Price to the Conversion Price after
giving effect to any such adjustment shall always be the same as the ratio
of the initial Reference Market Price to the initial Conversion Price.
8. RANKING. Any class or classes of stock of the Company shall be deemed
to rank:
(a) prior to the Preferred Stock, as to dividends or as to distribution of
assets upon liquidation, dissolution or winding up, if the holders of such class
shall be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Preferred Stock.
(b) on a parity with the Preferred Stock, as to dividends or as to
distribution of assets upon liquidation, dissolution or winding up, whether or
not the dividend rates, Dividend Payment Dates or redemption or liquidation
prices per share thereof be different from those of the Preferred Stock, if the
holders of such class of stock and the Preferred Stock shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in proportion to their respective amounts of
accrued and unpaid dividends per share or liquidation prices, without preference
or priority of one over the other; and
(c) junior to the Preferred Stock, as to dividends or as to the
distribution of assets upon liquidation, dissolution or winding up, if such
stock shall be Common Stock or if the holder of Preferred Stock shall be
entitled to receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to the
holders of shares of such stock.
9. VOTING RIGHTS. (a) The holders of the Preferred Stock will not have
any voting rights except as set forth below or as otherwise from time to time
required by law. In connection with any right to vote, each holder of the
Preferred Stock will have one vote for each share of Preferred Stock held. Any
shares of Preferred Stock held by the Company or any entity controlled by the
Company shall not have voting rights hereunder and shall not be counted in
determining the presence of a quorum.
(b) Whenever dividends on the Preferred Stock or on any outstanding shares
of preferred stock ranking on parity as to dividends with the Preferred Stock
shall be in arrears in an aggregate amount equal to at least six quarterly
dividends (whether or not consecutive), (i) the number of members of the Board
of
24
<PAGE> 27
Directors of the Company shall be increased by two, effective as of the time of
election of such directors as hereinafter provided and (ii) the holders of the
Preferred Stock (voting separately as a class with the holders of preferred
stock ranking on parity as to dividends with the Preferred Stock on which like
voting rights have been conferred and are exercisable, without regard to series)
will have the exclusive right to vote for and elect such two additional
directors of the Company at any meeting of shareholders of the Company at which
directors are to be elected held during the period such dividends remain in
arrears. The right of the holders of the Preferred Stock to vote for such two
additional directors shall terminate when all accrued and unpaid dividends on
the Preferred Stock and all other affected classes or series of preferred stock
ranking on parity as to dividends with the Preferred Stock have been declared
and paid or set apart for payment. The holders of the Preferred Stock voting as
a class shall have the right to remove without cause at any time and replace any
directors such holders shall have elected pursuant to this Section 9. If the
office of any director elected by the holders of Preferred Stock voting as a
class becomes vacant by reason of death, resignation, retirement,
disqualification, removal from office or otherwise, the remaining director
elected by the holders of Preferred Stock (together with any other series of
preferred stock ranking on a parity with the Preferred Stock and upon which like
voting rights have been conferred and are exercisable) voting as a class may
choose a successor who shall hold office for the unexpired term in respect of
which such vacancy occurred. The term of office of all directors so elected
shall terminate immediately upon the termination of the right of the holders of
the Preferred Stock, and the number of directors of the Board of Directors of
the Company shall immediately thereafter be reduced by two.
The foregoing right of the holders of the Preferred Stock with respect to
the election of two directors may be exercised at any annual meeting of
shareholders or at any special meeting of shareholders held for such purpose. If
the right to elect directors shall have accrued to the holders of the Preferred
Stock more than ninety (90) days preceding the date established for the next
annual meeting of shareholders, the President of the Company shall, within
twenty (20) days after the delivery to the Company at its principal office of a
written request for a special meeting signed by the holders of at least 10% of
all outstanding shares of Preferred Stock call a special meeting of the holders
of the Preferred Stock to be held within sixty (60) days after the delivery of
such request for the purpose of electing such additional directors.
(c) So long as the Preferred Stock is outstanding, the Company shall not,
without the affirmative vote or consent of the holders of at least a majority
(unless a higher percentage shall then be required by applicable law) of all
outstanding shares of Preferred Stock voting separately as a class with the
holders of preferred stock ranking on parity as to dividends with the Preferred
Stock on which like voting rights have been conferred and are exercisable,
without regard to series, (i) amend, alter or repeal any provision of the
Articles of Incorporation (including, without limitation, these resolutions) or
the Bylaws of the Company so as to affect adversely the relative rights,
preferences, qualifications, limitations or restrictions of the Preferred Stock,
or (ii) create, authorize or issue, or reclassify any authorized stock of the
Company into, or increase the authorized amount of, any class or series of the
Company's capital stock ranking senior to or on parity with the Preferred Stock
as to dividends or as to distributions of assets upon liquidation, dissolution
or winding up of the Company, whether voluntary or involuntary, or any
obligation or security convertible into shares of such a class or series. In
addition, so long as the Preferred Stock is outstanding, the Company shall not,
without the affirmative vote or consent of the holders of at least a majority
(unless a higher percentage shall then be required by applicable law) of all
outstanding shares of Preferred Stock voting separately as a class with the
holders of preferred stock ranking on parity as to dividends with the Preferred
Stock on which like voting rights have been conferred and are exercisable,
without regard to series, enter into a share exchange pursuant to which the
Preferred Stock would be exchanged for any other securities or merge or
consolidate with or into any other person or permit any other person to merge or
consolidate with or into the Company, unless in such case each share of
Preferred Stock shall remain outstanding or unaffected or shall be converted
into or exchanged for convertible exchangeable preferred stock of the surviving
entity having
25
<PAGE> 28
voting rights, preferences, limitations or special rights thereof substantially
similar (but no less favorable) to a share of Preferred Stock. A class vote on
the part of the Preferred Stock shall, without limitation, specifically not be
deemed to be required (except as otherwise required by law or resolution of the
Company's Board of Directors) in connection with (a) the authorization, issuance
or increase in the authorized amount of any shares of capital stock ranking
junior to or on parity with the Preferred Stock both as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, when and if issued,
including Common Stock; or (b) the authorization, issuance or increase in the
amount of any bonds, mortgages, debentures or other obligations of the Company
(other than those that may be covered by clause (ii) of the preceding sentence).
The holders of Preferred Stock shall also be entitled to vote on certain
amendments or supplements to the Indenture establishing the Debentures, for
which the Preferred Stock may be exchanged, as described in Section 10 hereof,
and provided in Article XI of such Indenture.
10. EXCHANGE. (a) The Preferred Stock shall be exchangeable, in whole but
not in part, at the option of the Company on any Dividend Payment Date beginning
March 1, 1999, for the Debentures at the rate of $50 principal amount of
Debentures for each share of Preferred Stock outstanding at the time of
exchange; PROVIDED that the Debentures will be issuable in denominations of
$1,000 and integral multiples thereof. If the exchange results in an amount of
Debentures that is not an integral multiple of $1,000, the amount in excess of
the closest integral multiple of $1,000 will be paid in cash by the Company.
(b) The Company will mail to each record holder of the Preferred Stock
written notice of its intention to exchange the Preferred Stock for the
Debentures no less than 30 nor more than 60 days prior to the date of the
exchange (the "Exchange Date"). The notice shall specify the Exchange Date, the
place or places where certificates for shares of the Preferred Stock are to be
surrendered for Debentures and shall state that dividends on Preferred Stock
will cease to accrue on and after the Exchange Date.
(c) If the Company has caused the Debentures to be authenticated on or
prior to the Exchange Date and has complied with the other provisions of this
Section 10, then, notwithstanding that any certificates for shares of Preferred
Stock have not been surrendered for exchange, on the Exchange Date dividends
shall cease to accrue on the Preferred Stock and at the close of business on the
Exchange Date the holders of the Preferred Stock shall cease to be shareholders
with respect to the Preferred Stock and shall have no interest in or other
claims against the Company by virtue thereof and shall have no voting or other
rights with respect to the Preferred Stock, except the right to receive the
Debentures issuable upon such exchange and the right to accumulated and unpaid
dividends, without interest thereon, upon surrender (and endorsement, if
required by the Company) of their certificates, and the shares evidenced thereby
shall no longer be deemed outstanding for any purpose. The Company will cause
the Debentures to be authenticated on or before the Exchange Date, and the
Company will pay interest on the Debentures at the rate and on the dates
specified in such Indenture from and after the Exchange Date.
(d) Notwithstanding the foregoing, if notice of exchange has been given
pursuant to this Section 10 and any holder of shares of Preferred Stock shall,
prior to the close of business on the Exchange Date, give written notice to the
Company pursuant to Section 7 of the conversion of any or all of the shares held
by the holder (accompanied by a certificate or certificates for such shares,
duly endorsed or assigned to the Company), then the exchange shall not become
effective as to the shares to be converted and the conversion shall become
effective as provided in Section 7.
26
<PAGE> 29
(e) The Debentures will be delivered to the persons entitled thereto upon
surrender to the Company or its agent appointed for that purpose of the
certificates for the shares of Preferred Stock being exchanged therefor.
(f) Notwithstanding the other provisions of this Section 10, if on the
Exchange Date the Company has not paid full cumulative dividends on the
Preferred Stock (or set aside a sum therefor) or an Event of Default under the
Indenture shall have occurred and be continuing, the Company may not exchange
the Preferred Stock for the Debentures and any notice previously given pursuant
to this Section 10 shall be of no effect.
(g) Prior to the Exchange Date, the Company will comply with any
applicable securities and blue sky laws with respect to the exchange of the
Preferred Stock for the Debentures.
(h) Dividends with respect to the shares of Preferred Stock to be
exchanged which are due on the quarterly Dividend Payment Date on which the
exchange is effected will be mailed to holders in the regular course.
11. RECORD HOLDERS. The Company and the Transfer Agent may deem and treat
the record holder of any shares of Preferred Stock as the true and lawful owner
thereof for all purposes and neither the Company nor the Transfer Agent shall be
affected by any notice to the contrary.
12. NOTICE. Except as may otherwise be provided for herein, all notices
referred to herein shall be in writing, and all notices hereunder shall be
deemed to have been given upon receipt, in the case of a notice of conversion
given to the Company as contemplated in Section 7(b) hereof, or, in all other
cases, upon the earlier of receipt of such notice or three Business Days after
the mailing of such notice if sent by registered mail (unless first-class mail
shall be specifically permitted for such notice under the terms of this
resolution) with postage prepaid, addressed, if to the Company, to its offices
at 64 Sidney Street, Cambridge, Massachusetts 02139-4136 (Attention: Chief
Financial Officer) or to an agent of the Company designated as permitted by this
certificate, or, if to any holder of the Preferred Stock, to such holder at the
address of such holder of the Preferred Stock as listed in the Company's stock
records or to such other address as the Company or holder, as the case may be,
shall have designated by notice similarly given.
13. RESTRICTIONS ON TRANSFER.
(a) So long as the shares of Preferred Stock are eligible for book-entry
settlement with the Depositary, or unless otherwise required by law, all shares
of Preferred Stock that are so eligible may be represented by a Preferred Stock
certificate in global form (the "Global Certificate") registered in the name of
the Depositary or the nominee of the Depositary, except as otherwise specified
below. The transfer and exchange of beneficial interests in the Global
Certificate shall be effected through the Depositary in accordance with this
Statement and the procedures of the Depositary therefor.
Shares of Preferred Stock that upon initial issuance are not owned by
Institutional Accredited Investors will be represented by one or more Global
Certificates. Transfers of interests in a Global Certificate will be made in
accordance with the standing instructions and procedures of the Depository and
its participants. The Transfer Agent shall make appropriate endorsements to
reflect increases or decreases in the Global Certificate as set forth on the
face of the Global Certificate to reflect any such transfers.
27
<PAGE> 30
Except as provided below, beneficial owners of an interest in a Global
Certificate shall not be entitled to have certificates registered in their
names, will not receive or be entitled to receive physical delivery of
certificates in definitive form and will not be considered holders of such
Global Certificates.
(b) So long as the shares of Preferred Stock are eligible for book-entry
settlement, or unless otherwise required by law, upon any transfer of a
definitive Preferred Stock certificate to a QIB in accordance with Rule 144A or
a Person other than a U.S. Person, and upon receipt of the definitive Preferred
Stock certificate or Preferred Stock certificates being so transferred, together
with a certification, substantially in the form of the reverse of the
certificate, from the transferor that the transfer is being made in compliance
with Rule 144A or to a Person other than a U.S. Person (or other evidence
satisfactory to the Transfer Agent), the Transfer Agent shall make an
endorsement on the Global Certificate to reflect an increase in the aggregate
amount of the Preferred Stock represented by the Global Certificate, the
Transfer Agent shall cancel such definitive Preferred Stock certificate or
Preferred Stock certificates in accordance with the standing instructions and
procedures of the Depositary and the aggregate amount of Preferred Stock
represented by the Global Certificate will be increased accordingly; PROVIDED
that no definitive Preferred Stock certificate, or portion thereof, in respect
of which the Company or an Affiliate of the Company held any beneficial interest
shall be included in such Global Certificate until such definitive Preferred
Stock certificate is freely tradable in accordance with Rule 144(k); PROVIDED
FURTHER that the Transfer Agent shall issue Preferred Stock certificates in
definitive form upon any transfer of a beneficial interest in any Global
Certificate to the Company or any Affiliate of the Company.
Upon any sale or transfer of Preferred Stock to an Institutional Accredited
Investor (other than pursuant to a registration statement that has been declared
effective under the Securities Act), such Institutional Accredited Investor
shall, prior to such sale or transfer, furnish to the Company and/or the
Transfer Agent a signed letter containing representations and agreements
relating to certain restrictions on transfer, the form of which is available
from the Transfer Agent upon request, and shall check the appropriate box on the
form of Assignment form on the reverse of such certificate, the form of which is
set forth in Section 14(b).
Any Global Certificate may be endorsed with or have incorporated in the
text thereof such legends or recitals or changes not inconsistent with the
provisions of this Statement as may be required by the custodian, the
Depositary, by the New York Stock Exchange or by the National Association of
Securities Dealers, Inc. in order for the shares of Preferred Stock to be
tradeable on The Portal Market or as may be required for the shares of Preferred
Stock to be tradeable on any other market developed for trading of securities
pursuant to Rule 144A or required to comply with any applicable law or any
regulation thereunder or with the rules and regulations of any securities
exchange upon which the shares of Preferred Stock may be listed or traded or to
conform with any usage with respect thereto, or to indicate any special
limitations or restrictions to which any particular shares of Preferred Stock
are subject.
(c) Every share of Preferred Stock that bears or is required under this
Section 13(c) to bear the legend set forth in this Section 13(c) (together with
any Common Stock issued upon conversion of the Preferred Stock and required to
bear the legend set forth in Section 13(d), collectively, the "Restricted
Preferred Stock") shall be subject to the restrictions on transfer set forth in
this Section 13(c) (including those set forth in the legend set forth below)
unless such restrictions on transfer shall be waived by written consent of the
Company, and the holder of each such Restricted Preferred Stock, by such
holder's acceptance thereof, agrees to be bound by all such restrictions on
transfer. As used in Sections 13(c) and 13(d), the term "transfer" encompasses
any sale, pledge, transfer or other disposition whatsoever of any Restricted
Preferred Stock.
28
<PAGE> 31
Until two (2) years after the original issue date of any Preferred Stock,
any certificate evidencing such Preferred Stock (and all securities issued in
exchange therefor or substitution thereof, other than Common Stock, if any,
issued upon conversion therefor, which shall bear the legend set forth in
Section 13(d), if applicable) shall bear a legend in substantially the following
form, unless such Preferred Stock has been sold pursuant to a registration
statement that has been declared effective under the Securities Act (and which
continues to be effective at the time of such transfer), or unless otherwise
agreed by the Company in writing, with written notice thereof to the Transfer
Agent:
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED HEREBY
IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT, WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED HEREBY, RESELL OR
OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH SECURITY WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT (A) TO THE COMPANY OR
ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO BOSTON
EQUISERVE, L.P., AS TRANSFER AGENT, A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THE SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM SUCH TRANSFER AGENT), (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME
OF SUCH TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE 2(E) ABOVE), IT WILL FURNISH TO BOSTON EQUISERVE, L.P.,
AS TRANSFER AGENT, A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH SECURITY (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE 2(E) ABOVE), THE HOLDER MUST CHECK THE APPROPRIATE BOX
SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE TRANSFER AGENT. IF THE PROPOSED TRANSFEREE
IS A PURCHASER WHO IS NOT A U.S. PERSON OR IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO BOSTON
EQUISERVE,
29
<PAGE> 32
L.P., AS TRANSFER AGENT, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS
LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE SECURITY
EVIDENCED HEREBY PURSUANT TO CLAUSE 2(E) ABOVE OR UPON THE EXPIRATION OF
TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED HEREBY.
Any Preferred Stock (or share of stock issued in exchange or substitution
therefor) as to which such restrictions on transfer shall have expired in
accordance with their terms or as to the conditions for removal of the foregoing
legend set forth therein have been satisfied may, upon surrender of such
Preferred Stock for exchange to the Transfer Agent in accordance with the
provisions of this Section 13, be exchanged for new Preferred Stock, of like
tenor and aggregate amount, which shall not bear the restrictive legend required
by this Section 13(c).
Notwithstanding any other provisions of this Statement (other than the
provisions set forth in this Section 13(c)), a Global Certificate 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 to a
successor Depositary or a nominee of such successor Depositary.
The Depositary shall be a clearing agency registered under the Exchange
Act. The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Global Certificates. Initially, the Global
Certificate shall be issued to the Depositary, registered in the name of Cede &
Co., as the nominee of the Depositary, and deposited with the custodian for Cede
& Co.
If at any time the Depositary for a Global Certificate notifies the Company
that it is unwilling or unable to continue as Depositary for such Global
Certificate, the Company may appoint a successor Depositary with respect to such
Global Certificate. If a successor Depositary for the Preferred Stock is not
appointed by the Company within 90 days after the Company receives such notice,
the Company will execute, and the Transfer Agent will authenticate and deliver,
Preferred Stock in certificated form, in an aggregate principal amount equal to
the principal amount of the Global Certificate, in exchange for such Global
Certificate.
Preferred Stock in definitive form issued in exchange for all or a part of
a Global Certificate pursuant to this Section 13 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 Transfer Agent. Upon execution and authentication, the Transfer
Agent shall deliver such Preferred Stock in certificated form to the Persons in
whose names such Preferred Stock in definitive form are so registered.
At such time as all interests in a Global Certificate have been redeemed,
converted, exchanged, repurchased or canceled for Preferred Stock in definitive
form, or transferred to a transferee who receives Preferred Stock in definitive
form, such Global Certificate shall be, upon receipt thereof, canceled by the
Transfer Agent in accordance with standing procedures and instructions existing
between the custodian and Depositary. At any time prior to such cancellation, if
any interest in a Global Certificate is exchanged for Preferred Stock in
certificated form, redeemed, converted, exchanged, repurchased by the Company or
canceled, or transferred for part of a Global Certificate, the
30
<PAGE> 33
principal amount of such Global Certificate shall, in accordance with the
standing procedures and instructions existing between the custodian and the
Depositary, be reduced or increased, as the case may be, and an endorsement
shall be made on such Global Certificate, by the Transfer Agent or the
custodian, at the direction of the Transfer Agent, to reflect such reduction or
increase.
(d) Until two (2) years after the original issuance date of any Preferred
Stock, any stock certificate representing Common Stock issued upon conversion of
a share of Preferred Stock shall bear a legend in substantially the following
form, unless such Common Stock has been sold pursuant to a registration
statement that has been declared effective under the Securities Act (and which
continues to be effective at the time of such transfer) or such Common Stock has
been issued upon conversion of Preferred Stock that have been transferred
pursuant to a registration statement that has been declared effective under the
Securities Act, or unless otherwise agreed by the Company in writing with
written notice thereof to the transfer agent for the Common Stock:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY UPON THE CONVERSION
OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED, (1) IT WILL NOT
RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS, EXCEPT
(A) THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
COMPLIANCE WITH RULE 144A, (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO BOSTON EQUISERVE, L.P., AS
TRANSFER AGENT, A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE COMMON STOCK
EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRANSFER AGENT), (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (E) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER); (2) PRIOR TO ANY SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT
TO CLAUSE 1(E) ABOVE), IT WILL FURNISH TO BOSTON EQUISERVE, L.P., AS
TRANSFER AGENT, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
THE COMPANY MAY REASONABLE REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) IT WILL DELIVER TO
EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED (OTHER
THAN A TRANSFER PURSUANT TO CLAUSE 1(E) ABOVE) A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF
THE TRANSFER OF
31
<PAGE> 34
THE COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE 1(E) ABOVE OR THE
EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE SECURITY UPON THE
CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED.
Any such Common Stock as to which such restrictions on transfer shall have
expired in accordance with their terms or as to which the conditions for removal
of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 13(d).
(e) Any Preferred Stock or Common Stock issued upon the conversion or
exchange of a Security that, prior to the expiration of the holding period
applicable to sales thereof under Rule 144(k) under the Securities Act (or any
successor provision), is purchased or owned by the Company or any Affiliate
thereof may not be resold by the Company or such Affiliate unless registered
under the Securities Act or resold pursuant to an exemption from the
registration requirements of the Securities Act in a transaction which results
in such Preferred Stock or Common Stock, as the case may be, no longer being
"restricted securities" (as defined under Rule 144).
(f) Notwithstanding any provision of Section 13 to the contrary, in the
event Rule 144(k) as promulgated under the Securities Act (or any successor
rule) is amended to change the two-year period under Rule 144(k) (or the
corresponding period under any successor rule), from and after receipt by the
Transfer Agent of the Officers' Certificate and Opinion of Counsel provided for
in this Section 13(f), (i) the references in the first sentence of the second
paragraph of Section 13(c) to "two (2) years" and in the restrictive legend set
forth in such paragraph to "TWO YEARS" shall be deemed for all purposes hereof
to be references to such changed period, (ii) the references in the first
paragraph of Section 13(d) to "two (2) years" and in the restrictive legend set
forth in such paragraph to "TWO YEARS" shall be deemed for all purposes hereof
to be references to such changed period and (iii) all corresponding references
in the Preferred Stock and the restrictive legends thereon shall be deemed for
all purposes hereof to be references to such changed period, provided that such
changes shall not become effective if they are otherwise prohibited by, or would
otherwise cause a violation of, the then-applicable federal securities laws. As
soon as practicable after the Company has knowledge of the effectiveness of any
such amendment to change the two-year period under Rule 144(k) (or the
corresponding period under any successor rule), unless such changes would
otherwise be prohibited by, or would otherwise cause a violation of, the
then-applicable securities law, the Company shall provide to the Trustee an
Officers' Certificate and Opinion of Counsel informing the Transfer Agent of the
effectiveness of such amendment and the effectiveness of the foregoing changes
to Sections 13(c) and 13(d) and the Preferred Stock. The provisions of this
Section 13(f) will not be effective until such time as the Opinion of Counsel
and Officers' Certificate have been received by the Trustee hereunder. This
Section 13(f) shall apply to successive amendments to Rule 144(k) (or any
successor rule) changing the holding period thereunder.
32
<PAGE> 35
14. FORM OF NOTICE OF CONVERSION; FORM OF ASSIGNMENT.
(a) The following is the form of Conversion Notice to be set forth on the
reverse of the Preferred Stock certificate:
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: Boston EquiServe, L.P.
The undersigned registered owner of the Preferred Stock hereby irrevocably
exercises the option to convert the Preferred Stock, or the portion hereof below
designated, into shares of Common Stock in accordance with the terms of the
Preferred Stock Statement, and directs that the shares issuable and deliverable
upon such conversion, together with any check in payment for fractional shares
and any Preferred Stock representing any unconverted amount of shares hereof, be
issued and delivered to the registered holder hereof unless a different name has
been indicated below. If shares or any portion of the Preferred Stock 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.
Dated:
-----------------------------
----------------------------------------
----------------------------------------
Signature(s)
33
<PAGE> 36
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule
17AD-15 if shares of Common Stock are to
be issued, or Preferred Stock to be
delivered, other than to and in the name
of the registered holder.
- ---------------------------------------
Signature Guarantee
Fill in for registration of shares if to
be issued, and Preferred Stock if to be
delivered, other than to and in the name
of the registered holder:
- ---------------------------------------
(Name)
- ---------------------------------------
(Street Address)
- ---------------------------------------
(City, State and Zip Code)
Please print name and address
Number of shares to be converted
(if less than all):
----------------------------------------
Social Security or Other Taxpayer
Identification Number
(b) The following is the form of Assignment to be set forth on the reverse
of the Preferred Stock certificate:
[FORM OF ASSIGNMENT]
For value received __________________________ hereby sell(s), assign(s) and
transfer(s) unto _________________________ (Please insert social security or
Taxpayer Identification Number of assignee) the Preferred Stock, and hereby
irrevocably constitutes and appoints ________________________ attorney to
transfer the said Preferred Stock on the books of the Company, with full power
of substitution in the premises.
In connection with any transfer of the Preferred Stock within the United
States or to, or for the account or benefit of, U.S. Persons occurring within
two years of the original issuance
34
<PAGE> 37
of such Preferred Stock (unless such Preferred Stock is being transferred
pursuant to a registration statement that has been declared effective under the
Securities Act), the undersigned confirms that such Preferred Stock is being
transferred:
|_| To Alkermes, Inc. or a subsidiary thereof; or
|_| Pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
|_| To an Institutional Accredited Investor pursuant to and in compliance
with the Securities Act of 1933, as amended; or
|_| Pursuant to and in compliance with Rule 144 under the Securities Act
of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such
Preferred Stock is not being transferred to an "affiliate" of the Company as
defined in Rule 144 under the Securities Act of 1933, as amended (an
"Affiliate").
|_| The transferee is an Affiliate of the Company.
Dated:
------------------------------
- -------------------------------------
- -------------------------------------
Signature(s)
Signature(s) must be guaranteed by
an eligible Guarantor Institution
(banks, stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule
17AD-15 if shares of Common Stock are to
be issued, or Preferred Stock to be
delivered, other than to and in the name
of the registered holder.
- -------------------------------------
Signature Guarantee
35
<PAGE> 38
NOTICE: The signature on the conversion notice, or the assignment must
correspond with the name as written upon the face of the Preferred Stock in
every particular without alteration or enlargement or any change whatever.
36
<PAGE> 1
EXHIBIT 4.7
37
<PAGE> 2
522779.001(BF)
================================================================================
ALKERMES, INC.
AND
STATE STREET BANK AND TRUST COMPANY
as Trustee
INDENTURE
Dated as of March 1, 1998
6 1/2% Convertible Subordinated Debentures
================================================================================
<PAGE> 3
CROSS REFERENCE SHEET*
-------------------------------------
Between
Provisions of Trust Indenture Act of 1939 and Indenture, dated as of March
1, 1998, between Alkermes, Inc. and State Street Bank and Trust Company, as
Trustee, providing for the 6 1/2% Convertible Subordinated Debentures:
Section of the Act Section of Indenture
- -------------------------------------------- ------------------------
310(a)(1) and (2)........................... 8.9
310(a)(3) and (4)........................... Inapplicable
310(b)...................................... 8.8 and 8.10(b) and (d)
310(c)...................................... Inapplicable
311(a)...................................... 8.13
311(b)...................................... 8.13
311(c)...................................... Inapplicable
312(a)...................................... 6.1 and 6.2(a)
312(b)...................................... 6.2(b)
312(c)...................................... 6.2(c)
313(a)...................................... 6.3(a)
313(b)(1)................................... Inapplicable
313(b)(2)................................... 6.3(a)
313(c)...................................... 6.3(a)
313(d)...................................... 6.3(b)
314(a)...................................... 6.4
314(b)...................................... Inapplicable
314(c)(1) and (2)........................... 16.5
314(c)(3)................................... Inapplicable
314(d)...................................... Inapplicable
314(e)...................................... 16.5
314(f)...................................... Inapplicable
315(a), (c) and (d)......................... 8.1
315(b)...................................... 7.8
315(e)...................................... 7.9
316(a)(1)................................... 7.7
316(a)(2)................................... Not required
316(a) (last sentence)...................... 9.4
316(b)...................................... 11.2
317(a)...................................... 7.2
317(b)...................................... 5.4 and 13.2
318(a)...................................... 16.8
- -----------
* This Cross Reference Sheet is not part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS.................................................... -1-
Section 1.1 Definitions............................................. -1-
ARTICLE II ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE
OF DEBENTURES......................................................... -9-
Section 2.1 Designation, Amount and Issue of Debentures............. -9-
Section 2.2 Form of Debentures...................................... -9-
Section 2.3 Date and Denomination of Debentures; Maturity;
Payments of Interest.................................... -10-
Section 2.4 Execution of Debentures................................. -11-
Section 2.5 Exchange and Registration of Transfer of Debentures..... -13-
Section 2.6 Mutilated, Destroyed, Lost or Stolen Debentures......... -21-
Section 2.7 Temporary Debentures.................................... -22-
Section 2.8 Cancellation of Debentures Paid, Etc.................... -22-
ARTICLE III REDEMPTION OF DEBENTURES..................................... -22-
Section 3.1 Redemption Prices....................................... -22-
Section 3.2 Notice of Redemption; Selection of Debentures........... -23-
Section 3.3 Payment of Debentures Called for Redemption............. -24-
Section 3.4 Conversion Arrangement on Call for Redemption........... -25-
ARTICLE IV SUBORDINATION OF DEBENTURES................................... -26-
Section 4.1 Agreement of Subordination.............................. -26-
Section 4.2 Payments to Debentureholders............................ -26-
Section 4.3 Subrogation of Debentures............................... -29-
Section 4.4 Authorization by Debentureholders....................... -30-
Section 4.5 Notice to Trustee....................................... -30-
Section 4.6 Trustee's Relation to Senior Indebtedness............... -31-
Section 4.7 No Impairment of Subordination.......................... -32-
Section 4.8 Certain Conversions Deemed Payment...................... -32-
Section 4.9 Article Applicable to Paying Agents..................... -32-
Section 4.10 Senior Indebtedness Entitled to Rely.................... -32-
ARTICLE V PARTICULAR COVENANTS OF THE COMPANY............................ -33-
Section 5.1 Payment of Principal, Premium and Interest.............. -33-
Section 5.2 Maintenance of Office or Agency......................... -33-
Section 5.3 Appointments to Fill Vacancies in Trustee's Office...... -33-
Section 5.4 Provisions as to Paying Agent........................... -34-
Section 5.5 Existence............................................... -35-
iii
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
Section 5.6 Maintenance of Properties............................... -35-
Section 5.7 Payment of Taxes and Other Claims....................... -35-
Section 5.8 Stay, Extension and Usury Laws.......................... -35-
Section 5.9 Compliance Certificate.................................. -36-
Section 5.10 Further Instruments and Acts............................ -36-
Section 5.11 Rule 144A Information Requirement....................... -36-
ARTICLE VI DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND
THE TRUSTEE...................................................... -37-
Section 6.1 Debentureholders' Lists................................. -37-
Section 6.2 Preservation and Disclosure of Lists.................... -37-
Section 6.3 Reports by Trustee...................................... -37-
Section 6.4 Reports by Company...................................... -38-
ARTICLE VII DEFAULTS AND REMEDIES........................................ -38-
Section 7.1 Events of Default....................................... -38-
Section 7.2 Payments of Debentures on Default; Suit Therefor........ -41-
Section 7.3 Application of Monies Collected by Trustee.............. -43-
Section 7.4 Proceedings by Debentureholder.......................... -43-
Section 7.5 Proceedings by Trustee.................................. -44-
Section 7.6 Remedies Cumulative and Continuing...................... -44-
Section 7.7 Direction of Proceedings and Waiver of Defaults by
Majority of Debentureholders............................ -45-
Section 7.8 Notice of Defaults...................................... -45-
Section 7.9 Undertaking to Pay Costs................................ -45-
Section 7.10 Delay or Omission Not Waiver............................ -46-
ARTICLE VIII CONCERNING THE TRUSTEE...................................... -46-
Section 8.1 Duties and Responsibilities of Trustee.................. -46-
Section 8.2 Reliance on Documents, Opinions, Etc.................... -47-
Section 8.3 No Responsibility for Recitals, Etc..................... -48-
Section 8.4 Trustee, Paying Agents, Conversion Agents or
Registrar May Own Debentures. .......................... -49-
Section 8.5 Monies to Be Held in Trust.............................. -49-
Section 8.6 Compensation and Expenses of Trustee.................... -49-
Section 8.7 Officers' Certificate as Evidence....................... -49-
Section 8.8 Conflicting Interests of Trustee........................ -50-
Section 8.9 Eligibility of Trustee.................................. -50-
iv
<PAGE> 6
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
Section 8.10 Resignation or Removal of Trustee....................... -50-
Section 8.11 Acceptance by Successor Trustee......................... -51-
Section 8.12 Succession by Merger, Etc............................... -52-
Section 8.13 Limitation on Rights of Trustee as Creditor............. -53-
ARTICLE IX CONCERNING THE DEBENTUREHOLDERS............................... -53-
Section 9.1 Action by Debentureholders.............................. -53-
Section 9.2 Proof of Execution by Debentureholders.................. -53-
Section 9.3 Who Are Deemed Absolute Owners.......................... -53-
Section 9.4 Company-Owned Debentures Disregarded.................... -54-
Section 9.5 Revocation of Consents; Future Holders Bound............ -54-
ARTICLE X DEBENTUREHOLDERS' MEETINGS..................................... -55-
Section 10.1 Purpose of Meetings..................................... -55-
Section 10.2 Call of Meetings by Trustee............................. -55-
Section 10.3 Call of Meetings by Company or Debentureholders......... -56-
Section 10.4 Qualifications for Voting............................... -56-
Section 10.5 Regulations............................................. -56-
Section 10.6 Voting.................................................. -57-
Section 10.7 No Delay of Rights by Meeting........................... -57-
ARTICLE XI SUPPLEMENTAL INDENTURES....................................... -57-
Section 11.1 Supplemental Indentures Without Consent
of Debentureholders..................................... -57-
Section 11.2 Supplemental Indentures with Consent
of Debentureholders..................................... -59-
Section 11.3 Effect of Supplemental Indentures....................... -59-
Section 11.4 Notation on Debentures.................................. -60-
Section 11.5 Evidence of Compliance of Supplemental Indenture
to Be Furnished Trustee ................................ -60-
ARTICLE XII MERGER, SALE OR CONSOLIDATION................................ -60-
Section 12.1 Limitation on Merger, Sale or Consolidation............. -60-
Section 12.2 Successor Corporation to Be Substituted................. -61-
ARTICLE XIII SATISFACTION AND DISCHARGE OF INDENTURE..................... -61-
Section 13.1 Discharge of Indenture.................................. -61-
Section 13.2 Deposited Monies to Be Held in Trust by Trustee......... -62-
v
<PAGE> 7
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
Section 13.3 Paying Agent to Repay Monies Held....................... -62-
Section 13.4 Return of Unclaimed Monies.............................. -62-
Section 13.5 Reinstatement........................................... -63-
ARTICLE XIV IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND
DIRECTORS............................................................. -63-
Section 14.1 Indenture and Debentures Solely Corporate
Obligations............................................. -63-
ARTICLE XV CONVERSION OF DEBENTURES...................................... -63-
Section 15.1 Right to Convert........................................ -63-
Section 15.2 Exercise of Conversion Privilege; Issuance of
Common Stock on Conversion; No Adjustment for
Interest or Dividends................................... -64-
Section 15.3 Cash Payments in Lieu of Fractional Shares.............. -65-
Section 15.4 Conversion Price........................................ -66-
Section 15.5 Adjustment of Conversion Price.......................... -66-
Section 15.6 Reclassification, Consolidation, Merger or Sale......... -76-
Section 15.7 Taxes on Shares Issued.................................. -78-
Section 15.8 Reservation of Shares; Shares to Be Fully Paid;
Listing of Common Stock ................................ -78-
Section 15.9 Responsibility of Trustee............................... -79-
Section 15.10 Notice to Holders Prior to Certain Actions.............. -79-
Section 15.11 Adjustments to Conversion Price in the Event of a
Fundamental Change...................................... -80-
ARTICLE XVI MISCELLANEOUS PROVISIONS..................................... -83-
Section 16.1 Provisions Binding on Company's Successors.............. -83-
Section 16.2 Official Acts by Successor Corporation.................. -83-
Section 16.3 Addresses for Notices, Etc.............................. -83-
Section 16.4 Governing Law........................................... -83-
Section 16.5 Evidence of Compliance with Conditions Precedent;
Certificates to Trustee ................................ -84-
Section 16.6 Legal Holidays.......................................... -84-
Section 16.7 No Security Interest Created............................ -84-
Section 16.8 Trust Indenture Act..................................... -84-
Section 16.9 Benefits of Indenture................................... -84-
Section 16.10 Table of Contents, Headings, Etc........................ -85-
Section 16.11 Authenticating Agent.................................... -85-
Section 16.12 Execution in Counterparts............................... -86-
vi
<PAGE> 8
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
EXHIBIT A Form of Debenture
EXHIBIT B Form of Institutional Accredited Investor Letter
vii
<PAGE> 9
INDENTURE, dated as of March 1, 1998, between Alkermes, Inc., a
Pennsylvania corporation (hereinafter sometimes called the "Company", as more
fully set forth in Section 1.1), and State Street Bank and Trust Company, a
trust company organized under the laws of the Commonwealth of Massachusetts
(hereinafter sometimes called the "Trustee", as more fully set forth in Section
1.1).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized
the issue of its 6 1/2% Convertible Subordinated Debentures (hereinafter
sometimes called the "Debentures"), in an aggregate principal amount not to
exceed $115,000,000 and, to provide the terms and conditions upon which the
Debentures are to be authenticated, issued and delivered, the Company has duly
authorized the execution and delivery of this Indenture; and
WHEREAS, the Debentures, the certificate of authentication to be borne by
the Debentures, a form of assignment, and a form of conversion notice to be
borne by the Debentures are to be substantially in the forms hereinafter
provided for; and
WHEREAS, all acts and things necessary to make the Debentures, when
executed by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute these presents a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Debentures have in
all respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Debentures
are to be authenticated, issued and delivered, and in consideration of the
premises and of the purchase and acceptance of the Debentures by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the
Debentures (except as otherwise provided below), as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Each of the terms defined in this Section 1.1
(except as herein otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section 1.1. Each of
the terms used in this Indenture, which are defined in the Trust Indenture Act
or which are by reference therein defined in the Securities Act (except as
herein otherwise expressly provided or unless the context otherwise requires)
shall have the meanings assigned to such term in said Trust Indenture Act and in
said Securities
<PAGE> 10
Act as in force at the date of the execution of this Indenture. The words
"herein," "hereof," "hereunder," and words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision. The terms defined in this Article include the plural as well as the
singular.
ADDITIONAL INTEREST: The term "Additional Interest" shall have the meaning
specified in Section 2.3.
AFFILIATE: The term "Affiliate" of any specified person shall mean any
other person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person. For the purposes of this
definition, "control," when used with respect to any specified person means the
power to direct or cause the direction of the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
APPLICABLE PRICE: The term "Applicable Price" shall have the meaning
specified in Section 15.11(b).
BOARD OF DIRECTORS: The term "Board of Directors" shall mean the Board of
Directors of the Company or a committee of such Board duly authorized to act for
it hereunder.
BOARD RESOLUTION: The term "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: The term "Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which the banking
institutions in The City of New York or the city in which the Corporate Trust
Office is located are authorized or obligated by law or executive order to close
or be closed.
COMMISSION: The term "Commission" shall mean the Securities and Exchange
Commission.
COMMON STOCK: The term "Common Stock" shall mean any stock of any class of
the Company 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.
Subject to the provisions of Section 15.6, however, shares issuable on
conversion of Debentures shall include only shares of the class designated as
common stock of the Company at the date of this 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
(2)
<PAGE> 11
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.
COMMON STOCK FUNDAMENTAL CHANGE: The term "Common Stock Fundamental Change"
shall have the meaning specified in Section 15.11(b).
COMPANY: The term "Company" shall mean Alkermes, Inc., a Pennsylvania
corporation, and subject to the provisions of Article XII, shall include its
successors and assigns.
CONVERSION PRICE: The term "Conversion Price" shall have the meaning
specified in Section 15.4.
CORPORATE TRUST OFFICE: The term "Corporate Trust Office," or other similar
term, shall mean the office of the Trustee at which at any particular time its
corporate trust business shall be principally administered, which office is, at
the date as of which this Indenture is dated, located at 2 International Place,
4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Division
(Alkermes, Inc., 6 1/2% Convertible Subordinated Debentures).
CUSTODIAN: The term "Custodian" means State Street Bank and Trust Company,
as custodian with respect to the Debentures in global form, or any successor
entity thereto.
DEBENTURE OR DEBENTURES: The terms "Debenture" or "Debentures" shall mean
any Debenture or Debentures, as the case may be, authenticated and delivered
under this Indenture.
DEBENTUREHOLDER; HOLDER: The terms "Debentureholder" or "holder" as applied
to any Debenture, or other similar terms (but excluding the term "beneficial
holder"), shall mean any person in whose name at the time a particular Debenture
is registered on the Debenture register.
DEBENTURE REGISTER: The term "Debenture register" shall have the meaning
specified in Section 2.5.
DEFAULT: The term "default" shall mean any event that is, or after notice
or passage of time, or both, would be, an Event of Default.
(3)
<PAGE> 12
DEPOSITARY: The term "Depositary" means, with respect to the Debentures
issuable or issued in whole or in part in global form, the person specified in
Section 2.5(d) as the Depositary with respect to such Debentures, until a
successor shall have been appointed and become such pursuant to the applicable
provisions of this Indenture, and thereafter, "Depositary" shall mean or include
such successor.
DESIGNATED SENIOR INDEBTEDNESS: The term "Designated Senior Indebtedness"
means any particular Senior Indebtedness in which the instrument creating or
evidencing the same or the assumption or guarantee thereof (or related
agreements or documents to which the Company is a party) expressly provides that
such Senior Indebtedness shall be "Designated Senior Indebtedness" for purposes
of this Indenture (provided that such instrument, agreement or other document
may place limitations and conditions on the right of such Senior Indebtedness to
exercise the rights of Designated Senior Indebtedness).
EVENT OF DEFAULT: The term "Event of Default" shall mean any event
specified in Section 7.1 continued for the period of time, if any, and after the
giving of notice, if any, therein designated.
EXCHANGE ACT: The term "Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
EXCHANGE DATE: The term "Exchange Date" shall mean the date on which the
Debentures are issued in exchange for all of the outstanding shares of Preferred
Stock.
FUNDAMENTAL CHANGE: The term "Fundamental Change" shall have the meaning
specified in Section 15.11(b).
GLOBAL DEBENTURE: The term "Global Debenture" shall have the meaning
specified in Section 2.5(b).
INDEBTEDNESS: The term "Indebtedness" means, with respect to any person,
all obligations, whether or not contingent, of such person (i) (a) for borrowed
money, (b) evidenced by a note, debenture, bond or other written instrument, (c)
under a lease required to be capitalized on the balance sheet of the lessee
under generally accepted accounting principles or under any lease or related
document (including a purchase agreement) that provides that the Company is
contractually obligated to purchase or cause a third party to purchase and
thereby guarantee a minimum residual value of the lease property to the lessor
and the obligations of the Company under such lease or related document to
purchase or to cause a third party to purchase such leased property, (d) in
respect of letters of credit, bank guarantees or bankers' acceptances (including
reimbursement obligations with respect to any of the foregoing), (e) with
respect to Indebtedness secured by a mortgage, pledge, lien, encumbrance, charge
or adverse claim affecting title in an encumbrance to which the property or
assets of such person are subject, whether or not the obligation secured thereby
(4)
<PAGE> 13
shall have been assumed by or shall otherwise be such person's legal liability,
(f) in respect of the balance of deferred and unpaid purchase price of any
property or assets, (g) under interest rate or currency swap agreements, cap,
floor and collar agreements, spot and forward contracts and similar agreements
and arrangements; (ii) with respect to any obligation of others of the type
described in the preceding clause (i) or under clause (iii) below assumed by or
guaranteed in any manner by such person or in effect guaranteed by such person
through an agreement to purchase (including, without limitation, "take or pay"
and similar arrangements), contingent or otherwise (and the obligations of such
person under any such assumptions, guarantees or other such arrangements); and
(iii) any and all Indebtedness constituting deferrals, renewals, extensions,
refinancings and refundings of, or amendments, modifications or supplements to,
any of the foregoing.
INDENTURE: The term "Indenture" shall mean this instrument as originally
executed or, if amended or supplemented as herein provided, as so amended or
supplemented.
INITIAL PURCHASERS: The term "Initial Purchasers" means BancAmerica
Robertson Stephens, NationsBank Montgomery Securities LLC, Cowen & Company,
Credit Suisse First Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, J.P. Morgan Securities Inc., PaineWebber Incorporated and Smith
Barney Inc.
INSTITUTIONAL ACCREDITED INVESTOR: The term "Institutional Accredited
Investor" shall mean an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
NON-STOCK FUNDAMENTAL CHANGE: The term "Non-Stock Fundamental Change" shall
have the meaning specified in Section 15.11(b).
OFFICERS' CERTIFICATE: The term "Officers' Certificate", when used with
respect to the Company, shall mean a certificate signed by (a) one of the
President, the Chief Executive Officer, Executive or Senior Vice President or
any Vice President (whether or not designated by a number or numbers or word
added before or after the title "Vice President") and (b) by one of the
Treasurer or any Assistant Treasurer, Secretary or any Assistant Secretary or
Controller of the Company, which is delivered to the Trustee. Each such
certificate shall include the statements provided for in Section 16.5 if and to
the extent required by the provisions of such Section.
OPINION OF COUNSEL: The term "Opinion of Counsel" shall mean an opinion in
writing signed by legal counsel, who may be an employee of or counsel to the
Company, or other counsel acceptable to the Trustee, which is delivered to the
Trustee. Each such opinion shall include the statements provided for in Section
16.5 if and to the extent required by the provisions of such Section.
(5)
<PAGE> 14
OUTSTANDING: The term "outstanding," when used with reference to
Debentures, shall, subject to the provisions of Section 9.4, mean, as of any
particular time, all Debentures authenticated and delivered by the Trustee under
this Indenture, except
(a) Debentures theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Debentures, or portions thereof, for the payment, or redemption
of which monies in the necessary amount shall have been deposited in trust
with the Trustee or with any paying agent (other than the Company) or shall
have been set aside and segregated in trust by the Company (if the Company
shall act as its own paying agent); PROVIDED that if such Debentures are to
be redeemed prior to the maturity thereof, notice of such redemption shall
have been given as provided in Section 3.2, or provision satisfactory to
the Trustee shall have been made for giving such notice;
(c) Debentures in lieu of which, or in substitution for which, other
Debentures shall have been authenticated and delivered pursuant to the
terms of Section 2.6 unless proof satisfactory to the Trustee is presented
that any such Debentures are held by bona fide holders in due course; and
(d) Debentures converted into Common Stock pursuant to Article XV and
Debentures deemed not outstanding pursuant to Section 3.2.
PAYMENT BLOCKAGE NOTICE: The term "Payment Blockage Notice" has the meaning
specified in Section 4.2.
PERSON: The term "person" shall mean a corporation, a limited liability
company, an association, a partnership, an individual, a joint venture, a joint
stock company, a trust, an unincorporated organization or a government or an
agency or a political subdivision thereof.
PORTAL MARKET: The term "Portal Market" shall mean The Portal Market
operated by the National Association of Securities Dealers, Inc. or any
successor thereto.
PREDECESSOR DEBENTURE: The term "Predecessor Debenture" of any particular
Debenture shall mean every previous Debenture evidencing all or a portion of the
same debt as that evidenced by such particular Debenture; and, for the purposes
of this definition, any Debenture authenticated and delivered under Section 2.6
in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the
same debt as the lost, destroyed or stolen Debenture that it replaces.
PREFERRED STOCK: The term "Preferred Stock" shall mean the $3.25
Convertible Exchangeable Preferred Stock, par value $0.01 per share, of the
Company.
(6)
<PAGE> 15
PURCHASER STOCK PRICE: The term "Purchaser Stock Price" shall have the
meaning specified in Section 15.11(b).
QIB: The term "QIB" shall mean a "qualified institutional buyer" as defined
in Rule 144A.
REFERENCE MARKET PRICE: The term "Reference Market Price" shall have the
meaning specified in Section 15.11(b).
REGISTRATION DEFAULT: The term "Registration Default" shall have the
meaning set forth in Section 3 of the Registration Rights Agreement.
REGISTRATION RIGHTS AGREEMENT: The term "Registration Rights Agreement"
means that certain Registration Rights Agreement, dated as of March 1, 1998,
between the Company and the Initial Purchasers.
REPRESENTATIVE: The term "Representative" means the (a) indenture trustee
or other trustee, agent or representative for any Senior Indebtedness or (b)
with respect to any Senior Indebtedness that does not have any such trustee,
agent or other representative, (i) in the case of such Senior Indebtedness
issued pursuant to an agreement providing for voting arrangements as among the
holders or owners of such Senior Indebtedness, any holder or owner of such
Senior Indebtedness acting with the consent of the required persons necessary to
bind such holders or owners of such Senior Indebtedness and (ii) in the case of
all other such Senior Indebtedness, the holder or owner of such Senior
Indebtedness.
RESPONSIBLE OFFICER: The term "Responsible Officer", when used with respect
to the Trustee, shall mean an officer of the Trustee assigned to the Corporate
Trust Office, and any officer of the Trustee to whom such matter is referred to
because of his knowledge of and familiarity with the particular subject.
RESTRICTED SECURITIES: The term "Restricted Securities" has the meaning
specified in Section 2.5(d).
RULE 144: The term "Rule 144" shall mean Rule 144 as promulgated under the
Securities Act.
RULE 144A: The term "Rule 144A" shall mean Rule 144A as promulgated under
the Securities Act.
SECURITIES ACT: The term "Securities Act" means the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
(7)
<PAGE> 16
SENIOR INDEBTEDNESS: The term "Senior Indebtedness" means the principal of,
premium, if any, and interest on, rent under, and any other amounts payable on
or in or in respect of the Company's existing credit agreement and any other
Indebtedness of the Company (including, without limitation, any interest
accruing after the filing of a petition by or against the Company under any
bankruptcy law, whether or not allowed as a claim after such filing in any
proceeding under such bankruptcy law), whether outstanding on the date of this
Indenture or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by the Company (including all deferrals, renewals, extensions or
refundings of, or amendments, modifications or supplements to the foregoing);
PROVIDED, HOWEVER, that Senior Indebtedness does not include (v) Indebtedness
evidenced by the Debentures, (w) any liability for federal, state local or other
taxes owed or owing by the Company, (x) Indebtedness of the Company to any
subsidiary of the Company, (y) any trade payables of the Company incurred in the
ordinary course of business, and (z) any indebtedness in which the instrument
creating or evidencing the same or the assumption or thereof (or related
agreements or documents to which the Company is a party) expressly provides that
such Indebtedness shall not be senior in right of payment to, or is pari passu
with, or is subordinated or junior to, the Debentures.
SUBSIDIARY: The term "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.
TRADING DAY: The term "Trading Day" has the meaning specified in Section
15.5(i)(5).
TRANSFER RESTRICTED SECURITIES: The term "Transfer Restricted Securities"
shall have the meaning set forth in Section 1 of the Registration Rights
Agreement.
TRUST INDENTURE ACT: The term "Trust Indenture Act" shall mean the Trust
Indenture Act of 1939, as amended, as it was in force at the date of execution
of this Indenture, except as provided in Sections 11.3 and 15.6; PROVIDED,
HOWEVER, that in the event the Trust Indenture Act of 1939 is amended after the
date hereof, the term "Trust Indenture Act" shall mean, to the extent required
by such amendment, the Trust Indenture Act of 1939 as so amended.
TRUSTEE: The term "Trustee" shall mean State Street Bank and Trust Company
and its successors and any corporation resulting from or surviving any
consolidation or merger to which it or its successors may be a party and any
successor trustee at the time serving as successor trustee hereunder.
(8)
<PAGE> 17
U.S. PERSON: The term "U.S. Person" shall have the meaning set forth in
Regulation S of the Securities Act.
The definitions of certain other terms are as specified in Article XV.
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF DEBENTURES
Section 2.1 DESIGNATION, AMOUNT AND ISSUE OF DEBENTURES. The Debentures
shall be designated as "6 1/2% Convertible Subordinated Debentures." Debentures
not to exceed the aggregate principal amount of $100,000,000 (or $115,000,000 if
the over-allotment option set forth in Section 7 of the Purchase Agreement dated
February 27, 1998 (as amended from time to time by the parties thereto) by and
between the Company and the Initial Purchasers is exercised in full) (except
pursuant to Sections 2.5, 2.6, 3.3 and 15.2) upon the execution of this
Indenture, or from time to time thereafter, may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Debentures upon the written order of the Company,
signed by the Company's (a) President, Executive or Senior Vice President or any
Vice President (whether or not designated by a number or numbers or word or
words added before or after the title "Vice President") and (b) Treasurer or
Assistant Treasurer or its Secretary or any Assistant Secretary, without any
further action by the Company hereunder, PROVIDED, HOWEVER that said Debentures
may not be executed, delivered or authenticated unless and until (i) the Company
may legally issue said Debentures in accordance with Section 1551 of the
Pennsylvania Business Corporation Law of 1988, as amended, and (ii) the Trustee
shall have received an Officer's Certificate and opinion of counsel. The
Debentures may only be issued upon the exchange of all outstanding Preferred
Stock.
Section 2.2 FORM OF DEBENTURES. The Debentures and the Trustee's
certificate of authentication to be borne by such Debentures shall be
substantially in the form set forth in EXHIBIT A, which is incorporated in and
made a part of this Indenture.
Any of the Debentures may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Debentures may be
listed or designated for issuance, or to conform to usage.
Any Global Debenture shall represent such of the outstanding Debentures as
shall be specified therein and shall provide that it shall represent the
aggregate amount of
(9)
<PAGE> 18
outstanding Debentures from time to time endorsed thereon and that the aggregate
amount of outstanding Debentures represented thereby may from time to time be
increased or reduced to reflect transfers or exchanges permitted hereby. Any
endorsement of a Global Debenture to reflect the amount of any increase or
decrease in the amount of outstanding Debentures represented thereby shall be
made by the Trustee or the Custodian, at the direction of the Trustee, in such
manner and upon instructions given by the holder of such Debentures in
accordance with this Indenture. Payment of principal of and interest and
premium, if any (including any redemption price), on any Global Debenture shall
be made to the holder of such Debenture.
The terms and provisions contained in the form of Debenture attached as
EXHIBIT A hereto shall constitute, and are hereby expressly made, a part of this
Indenture and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.3 DATE AND DENOMINATION OF DEBENTURES; MATURITY; PAYMENTS OF
INTEREST. The Debentures shall be issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. Every
Debenture shall be dated the date of its authentication and, except as provided
in this Section, shall bear interest, payable semiannually on March 1 and
September 1, of each year, commencing on the first such date after the Exchange
Date, from the most recent date to which interest has been paid or duly provided
for, or if no interest has been paid or duly provided for on the Debentures,
from the Exchange Date, until payment of the principal sum has been made or
fully provided for. The Debentures will mature on the tenth year anniversary of
the Exchange Date. Notwithstanding the foregoing, when there is no existing
default in the payment of interest on the Debentures, all Debentures
authenticated by the Trustee after the close of business on the record date (as
defined in this Section 2.3) for any interest payment date (March 1 or September
1, as the case may be) and prior to such interest payment date shall be dated
the date of authentication but shall bear interest from such interest payment
date, PROVIDED, HOWEVER, that if and to the extent that the Company shall
default in interest due on such interest payment date then any such Debenture
shall bear interest from the March 1 or the September 1, as the case may be,
immediately preceding the date of such Debenture to which interest has been paid
or duly provided for or, if no interest has been paid or duly provided for on
the Debentures, from the Exchange Date.
The person in whose name any Debenture (or its Predecessor Debenture) is
registered at the close of business on any record date with respect to any
interest payment date (including any Debenture that is converted after the
record date and on or before the interest payment date) shall be entitled to
receive the interest payable on such interest payment date notwithstanding the
cancellation of such Debenture upon any transfer, exchange or conversion
subsequent to the record date and on or prior to such interest payment date.
Interest may, at the option of the Company, be paid by check mailed to the
address of such person on the registry kept for such purposes; PROVIDED that,
with respect to any holder of
(10)
<PAGE> 19
Debentures with an aggregate principal amount equal to or in excess of
$2,000,000, at the request of such holder in writing to the Company, interest on
such holder's Debentures shall be paid by wire transfer in immediately available
funds in accordance with the wire transfer instruction supplied by such holder
to the Trustee and paying agent (if different from Trustee). Interest payable
with respect to Debentures held in the form of a Global Debenture shall be paid
to the Depository by wire transfer in immediately available funds in accordance
with the applicable procedures of the Depository. The term "record date" with
respect to any interest payment date shall mean the February 15 or August 15
preceding said March 1 or September 1.
Interest on the Debentures shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Any interest on any Debenture which is payable, but is not punctually paid
or duly provided for, on any said March 1 or September 1 (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Debentureholder
on the relevant record date by virtue of his having been such Debentureholder;
and such Defaulted Interest shall be paid by the Company, at its election in
each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the persons in whose names the Debentures (or their respective Predecessor
Debentures) are registered at the close of business on a special record date for
the payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest to be paid on each Debenture and the date of the payment
(which shall be not less than twenty-five (25) days after the receipt by the
Trustee of such notice, unless the Trustee shall consent to an earlier date),
and at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the persons entitled to such Defaulted Interest as
in this clause provided. Thereupon the Trustee shall fix a special record date
for the payment of such Defaulted Interest which shall be not more than fifteen
(15) days and not less than ten (10) days prior to the date of the proposed
payment and not less than ten (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
Debentureholder as of such special record date at his address as it appears in
the Debenture register, not less than ten (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 Debentures (or their respective
Predecessor Debentures) were registered at the close of
(11)
<PAGE> 20
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 or automated quotation system on which the Debentures may be listed or
designated for issuance, and upon such notice as may be required by such
exchange or automated quotation system, 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.
In the event of a Registration Default, the Company will pay additional
interest ("Additional Interest") to each holder of Debentures that are Transfer
Restricted Securities, during the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to an additional
one-quarter of one percent (0.25%) of the principal amount of Debentures held by
such holder. The rate of accrual of the Additional Interest will increase to
one-half of one percent (0.50%) of the principal amount of the Debenture
constituting Transfer Restricted Securities for each subsequent 90-day period
until the applicable registration statement is filed, declared effective or
becomes available for effecting sales of securities, up to a maximum of
Additional Interest of 1.25% of the principal amount of the Debentures
constituting Transfer Restricted Securities. Following the cure of a
Registration Default, Additional interest will cease to accrue with respect to
such Registration Default (without in any way limiting the effect of any
subsequent Registration Default). All Additional Interest shall accrue and be
paid to the holders of Debentures in the manner, in all respects, as interest on
the Debentures under this Indenture. The Company shall notify the Trustee within
one Business Day after each and every date on which a Registration Default
occurs. In no event shall the Company be required to pay Additional Interest in
excess of the applicable maximum amount set forth above, regardless of whether
one or multiple Registration Defaults shall exist. All of the Company's
obligations set forth in this paragraph which are unsatisfied to any extent with
respect to any Debenture constituting a Transfer Restricted Security at the time
such Debenture ceases to be a Transfer Restricted Security shall survive until
such time as all such obligations with respect to such Debenture have been
satisfied in full.
Section 2.4 EXECUTION OF DEBENTURES. The Debentures shall be signed in the
name and on behalf of the Company by the facsimile signature of its President,
its Chief Executive Officer, any of its Executive or Senior Vice Presidents, or
any of its Vice Presidents (whether or not designated by a number or numbers or
word or words added before or after the title "Vice President") and attested by
the manual or facsimile signature of its Secretary or any of its Assistant
Secretaries (which may be printed, engraved or otherwise reproduced thereon, by
facsimile or otherwise). Only such Debentures as shall bear thereon a
certificate of authentication substantially in the form set forth on the form of
Debenture attached as EXHIBIT A hereto, manually executed by the Trustee (or an
authenticating agent appointed by the Trustee as provided by Section 16.11),
shall be entitled to the benefits of this Indenture
(12)
<PAGE> 21
or be valid or obligatory for any purpose. Such certificate by the Trustee (or
such an authenticating agent) upon any Debenture executed by the Company shall
be conclusive evidence that the Debenture so authenticated has been duly
authenticated and delivered hereunder and that the holder is entitled to the
benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Debentures shall cease to be such officer before the Debentures so signed shall
have been authenticated and delivered by the Trustee, or disposed of by the
Company, such Debentures nevertheless may be authenticated and delivered or
disposed of as though the person who signed such Debentures had not ceased to be
such officer of the Company; and any Debenture may be signed on behalf of the
Company by such persons as, at the actual date of the execution of such
Debenture, shall be the proper officers of the Company, although at the date of
the execution of this Indenture any such person was not such an officer.
Section 2.5 EXCHANGE AND REGISTRATION OF TRANSFER OF DEBENTURES.
(a) The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office and in any other office or
agency of the Company designated pursuant to Section 5.2 being herein sometimes
collectively referred to as the "Debenture register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Debentures and of transfers of Debentures. Such register shall
be in written form or in any form capable of being converted into written form
within a reasonable period of time. The Trustee is hereby appointed "Debenture
registrar" for the purpose of registering Debentures and transfers of Debentures
as herein provided. The Company may appoint one or more co-registrars in
accordance with Section 5.2.
Upon surrender for registration of transfer of any Debenture to the
Debenture registrar or any co-registrar, and satisfaction of the requirements
for such transfer set forth in this Section 2.5, the Company shall execute, and
the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Debentures of any authorized
denominations and of a like aggregate principal amount.
Debentures may be exchanged for other Debentures of any authorized
denominations and of a like aggregate principal amount, upon surrender of the
Debentures to be exchanged at any such office or agency. Whenever any Debentures
are so surrendered for exchange, the Company shall execute, and the Trustee
shall authenticate and deliver, the Debentures which the Debentureholder making
the exchange is entitled to receive, bearing registration numbers not
contemporaneously outstanding.
All Debentures presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company, the Trustee, the Debenture
registrar or any co-registrar) be duly endorsed, or be accompanied by a written
instrument or instruments of
(13)
<PAGE> 22
transfer in form satisfactory to the Company and duly executed, by the
Debentureholder thereof or his attorney duly authorized in writing.
No service charge shall be charged to the Debentureholder for any
exchange or registration of transfer of Debentures, but the Company may require
payment of a sum sufficient to cover any tax, assessments or other governmental
charges that may be imposed in connection therewith.
None of the Company, the Trustee, the Debenture registrar or any
co-registrar shall be required to exchange or register a transfer of (a) any
Debentures for a period of fifteen (15) days next preceding any selection of
Debentures to be redeemed or (b) any Debentures called for redemption or, if a
portion of any Debenture is selected or called for redemption, such portion
thereof selected or called for redemption or (c) any Debentures surrendered for
conversion or, if a portion of any Debenture is surrendered for conversion, such
portion thereof surrendered for conversion.
All Debentures issued upon any transfer or exchange of Debentures in
accordance with this Indenture shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this Indenture
as the Debentures surrendered upon such registration of transfer or exchange.
(b) So long as the Debentures are eligible for book-entry settlement
with the Depositary, or unless otherwise required by law, all Debentures that
are so eligible may be represented by a Debenture or Debentures in global form
(the "Global Debenture" or "Global Debentures") registered in the name of the
Depositary or the nominee of the Depositary, except as otherwise specified
below. The transfer and exchange of beneficial interests in the Global Debenture
shall be effected through the Depositary in accordance with this Indenture and
the procedures of the Depositary therefor.
Debentures that upon initial issuance are not owned by Institutional
Accredited Investors will be represented by one or more Global Debentures.
Transfers of interests in a Global Debenture will be made in accordance with the
standing instructions and procedures of the Depository and its participants. The
Transfer Agent shall make appropriate endorsements to reflect increases or
decreases in the Global Debenture as set forth on the face of the Global
Debenture to reflect any such transfers.
Except as provided below, beneficial owners of an interest in a Global
Debenture shall not be entitled to have certificates registered in their names,
will not receive or be entitled to receive physical delivery of certificates in
definitive form and will not be considered holders of such Global Debentures.
(c) So long as the Debentures are eligible for book-entry settlement,
or unless otherwise required by law, upon any transfer of a definitive Debenture
to a QIB in
(14)
<PAGE> 23
accordance with Rule 144A or to a Person other than a U.S. Person, and upon
receipt of the definitive Debenture or Debentures being so transferred, together
with a certification, substantially in the form of the reverse of the
certificate, from the transferor that the transfer is being made in compliance
with Rule 144A or to a Person other than a U.S. Person (or other evidence
satisfactory to the Trustee), the Trustee shall make an endorsement on the
Global Debenture to reflect an increase in the aggregate amount of the
Debentures represented by the Global Debenture, the Trustee shall cancel such
definitive Debenture or Debentures in accordance with the standing instructions
and procedures of the Depositary and the aggregate principal amount of
Debentures represented by the Global Debenture will be increased accordingly;
PROVIDED that no definitive Debenture, or portion thereof, in respect of which
the Company or an Affiliate of the Company held any beneficial interest shall be
included in such Global Debenture until such definitive Debenture is freely
tradable in accordance with Rule 144(k); PROVIDED FURTHER that the Trustee shall
issue Debentures in definitive form upon any transfer of a beneficial interest
in any Global Debenture to the Company or any Affiliate of the Company.
Upon any sale or transfer of Debentures to an Institutional Accredited
Investor (other than pursuant to a registration statement that has been declared
effective under the Securities Act), such Institutional Accredited Investor
shall, prior to such sale or transfer, furnish to the Company and/or the Trustee
a signed letter containing representations and agreements relating to certain
restrictions on transfer, the form of which is set forth in EXHIBIT B hereto,
and, in the case of a Debenture in definitive form, shall check the appropriate
box on the form of Assignment on the reverse of such Debenture.
Any Global Debenture may be endorsed with or have incorporated in the
text thereof such legends or recitals or changes not inconsistent with the
provisions of this Indenture as may be required by the Custodian, the
Depositary, by the New York Stock Exchange or by the National Association of
Securities Dealers, Inc. in order for the Debentures to be tradeable on The
Portal Market or as may be required for the Debentures to be tradeable on any
other market developed for trading of securities pursuant to Rule 144A or
required to comply with any applicable law or any regulation thereunder or with
the rules and regulations of any securities exchange upon which the Debentures
may be listed or traded or to conform with any usage with respect thereto, or to
indicate any special limitations or restrictions to which any particular
Debentures are subject.
(d) Every Debenture that bears or is required under this Section
2.5(d) to bear the legend set forth in this Section 2.5(d) (together with any
Common Stock issued upon conversion of the Debentures and required to bear the
legend set forth in Section 2.5(e), collectively, the "Restricted Securities")
shall be subject to the restrictions on transfer set forth in this Section
2.5(d) (including those set forth in the legend set forth below) unless such
restrictions on transfer shall be waived by written consent of the Company, and
the holder of each such Restricted Securities by such holder's acceptance
thereof, agrees to be bound by all such restrictions on transfer. As used in
Sections 2.5(d) and 2.5(e), the term
(15)
<PAGE> 24
"transfer" encompasses any sale, pledge, transfer or other disposition
whatsoever of any Restricted Securities.
Until two years after the original issue date of the Preferred Stock,
any certificate evidencing any Debenture issued upon exchange of the Preferred
Stock pursuant to this Indenture (and all securities issued in exchange therefor
or substitution thereof, other than Common Stock, if any, issued upon conversion
therefor, which shall bear the legend set forth in Section 2.5(e), if
applicable) shall bear a legend in substantially the following form, unless such
Debenture has been sold pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to be effective
at the time of such transfer), or unless otherwise agreed by the Company in
writing, with written notice thereof to the Trustee:
THE DEBENTURE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE DEBENTURE EVIDENCED HEREBY
IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT, WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THE PREFERRED STOCK OF WHICH THE DEBENTURE
EVIDENCED HEREBY HAS BEEN ISSUED UPON EXCHANGE THEREFOR, RESELL OR
OTHERWISE TRANSFER THE DEBENTURE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH DEBENTURE WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT (A) TO THE COMPANY OR
ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE,
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING
TO THE RESTRICTIONS ON TRANSFER OF THE DEBENTURE EVIDENCED HEREBY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
(16)
<PAGE> 25
THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND
WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE DEBENTURE EVIDENCED
HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(E)) A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE DEBENTURE EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THE PREFERRED STOCK OF WHICH THE DEBENTURE EVIDENCED
HEREBY HAS BEEN ISSUED UPON EXCHANGE THEREFOR (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE 2(E)), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS A
PURCHASER WHO IS NOT A U.S. PERSON OR IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE,
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE
EARLIER OF THE TRANSFER OF THE DEBENTURE EVIDENCED HEREBY PURSUANT TO
CLAUSE 2(E) ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE
OF THE PREFERRED STOCK OF WHICH THE DEBENTURE EVIDENCED HEREBY HAS BEEN
ISSUED UPON EXCHANGE THEREFOR.
Any Debenture (or security issued in exchange or substitution
therefor) as to which such restrictions on transfer shall have expired in
accordance with their terms or as to the conditions for removal of the foregoing
legend set forth therein have been satisfied may, upon surrender of such
Debenture for exchange to the Trustee in accordance with the provisions of this
Section 2.5(d), be exchanged for new Debenture or Debentures, of like tenor and
aggregate amount, which shall not bear the restrictive legend required by this
Section 2.5(d).
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in this Section 2.5(d)), a Global Debenture 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 to a
successor Depositary or a nominee of such successor Depositary.
(17)
<PAGE> 26
The Depositary shall be a clearing agency registered under the
Exchange Act. The Company initially appoints The Depository Trust Company to act
as Depositary with respect to the Global Debentures. Initially, the Global
Debenture shall be issued to the Depositary, registered in the name of Cede &
Co., as the nominee of the Depositary, and deposited with the Custodian for Cede
& Co.
If at any time the Depositary for a Global Debenture notifies the
Company that it is unwilling or unable to continue as Depositary for such Global
Debenture, the Company may appoint a successor Depositary with respect to such
Global Debenture. If a successor Depositary for the Debentures is not appointed
by the Company within 90 days after the Company receives such notice, the
Company will execute, and the Trustee will authenticate and deliver, Debentures
in certificated form, in an aggregate principal amount equal to the principal
amount of the Global Debenture, in exchange for such Global Debenture.
Debentures in definitive form issued in exchange for all or a part of
a Global Debenture pursuant to this Section 2.5(d) shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. Upon execution and authentication, the Trustee shall
deliver such Debentures in certificated form to the persons in whose names such
Debentures in definitive form are so registered.
At such time as all interests in a Global Debenture have been
redeemed, converted, exchanged, repurchased or canceled for Debentures in
definitive form, or transferred to a transferee who receives Debentures in
definitive form, such Global Debenture shall be, upon receipt thereof, canceled
by the Trustee in accordance with standing procedures and instructions existing
between the Custodian and Depositary. At any time prior to such cancellation, if
any interest in a Global Debenture is exchanged for Debentures in certificated
form, redeemed, converted, exchanged, repurchased by the Company or canceled, or
transferred for part of a Global Debenture, the principal amount of such Global
Debenture shall, in accordance with the standing procedures and instructions
existing between the Custodian and the Depositary, be reduced or increased, as
the case may be, and an endorsement shall be made on such Global Debenture, by
the Trustee or the Custodian, at the direction of the Trustee, to reflect such
reduction or increase.
(e) Until two years after the original issue date of the Preferred
Stock, any stock certificate representing Common Stock issued upon conversion of
a Debenture pursuant to this Indenture shall bear a legend in substantially the
following form, unless such Common Stock has been sold pursuant to a
registration statement that has been declared effective under the Securities Act
(and which continues to be effective at the time of such transfer) or such
Common Stock has been issued upon conversion of a Debenture that has been
transferred pursuant to a registration statement that has been declared
effective under the Securities Act, or unless otherwise agreed by the Company in
writing with written notice thereof to the transfer agent for the Common Stock:
(18)
<PAGE> 27
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OF, U.S. PERSONS EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE
EXPIRATION OF TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE PREFERRED STOCK
OF WHICH THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE DEBENTURE ISSUED
IN EXCHANGE FOR SUCH PREFERRED STOCK HEREBY WAS ISSUED, (1) IT WILL NOT
RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY WITHIN THE
UNITED STATES OR TO, OR FOR ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT (A)
TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN COMPLIANCE
WITH RULE 144A, (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO BOSTON EQUISERVE, L.P., AS TRANSFER AGENT, A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRANSFER AGENT), (D) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE), OR (E) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER); (2) PRIOR TO SUCH TRANSFER (OTHER
THAN A TRANSFER PURSUANT TO CLAUSE 1(E) ABOVE), IT WILL FURNISH TO BOSTON
EQUISERVE, L.P., AS TRANSFER AGENT, SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS THE COMPANY MAY REASONABLE REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT; AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK
EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE
1(E) ABOVE) A NOTICE SUBSTANTIALLY SIMILAR TO THIS LEGEND. THIS LEGEND WILL
BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE COMMON STOCK EVIDENCED
HEREBY PURSUANT TO CLAUSE 1(E) ABOVE OR THE EXPIRATION OF TWO YEARS FROM
THE ORIGINAL
(19)
<PAGE> 28
ISSUANCE OF THE PREFERRED STOCK OF WHICH THE COMMON STOCK ISSUABLE UPON
CONVERSION OF THE DEBENTURE ISSUED IN EXCHANGE FOR SUCH PREFERRED STOCK
HEREBY WAS ISSUED.
Any such Common Stock as to which such restrictions on transfer shall
have expired in accordance with their terms or as to which the conditions for
removal of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.5(e).
(f) Any Debenture or Common Stock issued upon the conversion or
exchange of a Debenture that, prior to the expiration of the holding period
applicable to sales thereof under Rule 144(k) under the Securities Act (or any
successor provision), is purchased or owned by the Company or any Affiliate
thereof may not be resold by the Company or such Affiliate unless registered
under the Securities Act or resold pursuant to an exemption from the
registration requirements of the Securities Act in a transaction which results
in such Debenture or Common Stock, as the case may be, no longer being
"restricted securities" (as defined under Rule 144).
(g) Notwithstanding any provision of Section 2.5 to the contrary, in
the event Rule 144(k) as promulgated under the Securities Act (or any successor
rule) is amended to change the two-year period under Rule 144(k) (or the
corresponding period under any successor rule), from and after receipt by the
Trustee of the Officers' Certificate and Opinion of Counsel provided for in this
Section 2.5(g), (i) the references in the first sentence of the second paragraph
of Section 2.5(d) to "two (2) years" and in the restrictive legend set forth in
such paragraph to "TWO YEARS" shall be deemed for all purposes hereof to be
references to such changed period, (ii) the references in the first paragraph of
Section 2.5(e) to "two (2) years" and in the restrictive legend set forth in
such paragraph to "TWO YEARS" shall be deemed for all purposes hereof to be
references to such changed period and (iii) all corresponding references in the
Debentures and the restrictive legends thereon shall be deemed for all purposes
hereof to be references to such changed period, provided that such changes shall
not become effective if they are otherwise prohibited by, or would otherwise
cause a violation of, the then-applicable federal securities laws. As soon as
practicable after the Company has knowledge of the effectiveness of any such
amendment to change the two-year period under Rule 144(k) (or the corresponding
period under any successor rule), unless such changes would otherwise be
prohibited by, or would otherwise cause a violation of, the then-applicable
securities law, the Company shall provide to the Trustee an Officers'
Certificate and Opinion of Counsel informing the Trustee of the effectiveness of
such amendment and the effectiveness of the foregoing changes to Sections 2.5(d)
and 2.5(e) and the Debentures. The provisions of this Section 2.5(g) will not be
effective until such time as the Opinion of Counsel and Officers' Certificate
have
(20)
<PAGE> 29
been received by the Trustee hereunder. This Section 2.5(g) shall apply to
successive amendments to Rule 144(k) (or any successor rule) changing the
holding period thereunder.
Section 2.6 MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES. In case any
Debenture shall become mutilated or be destroyed, lost or stolen, the Company in
its discretion may execute, and upon its request the Trustee or an
authenticating agent appointed by the Trustee shall authenticate and deliver, a
new Debenture, bearing a number not contemporaneously outstanding, in exchange
and substitution for the mutilated Debenture, or in lieu of and in substitution
for the Debenture so destroyed, lost or stolen. In every case the applicant for
a substituted Debenture shall furnish to the Company, to the Trustee and, if
applicable, to such authenticating agent such security or indemnity as may be
required by them to save each of them harmless for any loss, liability, cost or
expense caused by or connected with such substitution, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Company, to
the Trustee and, if applicable, to such authenticating agent evidence to their
satisfaction of the destruction, loss or theft of such Debenture and of the
ownership thereof.
The Trustee or such authenticating agent may authenticate any such
substituted Debenture and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Debenture, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Debenture which has matured or is
about to mature or has been called for redemption or is about to be converted
into Common Stock shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substitute Debenture, pay or authorize the
payment of or convert or authorize the conversion of the same (without surrender
thereof except in the case of a mutilated Debenture), as the case may be, if the
applicant for such payment or conversion shall furnish to the Company, to the
Trustee and, if applicable, to such authenticating agent such security or
indemnity as may be required by them to save each of them harmless for any loss,
liability, cost or expense caused by or connected with such substitution, and,
in case of destruction, loss or theft, evidence satisfactory to the Company, the
Trustee and, if applicable, any paying agent or conversion agent of the
destruction, loss or theft of such Debenture and of the ownership thereof.
Every substitute Debenture issued pursuant to the provisions of this
Section 2.6 by virtue of the fact that any Debenture is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Debenture shall be found at any
time, and shall be entitled to all the benefits of (but shall be subject to all
the limitations set forth in) this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder. To the extent permitted by
law, all Debentures shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement or payment or
conversion of mutilated, destroyed, lost or stolen Debentures and shall preclude
any and all other rights or remedies notwithstanding any law or statute
(21)
<PAGE> 30
existing or hereafter enacted to the contrary with respect to the replacement or
payment or conversion of negotiable instruments or other securities without
their surrender.
Section 2.7 TEMPORARY DEBENTURES. Pending the preparation of definitive
Debentures or any Global Debenture, the Company may execute and the Trustee or
an authenticating agent appointed by the Trustee shall, upon written request of
the Company, authenticate and deliver temporary Debentures (printed or
lithographed). Temporary Debentures shall be issuable in any authorized
denomination, and substantially in the form of the definitive Debentures but
with such omissions, insertions and variations as may be appropriate for
temporary Debentures, all as may be determined by the Company. Every such
temporary Debenture shall be executed by the Company and authenticated by the
Trustee or such authenticating agent upon the same conditions and in
substantially the same manner, and with the same effect, as the definitive
Debentures. Without unreasonable delay the Company will execute and deliver to
the Trustee or such authenticating agent definitive Debentures and thereupon any
or all temporary Debentures may be surrendered in exchange therefor, at each
office or agency maintained by the Company pursuant to Section 5.2 and the
Trustee or such authenticating agent shall authenticate and deliver in exchange
for such temporary Debentures an equal aggregate principal amount of definitive
Debentures. Such exchange shall be made by the Company at its own expense and
without any charge therefor. Until so exchanged, the temporary Debentures shall
in all respects be entitled to the same benefits and subject to the same
limitations under this Indenture as definitive Debentures authenticated and
delivered hereunder.
Section 2.8 CANCELLATION OF DEBENTURES PAID, ETC. All Debentures
surrendered for the purpose of payment, redemption, conversion, exchange or
registration of transfer, shall, if surrendered to the Company or any paying
agent or any Debenture registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be
promptly canceled by it, and no Debentures shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Indenture. Upon
written instructions of the Company, the Trustee shall destroy canceled
Debentures and, after such destruction, shall deliver a certificate of such
destruction to the Company. If the Company shall acquire any of the Debentures,
such acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Debentures unless and until the same are
delivered to the Trustee for cancellation.
ARTICLE III
REDEMPTION OF DEBENTURES
Section 3.1 REDEMPTION PRICES. The Company may, at its option, redeem all
or from time to time any part of the Debentures on any date prior to maturity,
upon notice as set forth in Section 3.2, and at the optional redemption prices
set forth in the form of Debenture attached
(22)
<PAGE> 31
as Exhibit A hereto, together with accrued interest, if any, to, but excluding,
the date fixed for redemption, PROVIDED, HOWEVER, that no such redemption shall
be effected before March 6, 2001.
Section 3.2 NOTICE OF REDEMPTION; SELECTION OF DEBENTURES. In case the
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Debentures pursuant to Section 3.1, it shall fix a date for
redemption, and it, or at its request (which must be received by the Trustee at
least ten (10) Business Days prior to the date the Trustee is requested to give
notice as described below unless a shorter period is agreed to by the Trustee),
the Trustee in the name of and at the expense of the Company, shall mail or
cause to be mailed a notice of such redemption at least twenty (20) and not more
than sixty (60) days prior to the date fixed for redemption to the holders of
Debentures so to be redeemed as a whole or in part at their last addresses as
the same appear on the Debenture register (PROVIDED that if the Company shall
give such notice, it shall also give such notice, and notice of the Debentures
to be redeemed, to the Trustee). If fewer than all the Debentures are to be
redeemed, the Company will give the Trustee written notice in the form of an
Officers' Certificate not fewer than thirty-five (35) days (or such shorter
period of time as may be acceptable to the Trustee) prior to the redemption date
as to the aggregate principal amount of Debentures to be redeemed. Such mailing
shall be by first class mail. The notice if mailed in the manner herein provided
shall be conclusively presumed to have been duly given, whether or not the
holder receives such notice. In any case, failure to give such notice by mail or
any defect in the notice to the holder of any Debenture designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Debenture.
Each such notice of redemption shall specify the aggregate principal amount
of Debentures to be redeemed, the date fixed for redemption, the redemption
price at which Debentures are to be redeemed, the CUSIP number or numbers for
the Debentures to be redeemed, the place or places of payment, that payment will
be made upon presentation and surrender of such Debentures, that interest
accrued to, but excluding, the date fixed for redemption will be paid as
specified in said notice, and that on and after said date interest thereon or on
the portion thereof to be redeemed will cease to accrue. Such notice shall also
state the current Conversion Price and the date on which the right to convert
such Debentures or portions thereof into Common Stock will expire. If fewer than
all the Debentures are to be redeemed, the notice of redemption shall identify
the Debentures to be redeemed. In case any Debenture is to be redeemed in part
only, the notice of redemption shall state the portion of the principal amount
thereof to be redeemed and shall state that on and after the date fixed for
redemption, upon surrender of such Debenture, a new Debenture or Debentures in
principal amount equal to the unredeemed portion thereof will be issued.
On or prior to the redemption date specified in the notice of redemption
given as provided in this Section 3.2, the Company will deposit with the Trustee
or with one or more paying agents (or, if the Company is acting as its own
paying agent, set aside, segregate and hold in trust as provided in Section 5.4)
an amount of money sufficient to redeem on the redemption date all the
Debentures (or portions thereof) so called for redemption (other than
(23)
<PAGE> 32
those theretofore surrendered for conversion into Common Stock) at the
appropriate redemption price, together with accrued interest to, but excluding,
the date fixed for redemption; PROVIDED that if such payment is made on the
redemption date it must be received by the Trustee or paying agent, as the case
may be, by 10:00 a.m. New York City time, on such date. If any Debenture called
for redemption is converted pursuant hereto, any money deposited with the
Trustee or any paying agent or so segregated and held in trust for the
redemption of such Debenture shall be paid to the Company upon its request, or,
if then held by the Company shall be discharged from such trust.
If fewer than all the Debentures are to be redeemed, the Trustee shall
select the Debentures or portions thereof to be redeemed (in principal amounts
of $1,000 or integral multiples thereof), by lot or, in its sole discretion, on
a pro rata basis. If any Debenture selected for partial redemption is converted
in part after such selection, the converted portion of such Debenture shall be
deemed (so far as may be) to be the portion to be selected for redemption. The
Debentures (or portions thereof) so selected shall be deemed duly selected for
redemption for all purposes hereof, notwithstanding that any such Debenture is
converted as a whole or in part before the mailing of the notice of redemption.
Upon any redemption of less than all Debentures, the Company and the
Trustee may (but need not) treat as outstanding any Debentures surrendered for
conversion during the period of fifteen (15) days next preceding the mailing of
a notice of redemption and may (but need not) treat as not outstanding any
Debenture authenticated and delivered during such period in exchange for the
unconverted portion of any Debenture converted in part during such period.
Section 3.3 PAYMENT OF DEBENTURES CALLED FOR REDEMPTION. If notice of
redemption has been given as above provided, the Debentures or portion of
Debentures with respect to which such notice has been given shall, unless
converted into Common Stock pursuant to the terms hereof, become due and payable
on the date and at the place or places stated in such notice at the applicable
redemption price, together with interest accrued to, but excluding, the date
fixed for redemption, and on and after said date (unless the Company shall
default in the payment of such Debentures at the redemption price, together with
interest accrued to, but excluding, said date) interest on the Debentures or
portion of Debentures so called for redemption shall cease to accrue and such
Debentures shall cease after the close of business on the Business Day next
preceding the date fixed for redemption to be convertible into Common Stock and,
except as provided in Sections 8.5 and 13.4, to be entitled to any benefit or
security under this Indenture, and the holders thereof shall have no right in
respect of such Debentures except the right to receive the redemption price
thereof and unpaid interest to, but excluding, the date fixed for redemption. On
presentation and surrender of such Debentures at a place of payment in said
notice specified, the said Debentures or the specified portions thereof to be
redeemed shall be paid and redeemed by the Company at the applicable redemption
price, together with interest accrued thereon to, but excluding, the date fixed
for redemption; PROVIDED that, if the applicable redemption date is an interest
payment date, the semi-annual payment of
(24)
<PAGE> 33
interest becoming due on such date shall be payable to the holders of such
Debentures registered as such on the relevant record date subject to the terms
and provisions of Section 2.3 hereof.
Upon presentation of any Debenture redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the holder thereof, at
the expense of the Company, a new Debenture or Debentures, of authorized
denominations, in principal amount equal to the unredeemed portion of the
Debentures so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any Debentures
or mail any notice of optional redemption during the continuance of a default in
payment of interest or premium on the Debentures or of any Event of Default of
which, in the case of any Event of Default other than under Section 7.1(a) or
(b), a Responsible Officer of the Trustee has knowledge. If any Debenture called
for redemption shall not be so paid upon surrender thereof for redemption, the
principal and premium, if any, shall, until paid or duly provided for, bear
interest from the date fixed for redemption at the rate borne by the Debenture
and such Debenture shall remain convertible into Common Stock until the
principal and premium, if any, shall have been paid or duly provided for.
Section 3.4 CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION. In connection
with any redemption of Debentures, the Company may arrange for the purchase and
conversion of any Debentures by an agreement with one or more investment bankers
or other purchasers to purchase such Debentures by paying to the Trustee in
trust for the Debentureholders, on or before the date fixed for redemption, an
amount not less than the applicable redemption price, together with interest
accrued to the date fixed for redemption, of such Debentures. Notwithstanding
anything to the contrary contained in this Article III, the obligation of the
Company to pay the redemption price of such Debentures, together with interest
accrued to, but excluding, the date fixed for redemption, shall be deemed to be
satisfied and discharged to the extent such amount is so paid by such
purchasers. If such an agreement is entered into, a copy of which will be filed
with the Trustee prior to the date fixed for redemption, any Debentures not duly
surrendered for conversion by the holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such holders and (notwithstanding anything to the contrary
contained in Article XV) surrendered by such purchasers for conversion, all as
of immediately prior to the close of business on the date fixed for redemption
(and the right to convert any such Debentures shall be deemed to have been
extended through such time), subject to payment of the above amount as
aforesaid. At the direction of the Company, the Trustee shall hold and dispose
of any such amount paid to it in the same manner as it would monies deposited
with it by the Company for the redemption of Debentures. Without the Trustee's
prior written consent, no arrangement between the Company and such purchasers
for the purchase and conversion of any Debentures shall increase or otherwise
affect any of the powers, duties, responsibilities or obligations of the Trustee
as set forth in this Indenture, and the Company agrees to indemnify the Trustee
from, and hold it harmless against, any loss, liability or expense arising out
of or in connection with any such arrangement for the purchase and conversion of
any Debentures between the Company and such
(25)
<PAGE> 34
purchasers to which the Trustee has not consented in writing, including the
costs and expenses incurred by the Trustee in the defense of any claim or
liability arising out of or in connection with the exercise or performance of
any of its powers, duties, responsibilities or obligations under this Indenture.
ARTICLE IV
SUBORDINATION OF DEBENTURES
Section 4.1 AGREEMENT OF SUBORDINATION. The Company covenants and agrees,
and each holder of Debentures issued hereunder by his acceptance thereof
likewise covenants and agrees, that all Debentures shall be issued subject to
the provisions of this Article IV; and each person holding any Debenture,
whether upon original issue or upon transfer, assignment or exchange thereof,
accepts and agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest (including
Liquidated Damages, if any) on all Debentures (including, but not limited to,
the redemption price with respect to the Debentures to be redeemed, as provided
in this Indenture) issued hereunder shall, to the extent and in the manner
hereinafter set forth, be subordinated and subject in right of payment to the
prior payment in full in cash or other payment satisfactory to holders of Senior
Indebtedness of all Senior Indebtedness.
No provision of this Article IV shall prevent the occurrence of any default
or Event of Default hereunder.
Section 4.2 PAYMENTS TO DEBENTUREHOLDERS. No payment shall be made with
respect to the principal of, or premium, if any, or interest (including
Liquidated Damages, if any) on the Debentures (including, but not limited to,
the redemption price with respect to the Debentures to be redeemed, as provided
in this Indenture), except payments and distributions made by the Trustee as
permitted by the first or second paragraph of Section 4.5, if:
(a) a default in the payment of principal, premium, interest, rent or
other obligations due on any Senior Indebtedness occurs and is continuing (or,
in the case of Senior Indebtedness for which there is a period of grace, in the
event of such a default that continues beyond the period of grace, if any,
specified in the instrument or lease evidencing such Senior Indebtedness),
unless and until such default shall have been cured or waived or shall have
ceased to exist; or
(b) a default, other than a payment default, on a Designated Senior
Indebtedness occurs and is continuing that then permits holders of such
Designated Senior Indebtedness to accelerate its maturity and the Trustee
receives a notice of the default (a
(26)
<PAGE> 35
"Payment Blockage Notice") from the Company or holder or Representative of
Designated Senior Indebtedness.
If the Trustee receives any Payment Blockage Notice pursuant to clause
(b) above, no subsequent Payment Blockage Notice shall be effective for purposes
of this Section unless and until (A) at least 365 days shall have elapsed since
the effectiveness of the immediately prior Payment Blockage Notice, and (B) all
scheduled payments of principal, premium, if any, and interest (including
Liquidated Damages, if any) on the Debentures that have come due have been paid
in full in cash. No nonpayment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Debentures upon the earlier of:
(1) the date upon which the default is cured or waived or ceases
to exist, or
(2) in the case of a default referred to in clause (b) above, the
earlier of (x) the date such default is cured or waived or ceases to exist and
(y) 179 days pass after notice is received if the maturity of such Designated
Senior Indebtedness has not been accelerated, unless this Article IV otherwise
prohibits the payment or distribution at the time of such payment or
distribution.
Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due upon all Senior Indebtedness shall first be paid in full, in cash or
other payment satisfactory to the holders of Senior Indebtedness or payment
thereof provided for in cash or other payment satisfactory to the holders of
Senior Indebtedness, before any payment is made on account of the principal (and
premium, if any) or interest (including Liquidated Damages, if any) on the
Debentures (except payments made pursuant to Article XIII from monies deposited
with the Trustee pursuant thereto prior to the happening of such dissolution,
winding-up, liquidation or reorganization or bankruptcy, insolvency,
receivership or other such proceedings); and upon any such dissolution or
winding-up or liquidation or reorganization or bankruptcy, insolvency,
receivership or other such proceedings, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the holders of the Debentures or the Trustee
under this Indenture would be entitled, except for the provision of this Article
IV, shall (except as aforesaid) be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by the holders of the Debentures or by the Trustee
under this Indenture if received by them or it, directly to the holders of
Senior Indebtedness (pro
(27)
<PAGE> 36
rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders or as otherwise required by law or a court
order) or their respective Representative or Representatives, as their
respective interests may appear, to the extent necessary to pay all Senior
Indebtedness in full in cash or other payment satisfactory to holders of Senior
Indebtedness after giving effect to any concurrent payment or distribution to or
for the holders of Senior Indebtedness, before any payment or distribution is
made to the holders of the Debentures or to the Trustee under this Indenture.
In the event of the acceleration of the Debentures pursuant to Article
VII, no payment or distribution shall be made to the Trustee or any holder of
Debentures in respect of the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Debentures (including, but not
limited to, the redemption price with respect to the Debentures called for
redemption in accordance with Section 3.2), except payments and distributions
made by the Trustee as permitted by the first or second paragraph of Section
4.5, until all Senior Indebtedness has been paid in full in cash or other
payment satisfactory to the holders of Senior Indebtedness or such acceleration
is rescinded in accordance with the terms of this Indenture. If payment of the
Debentures is accelerated pursuant to Article VII, the Company shall promptly
notify holders of Senior Indebtedness of such acceleration.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (including, without limitation, by way of setoff or
otherwise), prohibited by the foregoing, shall be received by the Trustee under
this Indenture or by any holders of the Debentures before all Senior
Indebtedness is paid in full in cash or other payment satisfactory to holders of
Senior Indebtedness, or provision is made for in cash or other payment
satisfactory to holders of Senior Indebtedness, such payment or distribution
shall be held by the recipient or recipients in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Indebtedness or their
respective Representative or Representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing any Senior
Indebtedness may have been issued, as their respective interests may appear, as
calculated by the Company, for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in cash or other payment satisfactory to the holders of
Senior Indebtedness, after giving effect to any concurrent payment or
distribution (or provision therefor) to or for the holders of such Senior
Indebtedness.
For purposes of this Article IV, the words "cash, property or
securities" shall not be deemed to include shares of stock 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, the payment of which
is subordinated (at least to the extent provided in this Article IV with respect
to the Debentures) to the payment of all Senior Indebtedness which may at the
time be outstanding; PROVIDED that (i) the Senior Indebtedness is assumed by the
new corporation, if any, resulting from such reorganization or adjustment, and
(ii) the rights of the holders of Senior Indebtedness (other than leases which
are not assumed by the Company or by
(28)
<PAGE> 37
the new corporation, as the case may be) are not, without the consent of such
holders, altered by such reorganization or readjustment. The consolidation of
the Company with, or the merger of the Company into, another corporation or the
liquidation or dissolution of the Company following the conveyance or transfer
of its property as an entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided for in Article XII shall not
be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 4.2 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions stated
in Article XII.
Nothing in this Section 4.2 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 8.6. This Section 4.2 shall be subject
to the further provisions of Section 4.5.
Section 4.3 SUBROGATION OF DEBENTURES. Subject to the payment in full of
all Senior Indebtedness, the rights of the holders of the Debentures shall be
subrogated to the extent of the payments or distributions made to the holders of
such Senior Indebtedness pursuant to the provisions of this Article IV (equally
and ratably with the holders of all indebtedness of the Company which by its
express terms is subordinated to other indebtedness of the Company to
substantially the same extent as the Debentures are subordinated and is entitled
to like rights of subrogation) to the rights of the holders of Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest (including Liquidated Damages,
if any) on the Debentures shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the holders of the
Debentures or the Trustee would be entitled except for the provisions of this
Article IV, and no payment over pursuant to the provisions of this Article IV,
to or for the benefit of the holders of Senior Indebtedness by holders of the
Debentures or the Trustee, shall, as between the Company, its creditors other
than holders of Senior Indebtedness, and the holders of the Debentures, be
deemed to be a payment by the Company to or on account of the Senior
Indebtedness; and no payments or distributions of cash, property or securities
to or for the benefit of the holders of the Debentures pursuant to the
subrogation provisions of this Article IV, which would otherwise have been paid
to the holders of Senior Indebtedness shall be deemed to be a payment by the
Company to or for the account of the Debentures. It is understood that the
provisions of this Article IV are and are intended solely for the purposes of
defining the relative rights of the holders of the Debentures, on the one hand,
and the holders of the Senior Indebtedness, on the other hand.
Nothing contained in this Article IV or elsewhere in this Indenture or in
the Debentures is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness, and the holders of the
Debentures, the obligation of the Company, which is absolute and unconditional,
to pay to the holders of the Debentures the principal of (and premium, if any)
and interest (including Liquidated Damages, if any) on the Debentures as and
when the same shall become due and payable in accordance with their terms, or is
intended to
(29)
<PAGE> 38
or shall affect the relative rights of the holders of the Debentures and
creditors of the Company other than the holders of the Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or the holder of any
Debenture from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article IV of the holders of Senior Indebtedness in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to in
this Article IV, the Trustee, subject to the provisions of Section 8.1, and the
holders of the Debentures shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which such bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution, delivered to the
Trustee or to the holders of the Debentures, for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article IV.
Section 4.4 AUTHORIZATION BY DEBENTUREHOLDERS. Each holder of a Debenture
by his acceptance thereof authorizes and directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article IV and appoints the Trustee his
attorney-in-fact for any and all such purposes.
Section 4.5 NOTICE TO TRUSTEE. The Company shall give prompt written notice
in the form of an Officers' Certificate to a Responsible Officer of the Trustee
and to any paying agent of any fact known to the Company which would prohibit
the making of any payment of monies to or by the Trustee or any paying agent in
respect of the Debentures pursuant to the provisions of this Article IV.
Notwithstanding the provisions of this Article IV or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any Senior Indebtedness or of any default or event of default with respect to
any Senior Indebtedness or of any other facts which would prohibit the making of
any payment of monies to or by the Trustee in respect of the Debentures pursuant
to the provisions of this Article IV, unless and until a Responsible Officer of
the Trustee shall have received written notice thereof at the Corporate Trust
Office from the Company (in the form of an Officers' Certificate) or a holder or
holders or Representative of Senior Indebtedness who shall have been certified
by the Company or otherwise established to the reasonable satisfaction of the
Trustee to be such holder or Representative; and before the receipt of any such
written notice, the Trustee, subject to the provisions of Section 8.1, shall be
entitled in all respects to assume that no such facts exist; PROVIDED that if on
a date at least two (2) Business Days prior to the date upon which by the terms
hereof any such monies may become payable for any purpose (including, without
limitation, the payment of the principal of, or premium, if any, or interest on
any Debenture), the Trustee shall not have received with respect to such monies
the notice provided for in this Section 4.5, then, anything herein contained to
the contrary notwithstanding, the Trustee shall
(30)
<PAGE> 39
have full power and authority to receive such monies and to apply the same to
the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such prior date.
Notwithstanding anything to the contrary hereinbefore set forth, nothing
shall prevent (a) any payment by the Company or the Trustee to the
Debentureholders of amounts in connection with a redemption of Debentures if (i)
notice of such redemption has been given pursuant to Article III prior to the
receipt by the Trustee of written notice as aforesaid, and (ii) such notice of
redemption is given not earlier than sixty (60) days before the redemption date,
or (b) any payment by the Trustee to the Debentureholders of monies deposited
with it pursuant to Section 13.1.
The Trustee, subject to the provisions of Section 8.1, 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 Representative on behalf of such
holder) to establish that such notice has been given by a holder of Senior
Indebtedness or a Representative on behalf of any such holder or holders. 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 IV, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such person under this Article IV, and if such evidence is not furnished the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment.
Section 4.6 TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS. The Trustee and any
agent of the Company or the Trustee in its individual capacity shall be entitled
to all the rights set forth in this Article IV in respect of any Senior
Indebtedness at any time held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in Section 8.13 or elsewhere in this Indenture
shall deprive the Trustee or any such agent of any of its rights as such holder.
Nothing in this Article IV shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 8.6.
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 IV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 4.2 and Section 8.1, the Trustee shall not be liable to
any holder of Senior Indebtedness if it shall pay over or deliver to holders of
Debentures, the Company or any other person money or assets to which any holder
of Senior Indebtedness shall be entitled by virtue of this Article IV or
otherwise.
(31)
<PAGE> 40
Section 4.7 NO IMPAIRMENT OF SUBORDINATION. 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 which any such holder may have or otherwise be charged with.
Section 4.8 CERTAIN CONVERSIONS DEEMED PAYMENT. For the purposes of this
Article only, (1) the issuance and delivery of junior securities upon conversion
of Debentures in accordance with Article XV shall not be deemed to constitute a
payment or distribution on account of the principal of (or premium, if any) or
interest on Debentures or on account of the purchase or other acquisition of
Debentures, and (2) the payment, issuance or delivery of cash (except in
satisfaction of fractional shares pursuant to Section 15.3), property or
securities (other than junior securities) upon conversion of a Debenture shall
be deemed to constitute payment on account of the principal of such Debenture.
For the purposes of this Section, the term "junior securities" means (a) shares
of any stock of any class of the Company and (b) securities of the Company which
are subordinated in right of payment to all Senior Indebtedness which may be
outstanding at the time of issuance or delivery of such securities to
substantially the same extent as, or to a greater extent than, the Debentures
are so subordinated as provided in this Article. Nothing contained in this
Article or elsewhere in this Indenture or in the Debentures is intended to or
shall impair, as among the Company, its creditors other than holders of Senior
Indebtedness and the holders of the Debentures, the right, which is absolute and
unconditional, of the holder of any Debenture to convert such Debenture in
accordance with Article XV.
Section 4.9 ARTICLE APPLICABLE TO PAYING AGENTS. If 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 (unless
the context otherwise requires) be construed as extending to and including such
paying agent within its meaning as fully for all intents and purposes as if such
paying agent were named in this Article in addition to or in place of the
Trustee; PROVIDED, HOWEVER, that the first paragraph of Section 4.5 shall not
apply to the Company or any Affiliate of the Company if it or such Affiliate
acts as paying agent.
Section 4.10 SENIOR INDEBTEDNESS ENTITLED TO RELY. The holders of Senior
Indebtedness (including, without limitation, Designated Senior Indebtedness)
shall have the right to rely upon this Article IV, and no amendment or
modification of the provisions contained herein shall diminish the rights of
such holders unless such holders shall have agreed in writing thereto.
(32)
<PAGE> 41
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest (including Liquidated
Damages, if any) on each of the Debentures at the places, at the respective
times and in the manner provided herein and in the Debentures.
Section 5.2 MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in
the Borough of Manhattan, The City of New York, an office or agency where the
Debentures may be surrendered for registration of transfer or exchange or for
presentation for payment or for conversion or redemption and where notices and
demands to or upon the Company in respect of the Debentures and this Indenture
may be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency not
designated or appointed by the Trustee. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office, or the office or agency of
the Trustee or an Affiliate of the Trustee, in the Borough of Manhattan, The
City of New York.
The Company may also from time to time designate one or more other offices
or agencies where the Debentures may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; PROVIDED that
no such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of 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.
The Company hereby initially designates the Trustee as paying agent,
Debenture registrar, Custodian and conversion agent and the Corporate Trust
Office and the office or agency of the Trustee in the Borough of Manhattan, The
City of New York (which shall initially be State Street Bank and Trust Company,
N.A., an Affiliate of the Trustee, located at 61 Broadway, 15th Floor, New York,
New York 10006) shall be considered as one such office or agency of the Company
for each of the aforesaid purposes.
So long as the Trustee is the Debenture registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 8.10(a) and the
third paragraph of Section 8.11.
Section 5.3 APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
(33)
<PAGE> 42
Section 5.4 PROVISIONS AS TO PAYING AGENT.
(a) If the Company shall appoint a paying agent other than the
Trustee, the Company will cause such paying agent to execute and deliver to the
Trustee an instrument in which such agent shall agree with the Trustee, subject
to the provisions of this Section 5.4:
(1) that it will hold all sums held by it as such agent for
the payment of the principal of and premium, if any, or interest on the
Debentures (whether such sums have been paid to it by the Company or by any
other obligor on the Debentures) in trust for the benefit of the holders of the
Debentures;
(2) that it will give the Trustee notice of any failure by
the Company (or by any other obligor on the Debentures) to make any payment of
the principal of and premium, if any, or interest on the Debentures when the
same shall be due and payable; and
(3) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it will forthwith pay to the Trustee all
sums so held in trust.
The Company shall, on or before each due date of the principal of,
premium, if any, or interest on the Debentures, deposit with the paying agent a
sum sufficient to pay such principal, premium, if any, or interest, and (unless
such paying agent is the Trustee) the Company will promptly notify the Trustee
of any failure to take such action, provided that if such deposit is made on the
due date, such deposit must be received by the paying agent by 10:00 a.m., New
York City time, on such date.
(b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of, premium, if any, or interest on the
Debentures, set aside, segregate and hold in trust for the benefit of the
holders of the Debentures a sum sufficient to pay such principal, premium, if
any, or interest so becoming due and will notify the Trustee of any failure to
take such action and of any failure by the Company (or any other obligor under
the Debentures) to make any payment of the principal of, premium, if any, or
interest on the Debentures when the same shall become due and payable.
(c) Anything in this Section 5.4 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by the Company or any paying agent hereunder
as required by this Section 5.4, such sums to be held by the Trustee upon the
trusts herein contained and upon such payment by the Company or any paying agent
to the Trustee, the Company or such paying agent shall be released from all
further liability with respect to such sums.
(34)
<PAGE> 43
(d) Anything in this Section 5.4 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 5.4 is subject to
Sections 13.3 and 13.4.
Section 5.5 EXISTENCE. Subject to Article XII, the Company will do or cause
to be done all things necessary to preserve and keep in full force and effect
its existence.
Section 5.6 MAINTENANCE OF PROPERTIES. The Company will cause all
properties used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; PROVIDED, HOWEVER, that nothing in this Section shall prevent the
Company from discontinuing the operation or maintenance of or disposing of any
of such properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business or the business of any Subsidiary and
not disadvantageous in any material respect to the holders.
Section 5.7 PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or
discharge, or cause to be paid or discharged, before the same may become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary, (ii) all claims for labor, materials
and supplies which, if unpaid, might by law become a lien or charge upon the
property of the Company or any Subsidiary, except for any mechanic liens upon
the property of the Company or any Subsidiary, and (iii) all stamps and other
duties, if any, which may be imposed by the United States or any political
subdivision thereof or therein in connection with the issuance, transfer,
exchange or conversion of any Debentures or with respect to this Indenture;
PROVIDED, HOWEVER, that, in the case of clauses (i) and (ii), the Company shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim (A) if the failure to do so will not, in the
aggregate, have a material adverse impact on the Company, or (B) if the amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Section 5.8 STAY, EXTENSION AND USURY LAWS. The Company covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on
the Debentures as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
Indenture; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.
(35)
<PAGE> 44
Section 5.9 COMPLIANCE CERTIFICATE. The Company shall deliver to the
Trustee, within 120 days after the end of each fiscal year of the Company ending
(beginning with the fiscal year in which the Exchange Date falls), 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.
The Company will deliver to the Trustee, forthwith upon becoming aware of
any default in the performance or observance of any covenant, agreement or
condition contained in this Indenture, or any Event of Default, an Officers'
Certificate specifying with particularity such default or Event of Default and
further stating what action the Company has taken, is taking or proposes to take
with respect thereto.
Any notice required to be given under this Section 5.9 shall be delivered
to the Trustee at its Corporate Trust Office.
Section 5.10 FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee, the
Company will execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more effectively the
purposes of this Indenture.
Section 5.11 RULE 144A INFORMATION REQUIREMENT. Within the period prior to
the expiration of the holding period applicable to sales of Debentures or Common
Stock issued upon conversion thereof under Rule 144(k) under the Securities Act
(or any successor provision), the Company covenants and agrees that it shall,
during any period in which it is not subject to Section 13 or 15(d) under the
Exchange Act, make available to any holder or beneficial holder of Debentures or
any Common Stock issued upon conversion thereof, in each case which continue to
be Restricted Securities, in connection with any sale thereof and any
prospective purchaser of Debentures or such Common Stock from such holder or
beneficial holder, the information required pursuant to Rule 144A(d)(4) under
the Securities Act upon the request of any holder or beneficial holder of the
Debentures or such Common Stock and it will take such further action as any
holder or beneficial holder of such Debentures or such Common Stock may
reasonably request, all to the extent required from time to time to enable such
holder or beneficial holder to sell its Debentures or Common Stock without
registration under the Securities Act within the limitation of the exemption
provided by Rule 144A, as such rule may be amended from time to time. Upon the
request of any holder or any beneficial holder of the Debentures or such Common
Stock, the Company will deliver to such holder a written statement as to whether
it has complied with such requirements.
(36)
<PAGE> 45
ARTICLE VI
DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEE
Section 6.1 DEBENTUREHOLDERS' LISTS. The Company covenants and agrees that
it will furnish or cause to be furnished to the Trustee, semi-annually, not more
than fifteen (15) days after each February 15 and August 15 in each year
beginning with the immediately succeeding February 15 or August 15 after the
Exchange Date, and at such other times as the Trustee may request in writing,
within thirty (30) days after receipt by the Company of any such request (or
such lesser time as the Trustee may reasonably request in order to enable it to
timely provide any notice to be provided by it hereunder), a list in such form
as the Trustee may reasonably require of the names and addresses of the holders
of Debentures as of a date not more than fifteen (15) days (or such other date
as the Trustee may reasonably request in order to so provide any such notices)
prior to the time such information is furnished, except that no such list need
be furnished so long as the Trustee is acting as Debenture registrar.
Section 6.2 PRESERVATION AND DISCLOSURE OF LISTS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Debentures contained in the most recent list furnished to it as provided in
Section 6.1 or maintained by the Trustee in its capacity as Debenture registrar,
if so acting. The Trustee may destroy any list furnished to it as provided in
Section 6.1 upon receipt of a new list so furnished.
(b) The rights of Debentureholders to communicate with other holders
of Debentures with respect to their rights under this Indenture or under the
Debentures and the corresponding rights and duties of the Trustee, shall be as
provided by the Trust Indenture Act.
(c) Every Debentureholder, 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 of Debentures
made pursuant to the Trust Indenture Act.
Section 6.3 REPORTS BY TRUSTEE.
(a) Within 60 days after May 1 of each year commencing with the year
in which the Exchange Date falls, the Trustee shall transmit to holders of
Debentures such reports dated as of May 1 of the year in which such reports are
made concerning the Trustee and its actions under this Indenture as may be
required pursuant to Section 313 of the Trust Indenture Act at the times and in
the manner provided pursuant thereto.
(37)
<PAGE> 46
(b) A copy of such report shall, at the time of such transmission to
holders of Debentures, be filed by the Trustee with each stock exchange or
automated quotation system upon which the Debentures are listed, with the
Commission and with the Company. The Company will notify the Trustee when the
Debentures are listed on any stock exchange or automated quotation system and
when any such listing is discontinued.
Section 6.4 REPORTS BY COMPANY.
(a) The Company (and any obligor upon the Debentures) shall file with
the Trustee and the Commission, and transmit to holders of Debentures, 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.
(b) The Company will deliver to the Trustee (a) as soon as available
and in any event within ninety (90) days after the end of each fiscal year of
the Company (i) a consolidated balance sheet of the Company and its subsidiaries
as of the end of such fiscal year and the related consolidated statements of
operations, stockholders' equity and cash flows for such fiscal year, all
reported on by an independent public accountant of nationally recognized
standing and (ii) a report containing a management's discussion and analysis of
the financial condition and results of operations and a description of the
business and properties of the Company and (b) as soon as available and in any
event within forty five (45) days after the end of each of the first three
quarters of each fiscal year of the Company (i) an unaudited consolidated
management's discussion and analysis of the financial condition and results of
operations of the Company for such quarter; provided that the foregoing
statements and reports shall not be required for any fiscal year or quarter, as
the case may be, with respect to which the Company files or expects to file with
the Trustee an annual report or quarterly report, as the case may be, pursuant
to Section 6.4(a). The Trustee shall have no liability as regards the substance
of the information provided by the Company or its agents pursuant to this
Section 6.4.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.1 EVENTS OF DEFAULT. In case one or more of the following Events
of Default (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body) shall have occurred and be continuing:
(38)
<PAGE> 47
(a) default in the payment of the principal of and premium, if any, on
any of the Debentures as and when the same shall become due and payable either
at maturity or in connection with any redemption, by declaration or otherwise,
whether or not such payment is prohibited by the provisions of Article IV; or
(b) default in the payment of any installment of interest (including
Liquidated Damages, if any), upon any of the Debentures as and when the same
shall become due and payable, and continuance of such default for a period of
thirty (30) days, whether or not such payment is prohibited by the provisions of
Article IV; or
(c) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the
Debentures or in this Indenture (other than a covenant or agreement a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with) continued for a period of forty-five (45) days after the date on
which written notice of such failure, requiring the Company to remedy the same,
shall have been given to the Company by the Trustee, or to the Company and a
Responsible Officer of the Trustee by the holders of at least 25% in aggregate
principal amount of the outstanding Debentures at the time outstanding
determined in accordance with Section 9.4; or
(d) failure by the Company to make any payment at maturity, including
any applicable grace period, in respect of Indebtedness, in an amount in excess
of $5,000,000 or the equivalent thereof in any other currency or composite
currency and such failure shall have continued for thirty (30) days after
written notice thereof shall have been given to the Company by the Trustee or to
the Company and a Responsible Officer of the Trustee or to the Company and a
Responsible Officer of the Trustee by the holders of at least 25% in aggregate
principal amount of the outstanding Debentures at the time outstanding
determined in accordance with Section 9.4; or
(e) a default by the Company with respect to any Indebtedness which
default results in the acceleration of Indebtedness in an amount in excess of
$5,000,000 or the equivalent thereof in any other currency or composite currency
without such Indebtedness having been discharged or such acceleration having
been cured, waived, rescinded or annulled for a period of thirty (30) days after
written notice thereof shall have been given to the Company by the Trustee by
the holders of at least 25% in aggregate principal amount of the outstanding
Debentures at the time outstanding determined in accordance with Section 9.4; or
(f) the Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a
(39)
<PAGE> 48
general assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due; or
(g) an involuntary case or other proceeding shall be commenced against
the Company liquidation, reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of ninety (90) consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(f) or (g)), unless the principal of all of the Debentures shall
have already become due and payable, either the Trustee or the holders of not
less than 25% in aggregate principal amount of the Debentures then outstanding
hereunder determined in accordance with Section 9.4, by notice in writing to the
Company (and to the Trustee if given by Debentureholders), may declare the
principal of and premium, if any, on all the Debentures and the interest accrued
thereon (including Liquidated Damages, if any) to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Indenture or in the Debentures
contained to the contrary notwithstanding. If an Event of Default specified in
Section 7.1(f) or (g) occurs and is continuing, the principal of all the
Debentures and the interest accrued thereon shall be immediately due and
payable. This provision, however, is subject to the conditions that if, at any
time after the principal of the Debentures shall have been so declared due and
payable, and before any judgment or decree for the payment of the monies due
shall have been obtained or entered as hereinafter provided, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest (including Liquidated Damages, if any) upon all
Debentures and the principal of and premium, if any, on any and all Debentures
which shall have become due otherwise than by acceleration (with interest on
overdue installments of interest (including Liquidated Damages, if any) (to the
extent that payment of such interest is enforceable under applicable law) and on
such principal and premium, if any, at the rate borne by the Debentures, to the
date of such payment or deposit) and amounts due to the Trustee pursuant to
Section 8.6, and if any and all defaults under this Indenture, other than the
nonpayment of principal of and premium, if any, and accrued interest (including
Liquidated Damages, if any) on Debentures which shall have become due by
acceleration, shall have been cured or waived pursuant to Section 7.7, then and
in every such case the holders of a majority in aggregate principal amount of
the Debentures then outstanding, by written notice to the Company and to the
Trustee, may waive all defaults or Events of Default and rescind and annul such
declaration and its consequences; but no such waiver or rescission and annulment
shall extend to or shall affect any subsequent default or Event of Default, or
shall impair any right consequent thereon. The Company shall notify the
Responsible Officer of the Trustee, promptly upon becoming aware thereof, of any
Event of Default.
(40)
<PAGE> 49
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such waiver or rescission and annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the holders of Debentures, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Debentures, and the Trustee
shall continue as though no such proceeding had been instituted.
Section 7.2 PAYMENTS OF DEBENTURES ON DEFAULT; SUIT THEREFOR. The Company
covenants that (a) in case default shall be made in the payment by the Company
of any installment of interest (including Liquidated Damages, if any) upon any
of the Debentures as and when the same shall become due and payable, and such
default shall have continued for a period of thirty (30) days, or (b) in case
default shall be made in the payment of the principal of or premium, if any, on
any of the Debentures as and when the same shall have become due and payable,
whether at maturity of the Debentures or in connection with any redemption, by
declaration under this Indenture or otherwise, then, upon demand of the Trustee,
the Company will pay to the Trustee, for the benefit of the holders of the
Debentures, the whole amount that then shall have become due and payable on all
such Debentures for principal and premium, if any, or interest (including
Liquidated Damages, if any), or both, as the case may be, with interest upon the
overdue principal and premium, if any, and (to the extent that payment of such
interest is enforceable under applicable law) upon the overdue installments of
interest (including Liquidated Damages, if any) at the rate borne by the
Debentures; and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including reasonable compensation
to the Trustee, its agents, attorneys and counsel, and any expenses or
liabilities incurred by the Trustee hereunder other than through its negligence
or bad faith. Until such demand by the Trustee, the Company may pay the
principal of and premium, if any, and interest (including Liquidated Damages, if
any) on the Debentures to the registered holders, whether or not the Debentures
are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the
Debentures and collect in the manner provided by law out of the property of the
Company or any other obligor on the Debentures wherever situated the monies
adjudged or decreed to be payable.
In the case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Debentures under
Title 11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the
(41)
<PAGE> 50
Company or such other obligor, or in the case of any other judicial proceedings
relative to the Company or such other obligor upon the Debentures, or to the
creditors or property of the Company or such other obligor, the Trustee,
irrespective of whether the principal of the Debentures shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section 7.2, shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount of principal, premium, if any, and interest (including Liquidated
Damages, if any) owing and unpaid in respect of the Debentures, and, in case of
any judicial proceedings, to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and of the Debentureholders allowed in such judicial proceedings
relative to the Company or any other obligor on the Debentures, its or their
creditors, or its or their property, and to collect and receive any monies or
other property payable or deliverable on any such claims, and to distribute the
same after the deduction of any amounts due the Trustee under Section 8.6; and
any receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
custodian or similar official is hereby authorized by each of the
Debentureholders 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
Debentureholders, to pay to the Trustee any amount due it for reasonable
compensation, expenses, advances and disbursements, including counsel fees
incurred by it up to the date of such distribution. To the extent that such
payment of reasonable compensation, expenses, advances and disbursements out of
the estate in any such proceedings shall be denied for any reason, payment of
the same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property which the
holders of the Debentures may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or adopt on behalf of any Debentureholder any plan of
reorganization or arrangement affecting the Debentures or the rights of any
Debentureholder, or to authorize the Trustee to vote in respect of the claim of
any Debentureholder in any such proceeding; PROVIDED, HOWEVER, that the Trustee
may, on behalf of the Debentureholders, vote for the election of a trustee in
bankruptcy or similar official and may be a member of the creditor's committee
established with respect to such bankruptcy.
All rights of action and of asserting claims under this Indenture, or under
any of the Debentures, may be enforced by the Trustee without the possession of
any of the Debentures, or the production thereof on any trial or other
proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Debentures.
(42)
<PAGE> 51
Section 7.3 APPLICATION OF MONIES COLLECTED BY TRUSTEE. Any monies
collected by the Trustee pursuant to this Article VII shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Debentures, and stamping
thereon the payment, if only partially paid, and upon surrender thereof, if
fully paid:
First: To the payment of all amounts due the Trustee under Section
8.6;
Second: Subject to the provisions of Article IV, in case the principal
of the outstanding Debentures shall not have become due and be unpaid, to
the payment of interest on the Debentures in default in the order of the
maturity of the installments of such interest, with interest (to the extent
that such interest has been collected by the Trustee) upon the overdue
installments of interest at the rate borne by the Debentures, such payments
to be made ratably to the persons entitled thereto;
Third: Subject to the provisions of Article IV, in case the principal
of the outstanding Debentures shall have become due, by declaration or
otherwise, and be unpaid, to the payment of the whole amount then owing and
unpaid upon the Debentures for principal and premium, if any, and interest,
with interest on the overdue principal and premium, if any, and (to the
extent that such interest has been collected by the Trustee) upon overdue
installments of interest at the rate borne by the Debentures; and in case
such monies shall be insufficient to pay in full the whole amounts so due
and unpaid upon the Debentures, then to the payment of such principal and
premium, if any, and interest without preference or priority of principal
and premium, if any, over interest, or of interest over principal and
premium, if any, or of any installment of interest over any other
installment of interest, or of any Debenture over any other Debenture,
ratably to the aggregate of such principal and premium, if any, and accrued
and unpaid interest; and
Fourth: Subject to the provisions of Article IV, to the payment of the
remainder, if any, to the Company or any other person lawfully entitled
thereto.
Section 7.4 PROCEEDINGS BY DEBENTUREHOLDER. No holder of any Debenture
shall have any right by virtue of or by availing of any provision of this
Indenture to institute any suit, action or proceeding in equity or at law upon
or under or with respect to this Indenture, or for the appointment of a
receiver, trustee, liquidator, custodian or other similar official, or for any
other remedy hereunder, unless such holder previously shall have given to the
Trustee written notice of an Event of Default and of the continuance thereof, as
hereinbefore provided, and unless also the holders of not less than 25% in
aggregate principal amount of the Debentures then outstanding shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for sixty (60)
days after its receipt of such notice, request
(43)
<PAGE> 52
and offer of indemnity, shall have neglected or refused to institute any such
action, suit or proceeding and no direction inconsistent with such written
request shall have been given to the Trustee pursuant to Section 7.7; it being
understood and intended that no one or more holders of Notes 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
of Notes, or to obtain or 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 of
Notes.
Notwithstanding any other provision of this Indenture and any provision of
any Debenture, the right of any holder of any Debenture to receive payment of
the principal of and premium, if any, and interest on such Debenture, on or
after the respective due dates expressed in such Debenture, or to institute suit
for the enforcement of any such payment on or after such respective dates
against the Company shall not be impaired or affected without the consent of
such holder.
Anything in this Indenture or the Debentures to the contrary
notwithstanding, the holder of any Debenture, without the consent of either the
Trustee or the holder of any other Debenture, in his own behalf and for his own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, his rights of conversion as provided herein.
Section 7.5 PROCEEDINGS BY TRUSTEE. In case of an Event of Default, the
Trustee may in its discretion proceed to protect and enforce the rights vested
in it by this Indenture by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any of such rights, either by
suit in equity or by action at law or by proceeding in bankruptcy or otherwise,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or in aid of the exercise of any power granted in this Indenture,
or to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.
Section 7.6 REMEDIES CUMULATIVE AND CONTINUING. Except as provided in
Section 2.6, all powers and remedies given by this Article VII to the Trustee or
to the Debentureholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any thereof or of any other powers and remedies
available to the Trustee or the holders of the Debentures, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Trustee or of any holder of any of the Debentures to exercise any right
or power accruing upon any default or Event of Default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or any acquiescence therein; and, subject to the
provisions of Section 7.4, every power and remedy given by this Article VII or
by law to the Trustee or to the Debentureholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Debentureholders.
(44)
<PAGE> 53
Section 7.7 DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY MAJORITY OF
DEBENTUREHOLDERS. The holders of a majority in aggregate principal amount of the
Debentures at the time outstanding determined in accordance with Section 9.4
shall have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; PROVIDED, HOWEVER, that (a) such direction shall
not be in conflict with any rule of law or with this Indenture, and (b) the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction. The holders of a majority in aggregate
principal amount of the Debentures at the time outstanding determined in
accordance with Section 9.4 may on behalf of the holders of all of the
Debentures waive any past default or Event of Default hereunder and its
consequences except (i) a default in the payment of interest or premium, if any,
on, or the principal of, the Debentures, (ii) a failure by the Company to
convert any Debentures into Common Stock or (iii) a default in respect of a
covenant or provisions hereof which under Article XI cannot be modified or
amended without the consent of the holders of all Debentures then outstanding.
Upon any such waiver the Company, the Trustee and the holders of the Debentures
shall be restored to their former positions and rights hereunder; but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon. Whenever any default or Event of Default
hereunder shall have been waived as permitted by this Section 7.7, said default
or Event of Default shall for all purposes of the Debentures and this Indenture
be deemed to have been cured and to be not continuing; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
Section 7.8 NOTICE OF DEFAULTS. The Trustee shall, within ninety (90) days
after the occurrence of a default, mail to all Debentureholders, as the names
and addresses of such holders appear upon the Debenture register, notice of all
defaults known to a Responsible Officer, unless such defaults shall have been
cured or waived before the giving of such notice; and PROVIDED that, except in
the case of default in the payment of the principal of, or premium, if any, or
interest on any of the Debentures, the Trustee shall be protected in withholding
such notice if and so long as a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interests of the Debentureholders.
Section 7.9 UNDERTAKING TO PAY COSTS. All parties to this Indenture agree,
and each holder of any Debenture by his acceptance thereof shall be deemed to
have agreed, that any court may, in its discretion, require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; PROVIDED that the provisions of this Section 7.9 shall not apply to
any suit instituted by the Trustee, to any suit instituted by any
Debentureholder, or group of Debentureholders, holding in the aggregate more
than 10% in
(45)
<PAGE> 54
principal amount of the Debentures at the time outstanding determined in
accordance with Section 9.4, or to any suit instituted by any Debentureholder
for the enforcement of the payment of the principal of or premium, if any, or
interest on any Debenture (including, but not limited to, the redemption price
with respect to the Debentures being redeemed, as provided in this Indenture) on
or after the due date expressed in such Debenture or to any suit for the
enforcement of the right to convert any Debenture in accordance with the
provisions of Article XV.
Section 7.10 DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any holder of any Debenture 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 any acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
holders of Debentures may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the holders of Debentures, as the case
may be.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.1 DUTIES AND RESPONSIBILITIES OF TRUSTEE. The Trustee, prior to
the occurrence of an Event of Default and after the curing of all Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an Event of
Default has occurred (which has not been cured or waived) the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Indenture and 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 no implied
covenants or obligations shall be read into this Indenture and the Trust
Indenture Act against the Trustee; and
(46)
<PAGE> 55
(2) 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 expressed therein, upon any certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture;
but, in the case of any such certificates or opinions 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 to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Officers of the Trustee, unless it shall
be provided that the Trustee was negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable to any Debentureholder 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
principal amount of the Debentures at the time outstanding determined as
provided in Section 9.4 relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture; and
(d) whether or not therein 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.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 8.2 RELIANCE ON DOCUMENTS, OPINIONS, ETC. Except as otherwise
provided in Section 8.1:
(a) the Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, Debenture, coupon or other paper or document
believed by it in good faith to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Trustee by a copy
thereof certified by the Secretary or an Assistant Secretary of the Company;
(47)
<PAGE> 56
(c) the Trustee may consult with counsel and any advice or Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken or omitted by it hereunder in good faith and in accordance with
such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Debentureholders pursuant to the provisions of this
Indenture, unless such Debentureholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby;
(e) 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 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; PROVIDED, HOWEVER, that if
the payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity from the Debentureholders against such expenses or
liability as a condition to so proceeding; the reasonable expenses of every such
examination shall be paid by the Company or, if paid by the Trustee or any
predecessor Trustee, shall be repaid by the Company upon demand; and
(f) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed by it with due care
hereunder.
In no event shall the Trustee be liable for any consequential loss or damage of
any kind whatsoever (including but not limited to lost profits), even if the
Trustee has been advised of the likelihood of such loss or damage and regardless
of the form of action other than through the Trustee's willful misconduct or
gross negligence.
Section 8.3 NO RESPONSIBILITY FOR RECITALS, ETC. The recitals contained
herein and in the Debentures (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Debentures. The Trustee shall not be accountable for the use or application by
the Company of any Debentures or the proceeds of any Debentures authenticated
and delivered by the Trustee in conformity with the provisions of this
Indenture.
(48)
<PAGE> 57
Section 8.4 TRUSTEE, PAYING AGENTS, CONVERSION AGENTS OR REGISTRAR MAY OWN
DEBENTURES. The Trustee, any paying agent, any conversion agent or Debenture
registrar, in its individual or any other capacity, may become the owner or
pledgee of Debentures with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Debenture registrar.
Section 8.5 MONIES TO BE HELD IN TRUST. Subject to the provisions of
Section 13.4, all monies received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received.
Money held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as may be
agreed from time to time by the Company and the Trustee.
Section 8.6 COMPENSATION AND EXPENSES OF TRUSTEE. The Company covenants and
agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, reasonable compensation for all services rendered by it hereunder
in any capacity (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust), and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or willful misconduct. The Company
also covenants to indemnify the Trustee in any capacity under this Indenture and
its agents and any authenticating agent for, and to hold them harmless against,
any loss, liability or expense incurred without negligence or willful misconduct
on the part of the Trustee or such agent or authenticating agent, as the case
may be, and arising out of or in connection with the acceptance or
administration of this trust or in any other capacity hereunder, including the
costs and expenses of defending themselves against any claim of liability in the
premises. The obligations of the Company under this Section 8.6 to compensate or
indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall be secured by a lien prior to that of the
Debentures upon all property and funds held or collected by the Trustee as such,
except, subject to the effect of Sections 4.3 and 7.6, funds held in trust
herewith for the benefit of the holders of particular Debentures prior to the
date of the accrual of such unpaid compensation or indemnifiable claim. The
obligation of the Company under this Section shall survive the satisfaction and
discharge of this Indenture.
When the Trustee and its agents and any authenticating agent incur expenses
or render services after an Event of Default specified in Section 7.1(f) or (g)
occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any bankruptcy, insolvency or
similar laws.
Section 8.7 OFFICERS' CERTIFICATE AS EVIDENCE. Except as otherwise provided
in Section 8.1 or Section 8.2, whenever in the administration of the provisions
of this Indenture
(49)
<PAGE> 58
the Trustee shall deem it necessary or desirable that a matter be proved or
established prior to taking or omitting any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed)
may, in the absence of negligence, willful misconduct, recklessness and bad
faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee, and such
Officers' Certificate, in the absence of negligence, willful misconduct,
recklessness and bad faith on the part of the Trustee, shall be full warrant to
the Trustee for any action taken or omitted by it under the provisions of this
Indenture upon the faith thereof.
Section 8.8 CONFLICTING INTERESTS OF TRUSTEE.
(a) 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.
(b) In the event that the Trustee shall fail to comply with Subsection
(a) of this Section 8.8, the Trustee shall transmit notice of such failure to
the holders of Debentures to the extent and in the manner provided by, and
subject to, the provisions of the Trust Indenture Act.
Section 8.9 ELIGIBILITY OF TRUSTEE. There shall at all times be a Trustee
hereunder which shall be a person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus (together
with its corporate parent) of at least $50,000,000. If such person publishes
reports of condition at least annually, pursuant to law or to the requirements
of any supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
Section 8.10 RESIGNATION OR REMOVAL OF TRUSTEE.
(a) The Trustee may at any time resign by giving written notice of
such resignation to the Company and by mailing notice thereof to the holders of
Debentures at their addresses as they shall appear on the Debenture register.
Upon receiving such notice of resignation, the Company shall promptly appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee. If no successor trustee
shall have been so appointed and have accepted appointment sixty (60) days after
the mailing of such notice of resignation to the Debentureholders, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee, or any Debentureholder who has been a bona fide holder of a
Debenture or Debentures for at least six months may, subject to the provisions
of Section 7.9, on behalf of himself and all others
(50)
<PAGE> 59
similarly situated, petition any such court for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8(a) after
written request therefor by the Company or by any Debentureholder who has been a
bona fide holder of a Debenture or Debentures for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with the
provisions of Section 8.9 and shall fail to resign after written request
therefor by the Company or by any such Debentureholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, the Company may remove the
Trustee and appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which instrument shall
be delivered to the Trustee so removed and one copy to the successor trustee,
or, subject to the provisions of Section 7.9, any Debentureholder who has been a
bona fide holder of a Debenture or Debentures for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may at any time remove the Trustee and
nominate a successor trustee which shall be deemed appointed as successor
trustee unless within ten (10) days after notice to the Company of such
nomination the Company objects thereto, in which case the Trustee so removed or
any Debentureholder, upon the terms and conditions and otherwise as in Section
8.10(a) provided, may petition any court of competent jurisdiction for an
appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.11.
Section 8.11 ACCEPTANCE BY SUCCESSOR TRUSTEE. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor
(51)
<PAGE> 60
trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, duties and obligations of its predecessor hereunder,
with like effect as if originally named as trustee herein; but, nevertheless, on
the written request of the Company or of the successor trustee, the trustee
ceasing to act shall, upon payment of any amounts then due it pursuant to the
provisions of Section 8.6, execute and deliver an instrument transferring to
such successor trustee all the rights and powers of the trustee so ceasing to
act. Upon request of any such successor trustee, the Company shall execute any
and all instruments in writing for more fully and certainly vesting in and
confirming to such successor trustee all such rights and powers. Any trustee
ceasing to act shall, nevertheless, retain a lien upon all property and funds
held or collected by such trustee as such, except for funds held in trust for
the benefit of holders of particular Debentures, to secure any amounts then due
it pursuant to the provisions of Section 8.6.
No successor trustee shall accept appointment as provided in this Section
8.11 unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as provided in this
Section 8.11, each of the Company and the former trustee shall mail or cause to
be mailed notice of the succession of such trustee hereunder to the holders of
Debentures at their addresses as they shall appear on the Debenture register. If
the Company fails to mail such notice within ten (10) days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Company.
Section 8.12 SUCCESSION BY MERGER, ETC. Any corporation or other entity
into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or other
entity succeeding to all or substantially all of the trust business of the
Trustee (including the trust created hereunder), shall be the successor to the
Trustee hereunder without the execution or filing of any paper or any further
act on the part of any of the parties hereto, provided that in the case of any
corporation succeeding to all or substantially all of the trust business of the
Trustee such corporation shall be qualified under the provisions of Section 8.8
and eligible under the provisions of Section 8.9.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Debentures shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee or authenticating agent
appointed by such predecessor trustee, and deliver such Debentures so
authenticated; and in case at that time any of the Debentures shall not have
been authenticated, any successor to the Trustee or an authenticating agent
appointed by such successor trustee may authenticate such Debentures either in
the name of any predecessor trustee hereunder or in the name of the successor
trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Debentures or in this Indenture provided that the
certificate of the
(52)
<PAGE> 61
Trustee shall have; PROVIDED, HOWEVER, that the right to adopt the certificate
of authentication of any predecessor Trustee or to authenticate Debentures in
the name of any predecessor Trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
Section 8.13 LIMITATION ON RIGHTS OF TRUSTEE AS CREDITOR. If and when the
Trustee shall be or become a creditor of the Company (or any other obligor upon
the Debentures and the Trust Indenture Act is applicable hereto), the Trustee
shall be subject to the provisions of Section 311(a) of the Trust Indenture Act
or, if applicable, Section 311(b) of the Trust Indenture Act regarding the
collection of the claims against the Company (or any such other obligor).
ARTICLE IX
CONCERNING THE DEBENTUREHOLDERS
Section 9.1 ACTION BY DEBENTUREHOLDERS. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Debentures may take any action (including the making of any demand
or request, the giving of any notice, consent or waiver or the taking of any
other action), the fact that at the time of taking any such action, the holders
of such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by
Debentureholders in person or by agent or proxy appointed in writing, or (b) by
the record of the holders of Debentures voting in favor thereof at any meeting
of Debentureholders duly called and held in accordance with the provisions of
Article X, or (c) by a combination of such instrument or instruments and any
such record of such a meeting of Debentureholders. Whenever the Company or the
Trustee solicits the taking of any action by the holders of the Debentures, the
Company or the Trustee may fix in advance of such solicitation, a date as the
record date for determining holders entitled to take such action. The record
date shall be not more than fifteen (15) days prior to the date of commencement
of solicitation of such action.
Section 9.2 PROOF OF EXECUTION BY DEBENTUREHOLDERS. Subject to the
provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Debentureholder or his agent or proxy shall be sufficient if
made in accordance with such reasonable rules and regulations as may be
prescribed by the Trustee or in such manner as shall be satisfactory to the
Trustee. The holding of Debentures shall be proved by the Debenture register or
by a certificate of the Debenture registrar. The record of any Debentureholders'
meeting shall be proved in the manner provided in Section 10.6.
Section 9.3 WHO ARE DEEMED ABSOLUTE OWNERS. The Company, the Trustee, any
paying agent, any conversion agent and any Debenture registrar may deem the
person in whose name such Debenture shall be registered upon the Debenture
register to be, and may treat him as, the absolute owner of such Debenture
(whether or not such Debenture shall be overdue and notwithstanding any notation
of ownership or other writing thereon) for the purpose of receiving
(53)
<PAGE> 62
payment of or on account of the principal of, premium, if any, and interest on
such Debenture, for conversion of such Debenture and for all other purposes; and
neither the Company nor the Trustee nor any paying agent nor any conversion
agent nor any Debenture registrar shall be affected by any notice to the
contrary. All such payments so made to any holder for the time being, or upon
his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for monies payable upon any
such Debenture.
Section 9.4 COMPANY-OWNED DEBENTURES DISREGARDED. In determining whether
the holders of the requisite aggregate principal amount of Debentures have
concurred in any direction, consent, waiver or other action under this
Indenture, Debentures which are owned by the Company or any other obligor on the
Debentures or by any person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any other obligor
on the Debentures shall be disregarded and deemed not to be outstanding for the
purpose of any such determination; PROVIDED that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction,
consent, waiver or other action only Debentures which a Responsible Officer of
the Trustee knows are so owned shall be so disregarded. Debentures so owned
which have been pledged in good faith may be regarded as outstanding for the
purposes of this Section 9.4 if the pledgee shall establish to the satisfaction
of the Trustee the pledgee's right to vote such Debentures and that the pledgee
is not the Company, any other obligor on the Debentures or a person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company or any such other obligor. In the case of a dispute as
to such right, any decision by the Trustee taken upon the advice of counsel
shall be full protection to the Trustee. Upon request of the Trustee, the
Company shall furnish to the Trustee promptly an Officers' Certificate listing
and identifying all Debentures, if any, known by the Company to be owned or held
by or for the account of any of the above described persons; and, subject to
Section 8.1, the Trustee shall be entitled to accept such Officers' Certificate
as conclusive evidence of the facts therein set forth and of the fact that all
Debentures not listed therein are outstanding for the purpose of any such
determination.
Section 9.5 REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND. At any time prior
to (but not after) the evidencing to the Trustee, as provided in Section 9.1, of
the taking of any action by the holders of the percentage in aggregate principal
amount of the Debentures specified in this Indenture in connection with such
action, any holder of a Debenture which is shown by the evidence to be included
in the Debentures the holders of which have consented to such action may, by
filing written notice with the Trustee at its Corporate Trust Office and upon
proof of holding as provided in Section 9.2, revoke such action so far as
concerns such Debenture. Except as aforesaid, any such action taken by the
holder of any Debenture shall be conclusive and binding upon such holder and
upon all future holders and owners of such Debenture and of any Debentures
issued in exchange or substitution therefor, irrespective of whether any
notation in regard thereto is made upon such Debenture or any Debenture issued
in exchange or substitution therefor.
(54)
<PAGE> 63
ARTICLE X
DEBENTUREHOLDERS' MEETINGS
Section 10.1 PURPOSE OF MEETINGS. A meeting of Debentureholders may be
called at any time and from time to time pursuant to the provisions of this
Article X for any of the following purposes:
(a) to give any notice to the Company or to the Trustee or to give any
directions to the Trustee permitted under this Indenture, or to consent to
the waiving of any default or Event of Default hereunder and its
consequences, or to take any other action authorized to be taken by
Debentureholders pursuant to any of the provisions of Article VII;
(b) to remove the Trustee and nominate a successor trustee pursuant to
the provisions of Article VIII;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2;
(d) to take any other action authorized to be taken by or on behalf of
the holders of any specified aggregate principal amount of the Debentures
under any other provision of this Indenture or under applicable law; or
(e) to take any other action authorized by this Indenture or under
applicable law.
Section 10.2 CALL OF MEETINGS BY TRUSTEE. The Trustee may at any time call
a meeting of Debentureholders to take any action specified in Section 10.1, to
be held at such time and at such place in the Borough of Manhattan, The City of
New York, as the Trustee shall determine. Notice of every meeting of the
Debentureholders, setting forth the time and the place of such meeting and in
general terms the action proposed to be taken at such meeting and the
establishment of any record date pursuant to Section 9.1, shall be mailed to
holders of Debentures at their addresses as they shall appear on the Debenture
register. Such notice shall also be mailed to the Company. Such notices shall be
mailed not less than twenty (20) nor more than ninety (90) days prior to the
date fixed for the meeting.
Any meeting of Debentureholders shall be valid without notice if the
holders of all Debentures then outstanding are present in person or by proxy or
if notice is waived before or after the meeting by the holders of all Debentures
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
(55)
<PAGE> 64
Section 10.3 CALL OF MEETINGS BY COMPANY OR DEBENTUREHOLDERS. In case at
any time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least 10% in aggregate principal amount of the Debentures then
outstanding, shall have requested the Trustee to call a meeting of
Debentureholders, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within twenty (20) days after receipt of such
request, then the Company or such Debentureholders may determine the time and
the place for such meeting and may call such meeting to take any action
authorized in Section 10.1, by mailing notice thereof as provided in Section
10.2.
Section 10.4 QUALIFICATIONS FOR VOTING. To be entitled to vote at any
meeting of Debentureholders a person shall (a) be a holder of one or more
Debentures on the record date pertaining to such meeting or (b) be a person
appointed by an instrument in writing as proxy by a holder of one or more
Debentures. The only persons who shall be entitled to be present or to speak at
any meeting of Debentureholders shall be the persons entitled to vote at such
meeting and their counsel and any representatives of the Trustee and its counsel
and any representatives of the Company and its counsel.
Section 10.5 REGULATIONS. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Debentureholders, in regard to proof of the holding
of Debentures and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Debentureholders as provided in Section 10.3, in which case the
Company or the Debentureholders calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the holders of a
majority in principal amount of the Debentures represented at the meeting and
entitled to vote at the meeting.
Subject to the provisions of Section 9.4, at any meeting each
Debentureholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Debentures held or represented by him; PROVIDED, HOWEVER,
that no vote shall be cast or counted at any meeting in respect of any Debenture
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Debentures held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Debentureholders. Any
meeting of Debentureholders duly called pursuant to the provisions of Section
10.2 or 10.3 may be adjourned from time to time by the holders of a majority of
the aggregate principal amount of Debentures represented
(56)
<PAGE> 65
at the meeting, whether or not constituting a quorum, and the meeting may be
held as so adjourned without further notice.
Section 10.6 VOTING. The vote upon any resolution submitted to any meeting
of Debentureholders shall be by written ballot on which shall be subscribed the
signatures of the holders of Debentures or of their representatives by proxy and
the principal amount of the Debentures held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Debentureholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 10.2. The record shall show the principal amount of the
Debentures voting in favor of or against any resolution. The record shall be
signed and verified by the affidavits of the permanent chairman and secretary of
the meeting and one of the duplicates shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7 NO DELAY OF RIGHTS BY MEETING. Nothing in this Article X
contained shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Debentureholders or any rights expressly or impliedly
conferred hereunder to make such call, any hindrance or delay in the exercise of
any right or rights conferred upon or reserved to the Trustee or to the
Debentureholders under any of the provisions of this Indenture or of the
Debentures.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF DEBENTUREHOLDERS.
The Company, when authorized by the resolutions of the Board of Directors, and
the Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to make provision with respect to the conversion rights of the
holders of Debentures pursuant to the requirements of Section 15.6;
(57)
<PAGE> 66
(b) subject to Article IV, to convey, transfer, assign, mortgage or
pledge to the Trustee as security for the Debentures, any property or assets;
(c) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation of
the covenants, agreements and obligations of the Company pursuant to Article
XII;
(d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Debentures, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; PROVIDED, HOWEVER, that in
respect of any such additional covenant, restriction or condition such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default;
(e) to provide for the issuance under this Indenture of Debentures in
coupon form (including Debentures registrable as to principal only) and to
provide for exchange of such Debentures with the Debentures issued hereunder in
fully registered form and to make all appropriate changes for such purpose;
(f) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture which shall not materially adversely affect the
interests of the holders of the Debentures;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Debentures; or
(h) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to effect the qualifications of this Indenture
under the Trust Indenture Act, or under any similar federal statute hereafter
enacted.
The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
(58)
<PAGE> 67
Any supplemental indenture authorized by the provisions of this Section
11.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Debentures at the time outstanding, notwithstanding any of
the provisions of Section 11.2.
Section 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF DEBENTUREHOLDERS. With
the consent (evidenced as provided in Article IX) of the holders of not less
than a majority in aggregate principal amount of the Debentures at the time
outstanding (determined in accordance with Section 9.4), the Company, when
authorized by the resolutions of the Board of Directors, and the Trustee may
from time to time and at any time enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or any
supplemental indenture or of modifying in any manner the rights of the holders
of the Debentures; PROVIDED, HOWEVER, that no such supplemental indenture shall
(i) extend the fixed maturity of any Debenture, or reduce the rate or extend the
time of payment of interest thereon, or reduce the principal amount thereof or
premium, if any, thereon, or reduce any amount payable on redemption thereof, or
impair or adversely affect the right of any Debentureholder to institute suit
for the payment thereof, or make the principal thereof or interest or premium,
if any, thereon payable in any coin or currency other than that provided in the
Debentures, or change or impair the right to convert the Debentures into Common
Stock subject to the terms set forth herein, including Section 15.6, or modify
the provisions of this Indenture with respect to the subordination of the
Debentures in a manner adverse to the Debentureholders, without the consent of
the holder of each Debenture so affected, or (ii) reduce the aforesaid
percentage of Debentures, the holders of which are required to consent to any
such supplemental indenture, without the consent of the holders of all
Debentures then outstanding.
Up to and prior to the close of business on the Exchange Date, only the
holders of shares of Preferred Stock shall be entitled to vote on any amendments
or supplements to this Indenture as provided above.
Upon the request of the Company, accompanied by a copy of the resolutions
of the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Debentureholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in is discretion, but shall not be obligated to, enter into
such supplemental indenture.
It shall not be necessary for the consent of the Debentureholders under
this Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 11.3 EFFECT OF SUPPLEMENTAL INDENTURES. Any supplemental indenture
executed pursuant to the provisions of this Article XI shall comply with the
Trust Indenture Act, as then
(59)
<PAGE> 68
in effect. Upon the execution of any supplemental indenture pursuant to the
provisions of this Article XI, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitation of rights, obligations, duties and immunities under this Indenture of
the Trustee, the Company and the holders of Debentures shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
Section 11.4 NOTATION ON DEBENTURES. Debentures authenticated and delivered
after the execution of any supplemental indenture pursuant to the provisions of
this Article XI may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Debentures so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any modification of this
Indenture contained in any such supplemental indenture may, at the Company's
expense, be prepared and executed by the Company, authenticated by the Trustee
(or an authenticating agent duly appointed by the Trustee pursuant to Section
16.11) and delivered in exchange for the Debentures then outstanding, upon
surrender of such Debentures then outstanding.
Section 11.5 EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE
FURNISHED TRUSTEE. The Trustee, subject to the provisions of Sections 8.1 and
8.2, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article XI.
ARTICLE XII
MERGER, SALE OR CONSOLIDATION
Section 12.1 LIMITATION ON MERGER, SALE OR CONSOLIDATION. The Company shall
not consolidate with or merge with or into another person or sell, lease, convey
or transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another person or group of affiliated persons, unless (i) either (A) in the case
of a consolidation or merger, the Company is the surviving entity or (B) the
resulting, surviving or transferee entity is a corporation organized under the
laws of the United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of the obligations of the
Company in connection with the Debentures and the Indenture; (ii) no default or
Event of Default shall exist or shall occur immediately before or after giving
effect on a pro forma basis to such transaction; and (iii) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, sale, lease, conveyance or
transfer and, if a supplemental indenture is required, such supplemental
indenture comply with the Indenture and that all conditions precedent relating
to such transactions have been satisfied.
(60)
<PAGE> 69
Section 12.2 SUCCESSOR CORPORATION TO BE SUBSTITUTED In case of any such
consolidation, merger, sale, conveyance or lease and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual payment
of the principal of and premium, if any, and interest on all of the Debentures
and the due and punctual performance of all of the covenants and conditions of
this Indenture to be performed by the Company, such successor corporation shall
succeed to and be substituted for the Company, with the same effect as if it had
been named herein as the party of the first part. Such successor corporation
thereupon may cause to be signed, and may issue either in its own name or in the
name of Alkermes, Inc. any or all of the Debentures issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor corporation instead of the
Company and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver, or cause
to be authenticated and delivered, any Debentures which previously shall have
been signed and delivered by the officers of the Company to the Trustee for
authentication, and any Debentures which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All the
Debentures so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Debentures theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Debentures had
been issued at the date of the execution hereof. In the event of any such
consolidation, merger, sale or conveyance (but not in the event of such lease),
the person named as the "Company" in the first paragraph of this Indenture, or
any successor which shall thereafter have become such in the manner prescribed
in this Article XII and which shall have transferred its rights and obligations
hereunder to another successor in the manner prescribed in this Article XII, may
be dissolved, wound up and liquidated at any time thereafter and such person
shall be released from its liabilities as obligor and maker of the Debentures
and from its obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form (but not in substance) may be made in the
Debentures thereafter to be issued as may be appropriate.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1 DISCHARGE OF INDENTURE. When (a) the Company shall deliver to
the Trustee for cancellation all Debentures theretofore authenticated (other
than any Debentures which have been destroyed, lost or stolen and in lieu of or
in substitution for which other Debentures shall have been authenticated and
delivered) and not theretofore canceled, or (b) all the Debentures not
theretofore canceled or delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit with the Trustee, in trust,
(61)
<PAGE> 70
funds sufficient to pay at maturity or upon redemption of all of the Debentures
(other than any Debentures which shall have been mutilated, destroyed, lost or
stolen and in lieu of or in substitution for which other Debentures shall have
been authenticated and delivered) not theretofore canceled or delivered to the
Trustee for cancellation, including principal and premium, if any, and interest
due or to become due to such date of maturity or redemption date, as the case
may be, and if in either case the Company shall also pay or cause to be paid all
other sums payable hereunder by the Company, then this Indenture shall cease to
be of further effect (except as to (i) remaining rights of registration of
transfer, substitution and exchange and conversion of Debentures, (ii) rights
hereunder of Debentureholders to receive payments of principal of and premium,
if any, and interest on, the Debentures and the other rights, duties and
obligations of Debentureholders, as beneficiaries hereof with respect to the
amounts, if any, so deposited with the Trustee and (iii) the rights, obligations
and immunities of the Trustee hereunder), and the Trustee, on demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel as
required by Section 16.5 and at the cost and expense of the Company, shall
execute proper instruments acknowledging satisfaction of and discharging this
Indenture; the Company, however, hereby agreeing to reimburse the Trustee for
any costs or expenses thereafter reasonably and properly incurred by the Trustee
and to compensate the Trustee for any services thereafter reasonably and
properly rendered by the Trustee in connection with this Indenture or the
Debentures.
Section 13.2 DEPOSITED MONIES TO BE HELD IN TRUST BY TRUSTEE. Subject to
Section 13.4, all monies deposited with the Trustee pursuant to Section 13.1
shall be held in trust and applied by it to the payment, notwithstanding the
provisions of Article IV, either directly or through any paying agent (including
the Company if acting as its own paying agent), to the holders of the particular
Debentures for the payment or redemption of which such monies have been
deposited with the Trustee, of all sums due and to become due thereon for
principal and interest and premium, if any.
Section 13.3 PAYING AGENT TO REPAY MONIES HELD. Upon the satisfaction and
discharge of this Indenture, all monies then held by any paying agent of the
Debentures (other than the Trustee) shall, upon demand of the Company, be repaid
to it or paid to the Trustee, and thereupon such paying agent shall be released
from all further liability with respect to such monies.
Section 13.4 RETURN OF UNCLAIMED MONIES. Subject to the requirements of
applicable law, any monies deposited with or paid to the Trustee for payment of
the principal of, premium, if any, or interest on Debentures and not applied but
remaining unclaimed by the holders of Debentures for two years after the date
upon which the principal of, premium, if any, or interest on such Debentures, as
the case may be, shall have become due and payable, shall be repaid to the
Company by the Trustee on demand and all liability of the Trustee shall
thereupon cease with respect to such monies; and the holder of any of the
Debentures shall thereafter look only to the Company for any payment which such
holder may be entitled to collect unless an applicable abandoned property law
designates another person.
(62)
<PAGE> 71
Section 13.5 REINSTATEMENT. If (i) the Trustee or the paying agent is
unable to apply any money in accordance with Section 13.2 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application and (ii) the holders of at least a
majority in principal amount of the then outstanding Debentures so request by
written notice to the Trustee, the Company's obligations under this Indenture
and the Debentures shall be revived and reinstated as though no deposit had
occurred pursuant to Section 13.1 until such time as the Trustee or the paying
agent is permitted to apply all such money in accordance with Section 13.2;
PROVIDED, HOWEVER, that if the Company makes any payment of interest on or
principal of any Debenture following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the holders of such Debentures to
receive such payment from the money held by the Trustee or paying agent.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, SHAREHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1 INDENTURE AND DEBENTURES SOLELY CORPORATE OBLIGATIONS. No
recourse for the payment of the principal of or premium, if any, or interest on
any Debenture, or for any claim based thereon or otherwise in respect thereof,
and no recourse under or upon any obligation, covenant or agreement of the
Company in this Indenture or in any supplemental indenture or in any Debenture,
or because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, shareholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Debentures.
ARTICLE XV
CONVERSION OF DEBENTURES
Section 15.1 RIGHT TO CONVERT. Subject to and upon compliance with the
provisions of this Indenture, the holder of any Debenture shall have, at his
option, the right, at any time on or prior to the close of business on the tenth
anniversary of the Exchange Date (except that, with respect to any Debenture or
portion of a Debenture which shall be called for redemption, such right shall
terminate, except as provided in the fourth paragraph of Section 15.2, at the
close of business on the next Business Day preceding the date fixed for
redemption of such Debenture or portion of a Debenture unless the Company shall
default in payment due upon redemption
(63)
<PAGE> 72
thereof) to convert the principal amount of any such Debenture, or any portion
of such principal amount which is $1,000 or an integral multiple thereof, into
that number of fully paid and non-assessable shares of Common Stock (as such
shares shall then be constituted) obtained by dividing the principal amount of
the Debenture or portion thereof surrendered for conversion by the Conversion
Price in effect at such time, by surrender of the Debenture so to be converted
in whole or in part in the manner provided in Section 15.2. A holder of
Debentures is not entitled to any rights of a holder of Common Stock until such
holder has converted his Debentures to Common Stock, and only to the extent such
Debentures are deemed to have been converted to Common Stock under this Article
XV.
Section 15.2 EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF COMMON STOCK ON
CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS. In order to exercise the
conversion privilege with respect to any Debenture, the holder of any such
Debenture to be converted in whole or in part shall surrender such Debenture,
duly endorsed, at an office or agency maintained by the Company pursuant to
Section 5.2, accompanied by the funds, if any, required by the last paragraph of
this Section 15.2, and shall give written notice of conversion in the form
provided on the Debentures (or such other notice which is acceptable to the
Company) to the office or agency that the holder elects to convert such
Debenture or such portion thereof specified in said notice. Such notice shall
also state the name or names (with address) in which the certificate or
certificates for shares of Common Stock which shall be issuable on such
conversion shall be issued, and shall be accompanied by transfer taxes, if
required pursuant to Section 15.7. Each such Debenture surrendered for
conversion shall, unless the shares issuable on conversion are to be issued in
the same name as the registration of such Debenture, be duly endorsed by, or be
accompanied by instruments of transfer in form satisfactory to the Company duly
executed by, the holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to any interest
in a Global Debenture, the beneficial holder must complete the appropriate
instruction form for conversion pursuant to the Depositary's book-entry
conversion program, deliver by book-entry delivery an interest in such Global
Debenture, furnish appropriate endorsements and transfer documents if required
by the Company or the Trustee or conversion agent, and pay the funds, if any,
required by the penultimate paragraph of this Section 15.2 and any transfer
taxes, if required pursuant to Section 15.7.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, the Company shall issue and shall deliver to such
holder or, if shares issuable on conversion are to be issued in a name other
than that of the Debentureholder (as if such transfer were a transfer of the
Debenture or Debentures (or portion thereof) so converted), to such other
person, at the office or agency maintained by the Company for such purpose
pursuant to Section 5.2, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such Debenture or portion
thereof in accordance with the provisions of this Article and a check or cash in
respect of any fractional interest in respect of a share of Common Stock arising
upon such conversion, as provided in Section 15.3 (which payment, if
(64)
<PAGE> 73
any, shall be paid no later than five Business Days after satisfaction of the
requirements for conversion set forth above). In case any Debenture of a
denomination greater than $1,000 shall be surrendered for partial conversion,
and subject to Section 2.3, the Company shall execute and the Trustee shall
authenticate and deliver to the holder of the Debenture so surrendered, without
charge to him, a new Debenture or Debentures in authorized denominations in an
aggregate principal amount equal to the unconverted portion of the surrendered
Debenture.
Each conversion shall be deemed to have been effected as to any such
Debenture (or portion thereof) on the date on which the requirements set forth
above in this Section 15.2 have been satisfied as to such Debenture (or portion
thereof), and the person in whose name any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become on said date the holder of record of the shares represented thereby;
PROVIDED, HOWEVER, that if any such surrender occurs on any date when the stock
transfer books of the Company shall be closed, the conversion shall be effected
on the next succeeding day on which such stock transfer books are open, and the
person in whose name the certificates are to be issued shall be the record
holder thereof for all purposes, but such conversion shall be at the Conversion
Price in effect on the date upon which such Debenture shall be surrendered.
Upon the conversion of an interest in a Global Debenture, the Trustee, or
the Custodian at the direction of the Trustee, shall make a notation on such
Global Debenture as to the reduction in the principal amount represented
thereby.
Any Debenture or portion thereof surrendered for conversion during the
period from the close of business on the record date for any interest payment
date through the close of business on the Business Day next preceding such
interest payment date shall (unless such Debenture or portion thereof being
converted shall have been called for redemption and a notice of redemption has
been sent to the holders of the Debentures pursuant to Section 3.2) be
accompanied by payment, in New York Clearing House funds or other funds
acceptable to the Company, of an amount equal to the interest otherwise payable
on such interest payment date on the principal amount being converted; PROVIDED,
HOWEVER, that no such payment need be made if there shall exist at the time of
conversion a default in the payment of interest on the Debentures. The Trustee
shall not be required to accept for conversion any Debentures not accompanied by
any payment required by the preceding sentence. Except as provided above in this
Section 15.2, no adjustment shall be made for interest accrued on any Debenture
converted or for dividends on any shares issued upon the conversion of such
Debenture as provided in this Article.
Section 15.3 CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Debentures. If more than one Debenture shall be surrendered
for conversion at one time by the same holder, the number of full shares which
shall be issuable upon conversion shall be computed on the basis of the
aggregate principal amount of the Debentures (or specified portions thereof to
the extent permitted hereby) so surrendered for conversion. If any fractional
share
(65)
<PAGE> 74
of stock otherwise would be issuable upon the conversion of any Debenture or
Debentures, the Company shall make an adjustment therefor in cash at the current
market value thereof to the holder of Debentures. The current market value of a
share of Common Stock shall be the Closing Price on the first Trading Day
immediately preceding the day on which the Debentures (or specified portions
thereof) are deemed to have been converted and such Closing Price shall be
determined as provided in Section 15.5(i).
Section 15.4 CONVERSION PRICE. The conversion price shall be as specified
in the form of Debenture (herein called the "Conversion Price") attached as
EXHIBIT A hereto, subject to adjustment as provided in this Article XV.
Section 15.5 ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall be
adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of Common
Stock, the Conversion Price in effect at the opening of business on the date
following the date fixed for the determination of 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 Record Date
(as defined in Section 15.5(i)) 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
Record Date. If any dividend or distribution of the type described in this
Section 15.5(a) is declared but not so paid or made, the Conversion Price shall
again be adjusted to the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
(b) In case the Company shall issue rights or warrants to all holders
of its outstanding shares of Common Stock entitling them (for a period expiring
within forty-five (45) days after the date fixed for the determination of
shareholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price (as defined in Section 15.5(i)) on the Record Date fixed for the
determination of shareholders entitled to receive such rights or warrants, the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect at the opening of
business on the date after such Record Date by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close of
business on the Record Date plus the number of shares which the aggregate
offering price of the total number of shares so offered would purchase at such
Current Market Price, and of which the denominator shall be the number of shares
of Common Stock outstanding on the close of business on the Record Date plus the
total number of additional shares of Common Stock so offered for subscription or
purchase. Such adjustment shall become effective immediately after the opening
of business on the day following the Record Date fixed for determination of
(66)
<PAGE> 75
shareholders entitled to receive such rights or warrants. To the extent that
shares of Common Stock are not delivered pursuant to such rights or warrants,
upon the expiration or termination of such rights or warrants the Conversion
Price shall be readjusted to the Conversion Price which would then be in effect
had the adjustments made upon the issuance of such rights or warrants been made
on the basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such date fixed for the determination of shareholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account any consideration received for such rights or
warrants, the value of such consideration, if other than cash, to be determined
by the Board of Directors.
(c) In case the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and conversely,
in case outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(d) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock shares of any class of capital stock of the
Company (other than any dividends or distributions to which Section 15.5(a)
applies) or evidences of its indebtedness, cash or other assets (including
securities, but excluding (1) any rights or warrants referred to in Section
15.5(b) or (2) dividends and distributions paid exclusively in cash (the
foregoing hereinafter in this Section 15.5(d) called the "Securities")), then,
in each such case, the Conversion Price shall be reduced so that the same shall
be equal to the price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the Record Date (as defined in
Section 15.5(i)) with respect to such distribution by a fraction of which the
numerator shall be the Current Market Price (determined as provided in Section
15.5(i)) on such date less the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) on such date of the portion of the Securities so distributed
applicable to one share of Common Stock and the denominator shall be such
Current Market Price, such reduction to become effective immediately prior to
the opening of business on the day following the Record Date; PROVIDED, HOWEVER,
that in the event the then fair market value (as so determined) of the portion
of the Securities so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price on the Record Date, in lieu of
the foregoing adjustment, adequate provision shall be made so that each
Debentureholder shall have the right to receive upon conversion of a
(67)
<PAGE> 76
Debenture (or any portion thereof) the amount of Securities such holder would
have received had such holder converted such Debenture (or portion thereof)
immediately prior to such Record Date. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes of this
Section 15.5(d) by reference to the actual or when issued trading market for any
securities comprising all or part of such distribution, it must in doing so
consider the prices in such market over the same period (the "Reference Period")
used in computing the Current Market Price pursuant to Section 15.5(i) to the
extent possible, unless the Board of Directors in a board resolution determines
in good faith that determining the fair market value during the Reference Period
would not be in the best interest of the Debentureholder.
In the event that the Company implements a shareholders' right plan (a
"Rights Plan"), such Rights Plan shall provide that upon conversion of the
Debentures the holders will receive, in addition to the Common Stock issuable
upon such conversion, the rights under such Rights Plan (notwithstanding the
occurrence of an event causing such rights to separate from the Common Stock at
or prior to the time of conversion). Any distribution of rights or warrants
pursuant to the Rights Plan complying with the requirements set forth in the
immediately preceding sentence of this paragraph shall not constitute a
distribution of rights or warrants for purposes of this Section 15.5(d).
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 15.5(d) (and no adjustment to the Conversion Price
under this Section 15.5(d) will be required) until the occurrence of the
earliest Trigger Event. If such right or warrant is subject to subsequent
events, upon the occurrence of which such right or warrant shall become
exercisable to purchase different securities, evidences of indebtedness or other
assets or entitle the holder to purchase a different number or amount of the
foregoing or to purchase any of the foregoing at a different purchase price,
then the occurrence of each such event shall be deemed to be the date of
issuance and record date with respect to a new right or warrant (and a
termination or expiration of the existing right or warrant 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 or other event (of the
type described in the preceding sentence) with respect thereto, that resulted in
an adjustment to the Conversion Price under this Section 15.5(d), (1) in the
case of any such rights or warrants 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 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
(68)
<PAGE> 77
received by a holder of Common Stock with respect to such rights or warrants
(assuming such holder had retained such rights or warrants), made to all holders
of Common Stock as of the date of such redemption or repurchase, and (2) in the
case of such rights or warrants all of which shall have expired or been
terminated without exercise, the Conversion Price shall be readjusted as if such
rights and warrants had never been issued.
For purposes of this Section 15.5(d) and Sections 15.5(a) and (b), any
dividend or distribution to which this Section 15.5(d) is applicable that also
includes shares of Common Stock to which 15.5(a) applies, or rights or warrants
to subscribe for or purchase shares of Common Stock to which Section 15.5(b)
applies (or both), shall be deemed instead to be (1) a dividend or distribution
of the evidences of indebtedness, assets, shares of capital stock, rights or
warrants other than such shares of Common Stock to which 15.5(a) applies or
rights or warrants to which Section 15.5(b) applies (and any Conversion Price
reduction required by this Section 15.5(d) with respect to such dividend or
distribution shall then be made) immediately followed by (2) a dividend or
distribution of such shares of Common Stock or such rights or warrants (and any
further Conversion Price reduction required by Sections 15.5(a) and (b) with
respect to such dividend or distribution shall then be made, except (A) the
Record Date of such dividend or distribution shall be substituted as "the date
fixed for the determination of shareholders entitled to receive such dividend or
other distribution", "Record Date fixed for such determination" and "Record
Date" within the meaning of Section 15.5(a) and as "the date fixed for the
determination of shareholders entitled to receive such rights or warrants", "the
Record Date fixed for the determination of the shareholders entitled to receive
such rights or warrants" and "such Record Date" within the meaning of Section
15.5(b) and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of Section 15.5(a).
(e) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding any cash that is distributed
upon a merger or consolidation to which Section 15.6 applies or as part of a
distribution referred to in Section 15.5(d)), in an aggregate amount that,
combined together with (1) the aggregate amount of any other such distributions
to all holders of its Common Stock made exclusively in cash within the twelve
(12) months preceding the date of payment of such distribution, and in respect
of which no adjustment pursuant to this Section 15.5(e) has been made, and (2)
the aggregate of any cash plus the fair market value (as determined by the Board
of Directors, whose determination shall be conclusive and described in a Board
Resolution) of consideration payable in respect of any tender offer by the
Company or any of its subsidiaries for all or any portion of the Common Stock
concluded within the twelve (12) months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant to Section 15.5(f)
has been made, exceeds 10.0% of the product of the Current Market Price
(determined as provided in Section 15.5(i)) on the Record Date with respect to
such distribution times the number of shares of Common Stock outstanding on such
date, then, and in each such case, immediately after the close of business on
such date, the Conversion Price shall be reduced so that the same shall equal
the price determined by multiplying the Conversion Price in effect immediately
prior to
(69)
<PAGE> 78
the close of business on such Record Date by a fraction (i) the numerator of
which shall be equal to the Current Market Price on the Record Date less an
amount equal to the quotient of (x) the excess of such combined amount over such
10.0% and (y) the number of shares of Common Stock outstanding on the Record
Date and (ii) the denominator of which shall be equal to the Current Market
Price on such date, provided, however, that in the event the portion of the cash
so distributed applicable to one share of Common Stock is equal to or greater
than the Current Market Price of the Common Stock on the Record Date, in lieu of
the foregoing adjustment, adequate provision shall be made so that each
Debentureholder shall have the right to receive upon conversion of a Debenture
(or any portion thereof) the amount of cash such holder would have received had
such holder converted such Debenture (or portion thereof) immediately prior to
such Record Date. In the event that such dividend or distribution is not so paid
or made, the Conversion Price shall again be adjusted to be the Conversion Price
which would then be in effect if such dividend or distribution had not been
declared. Any cash distribution to all holders of Common Stock as to which the
Company makes the election permitted by Section 15.5(n) and as to which the
Company has complied with the requirements of such Section shall be treated as
not having been made for all purposes of this Section 15.5(e).
(f) In case a tender offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock shall expire and such
tender offer (as amended upon the expiration thereof) shall require the payment
to shareholders (based on the acceptance (up to any maximum specified in the
terms of the tender offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a fair market value (as determined by the Board
of Directors, whose determination shall be conclusive and described in a Board
Resolution) that combined together with (1) the aggregate of the cash plus the
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution), as of the expiration
of such tender offer, of consideration payable in respect of any other tender
offers, by the Company or any of its subsidiaries for all or any portion of the
Common Stock expiring within the twelve (12) months preceding the expiration of
such tender offer and in respect of which no adjustment pursuant to this Section
15.5(f) has been made and (2) the aggregate amount of any distributions to all
holders of the Company's Common Stock made exclusively in cash within twelve
(12) months preceding the expiration of such tender offer and in respect of
which no adjustment pursuant to Section 15.5(e) has been made, exceeds 10.0% of
the product of the Current Market Price (determined as provided in Section
15.5(i)) as of the last time (the "Expiration Time") tenders could have been
made pursuant to such tender offer (as it may be amended) times the number of
shares of Common Stock outstanding (including any tendered shares) on the
Expiration Time, then, and in each such case, immediately prior to the opening
of business on the day after the date of the Expiration Time, the Conversion
Price shall be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to close of
business on the date of the Expiration Time by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding (including any
tendered shares) on the Expiration Time multiplied by the Current Market Price
of the Common Stock on the Trading Day next succeeding the Expiration Time and
the denominator shall be the sum of (x) the fair market value (determined
(70)
<PAGE> 79
as aforesaid) of the aggregate consideration payable to shareholders based on
the acceptance (up to any maximum specified in the terms of the tender offer) of
all shares validly tendered and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred to as the
"Purchased Shares") and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) on the Expiration Time and the Current
Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction (if any) to become effective immediately prior
to the opening of business on the day following the Expiration Time. In the
event that the Company is obligated to purchase shares pursuant to any such
tender offer, but the Company is permanently prevented by applicable law from
effecting any such purchases or all such purchases are rescinded, the Conversion
Price shall again be adjusted to be the Conversion Price which would then be in
effect if such tender offer had not been made. If the application of this
Section 15.5(f) to any tender offer would result in an increase in the
Conversion Price, no adjustment shall be made for such tender offer under this
Section 15.5(f). Any cash distribution to all holders of Common Stock as to
which the Company has made the election permitted by Section 15.5(n) and as to
which the Company has complied with the requirements of such Section shall be
treated as not having been made for all purposes of this Section 15.5(f).
(g) In case of a tender or exchange offer made by a person other than
the Company or any Subsidiary for an amount which increases the offeror's
ownership of Common Stock to more than 25% of the Common Stock outstanding and
shall involve the payment by such person of consideration per share of Common
Stock having a fair market value (as determined by the Board of Directors, whose
determination shall be conclusive, and described in a resolution of the Board of
Directors at the last time (the "Tender Expiration Time") tenders or exchanges
may be made pursuant to such tender or exchange offer (as it shall have been
amended)) that exceeds the Current Market Price of the Common Stock on the
Trading Day next succeeding the Tender Expiration Time, and in which, as of the
Tender Expiration Time the Board of Directors is not recommending rejection of
the offer, the Conversion Price shall be reduced so that the same shall equal
the price determined by multiplying the Conversion Price in effect immediately
prior to the Tender Expiration Time by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding (including any tendered or
exchanged shares) on the Tender Expiration Time multiplied by the Current Market
Price of the Common Stock on the Trading Day next succeeding the Tender
Expiration Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
shareholders based on the acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares validly tendered or exchanged and
not withdrawn as of the Tender Expiration Time (the shares deemed so accepted,
up to any such maximum, being referred to as the "Tender Purchased Shares") and
(y) the product of the number of shares of Common Stock outstanding (less any
Tender Purchased Shares) on the Tender Expiration Time and the Current Market
Price of the Common Stock on the Trading Day next succeeding the Tender
Expiration Time, such reduction to become effective immediately prior to the
opening of business on the day following the Tender Expiration Time. In the
event that such person is obligated to purchase shares pursuant to any
(71)
<PAGE> 80
such tender or exchange offer, but such person is permanently prevented by
applicable law from effecting any such purchases or all such purchases are
rescinded, the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such tender or exchange offer had not
been made. Notwithstanding the foregoing, the adjustment described in this
Section 15.5(g) shall not be made if, as of the Tender Expiration Time, the
offering documents with respect to such offer disclose a plan or intention to
cause the Company to engage in any transaction described in Article XII.
(h) In case the Company shall issue Common Stock or securities
convertible into, or exchangeable for, Common Stock at a price per share (or
having a conversion or exchange price per share) that is less than 95% the then
Current Market Price of the Common Stock (but excluding, among other things,
issuances: (a) pursuant to any bona fide plan for the benefit of employees,
directors or consultants of the Company now or hereafter in effect; (b) to
acquire all or any portion of a business in an arm's-length transaction between
the Company and an unaffiliated third party including, if applicable, issuances
upon exercise of options or warrants assumed in connection with such an
acquisition; (c) in a bona fide public offering pursuant to a firm commitment
underwriting (or a similar type of offering made pursuant to Rule 144A and/or
Regulation S under the Securities Act) or sales at the market pursuant to a
continuous offering stock program; (d) pursuant to the exercise of warrants,
rights (including, without limitation, earnout rights) or options, or upon the
conversion of convertible securities, which are issued and outstanding on the
date hereof, or which may be issued in the future at fair value and with an
exercise price or Conversion Price at least equal to the Current Market Price of
the Common Stock at the time of issuance of such warrant, right, option or
convertible security; and (e) pursuant to a dividend reinvestment plan or other
plan hereafter adopted for the reinvestment of dividends or interest provided
that such Common Stock is issued at a price at least equal to 95% of the Current
Market Price of the Common Stock at the time of such issuance), the Conversion
Price shall be adjusted so that the holder of each Debenture shall be entitled
to receive, upon the conversion thereof, the number of shares of Common Stock
determined by multiplying (i) the Conversion Price on the day immediately prior
to such date of issuance by (ii) a fraction, the numerator of which shall be the
sum of (A) the number of shares of Common Stock outstanding on such date and (B)
the number of additional shares of Common Stock issued (or into which the
convertible securities may convert), and the denominator of which shall be the
sum of (1) the number of shares of Common Stock outstanding on such date and (2)
the number of shares of Common Stock which the aggregate consideration
receivable by the Company for the total number of shares of Common Stock so
issued (or into which the convertible securities may convert) would purchase at
such Conversion Price on such date. An adjustment made pursuant to this
paragraph (h) shall be made on the next Business Day following the date on which
any such issuance is made and shall be effective retroactively immediately after
the close of business on such date. For purposes of this paragraph (h), the
aggregate consideration receivable by the Company in connection with the
issuance of shares of Common Stock or of securities convertible into shares of
Common Stock shall be deemed to be equal to the sum of the aggregate offering
price (before deduction of underwriting discounts or commissions and expenses
payable to third parties) of all such securities plus the minimum
(72)
<PAGE> 81
aggregate amount, if any, payable upon conversion of any such convertible
securities into shares of Common Stock.
(i) For purposes of this Section 15.5, the following terms shall have
the meaning indicated:
(1) "Closing Price" with respect to any securities on any
day shall mean the closing sale price regular way on such day or, in case no
such sale takes place on such day, the average of the reported closing bid and
asked prices, regular way, in each case on the Nasdaq National Market or New
York Stock Exchange, as applicable, or, if such security is not listed or
admitted to trading on such National Market or Exchange, on the principal
national security exchange or quotation system on which such security is quoted
or listed or admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the average of
the closing bid and asked prices of such security on the over-the-counter market
on the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or if not so
available, in such manner as furnished by any New York Stock Exchange member
firm selected from time to time by the Board of Directors for that purpose, or a
price determined in good faith by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution.
(2) "Current Market Price" shall mean the average of the
daily Closing Prices per share of Common Stock for the ten (10) consecutive
Trading Days immediately prior to the date in question; PROVIDED, HOWEVER, that
(1) if the "ex" date (as hereinafter defined) for any event (other than the
issuance or distribution or Fundamental Change requiring such computation) that
requires an adjustment to the Conversion Price pursuant to Section 15.5(a), (b),
(c), (d), (e), (f), (g) or (h) occurs during such ten (10) consecutive Trading
Days, the Closing Price for each Trading Day prior to the "ex" date for such
other event shall be adjusted by multiplying such Closing Price by the same
fraction by which the Conversion Price is so required to be adjusted as a result
of such other event, (2) if the "ex" date for any event (other than the issuance
or distribution or Fundamental Change requiring such computation) that requires
an adjustment to the Conversion Price pursuant to Section 15.5(a), (b), (c),
(d), (e), (f), (g) or (h) occurs on or after the "ex" date for the issuance or
distribution or Fundamental Change requiring such computation and prior to the
day in question, the Closing Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying such Closing Price by
the reciprocal of the fraction by which the Conversion Price is so required to
be adjusted as a result of such other event, and (3) if the "ex" date for the
issuance, distribution or Fundamental Change requiring such computation is prior
to the day in question, after taking into account any adjustment required
pursuant to clause (1) or (2) of this proviso, the Closing Price for each
Trading Day on or after such "ex" date shall be adjusted by adding thereto the
amount of any cash and the fair market value (as determined by the Board of
Directors in a manner consistent with any determination of such value for
purposes of Section 15.5(d), (f) or (g), whose determination shall be conclusive
and described in a Board
(73)
<PAGE> 82
Resolution) of the evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For purposes of any computation under
Sections 15.5(f) or (g), the Current Market Price of the Common Stock on any
date shall be deemed to be the average of the daily Closing Prices per share of
Common Stock for such day and the next two succeeding Trading Days; PROVIDED,
HOWEVER, that if the "ex" date for any event (other than the tender offer
requiring such computation) that requires an adjustment to the Conversion Price
pursuant to Section 15.5(a), (b), (c), (d), (e), (f), (g) or (h) occurs on or
after the Expiration Time for the tender or exchange offer requiring such
computation and prior to the day in question, the Closing Price for each Trading
Day on and after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such other event.
For purposes of this paragraph, the term "ex" date, (1) when used with respect
to any issuance or distribution or Fundamental Change, means the first date on
which the Common Stock trades regular way on the relevant exchange or in the
relevant market from which the Closing Price was obtained without the right to
receive such issuance or distribution, (2) when used with respect to any
subdivision or combination of shares of Common Stock, means the first date on
which the Common Stock trades regular way on such exchange or in such market
after the time at which such subdivision or combination becomes effective, and
(3) when used with respect to any tender or exchange offer means the first date
on which the Common Stock trades regular way on such exchange or in such market
after the Expiration Time or Tender Expiration Time, as the case may be, of such
offer. Notwithstanding the foregoing, whenever successive adjustments to the
Conversion Price are called for pursuant to this Section 15.5, such adjustments
shall be made to the Current Market Price as may be necessary or appropriate to
effectuate the intent of this Section 15.5 and to avoid unjust or inequitable
results as determined in good faith by the Board of Directors.
(3) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable security
is listed or admitted for trading on the New York Stock Exchange or another
national security exchange, a day on which the New York Stock Exchange or
another national security exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on which trades may be
made thereon or (z) if the applicable security is not so listed, admitted for
trading or quoted, any day other than a Saturday or Sunday or a day on which
(74)
<PAGE> 83
banking institutions in the State of New York are authorized or obligated by law
or executive order to close.
(j) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 15.5(a), (b), (c), (d), (e), (f) and (g),
as the Board of Directors considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase Common stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from time to
time may reduce the Conversion Price by any amount for any period of time if the
period is at least twenty (20) days, the reduction is irrevocable during the
period and the Board of Directors shall have made a determination that such
reduction would be in the best interests of the Company, which determination
shall be conclusive and described in a Board Resolution. Whenever the Conversion
Price is reduced pursuant to the preceding sentence, the Company shall mail to
the holder of each Debenture at his last address appearing on the Debenture
register provided for in Section 2.5 a notice of the reduction at least fifteen
(15) days prior to the date the reduced Conversion Price takes effect, and such
notice shall state the reduced Conversion Price and the period during which it
will be in effect.
(k) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
price; PROVIDED, HOWEVER, that any adjustments which by reason of this Section
15.5(k) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Article XV
shall be made by the Company and shall be made to the nearest cent or to the
nearest one hundredth of a share, as the case may be. No adjustment need be made
for a change in the par value or no par value of the Common Stock.
(l) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Trustee and any conversion agent other than
the Trustee an Officers' Certificate setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment. Unless and until a Responsible Officer of the Trustee shall have
received such Officers' Certificate, the Trustee shall not be deemed to have
knowledge of any adjustment of the Conversion Price and may assume without
inquiry that the last Conversion Price of which it has knowledge remains in
effect. Promptly after delivery of such certificate, the Company shall prepare a
notice of such adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the date on which each adjustment becomes effective and
shall mail such notice of such adjustment of the Conversion Price to the holder
of each Debenture at his last address appearing on the Debenture register
provided for in Section 2.5, within twenty (20) days of the effective date of
such adjustment. Failure to deliver such notice shall not effect the legality or
validity of any such adjustment.
(75)
<PAGE> 84
(m) In any case in which this Section 15.5 provides that an adjustment
shall become effective immediately after a Record Date for an event, the Company
may defer until the occurrence of such event (i) issuing to the holder of any
Debenture converted after such Record Date and before the occurrence of such
event the additional shares of Common Stock issuable upon such conversion by
reason of the adjustment required by such event over and above the Common Stock
issuable upon such conversion before giving effect to such adjustment and (ii)
paying to such holder any amount in cash in lieu of any fraction pursuant to
Section 15.3.
(n) For purposes of this Section 15.5, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Company will not pay
any dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.
(o) In lieu of making any adjustment to the Conversion Price pursuant
to Section 15.5(e), the Company may elect to reserve an amount of cash for
distribution to the holders of the Debentures upon the conversion of the
Debentures so that any such holder converting Debentures will receive upon such
conversion, in addition to the shares of Common Stock and other items to which
such holder is entitled, the full amount of cash which such holder would have
received if such holder had, immediately prior to the Record Date for such
distribution of cash, converted its Debentures into Common Stock, together with
any interest accrued with respect to such amount, in accordance with this
Section 15.5(o). The Company may make such election by providing an Officers'
Certificate to the Trustee to such effect on or prior to the payment date for
any such distribution and depositing with the Trustee on or prior to such date
an amount of cash equal to the aggregate amount the holders of the Debentures
would have received if such holders had, immediately prior to the Record Date
for such distribution, converted all of the Debentures into Common Stock. Any
such funds so deposited by the Company with the Trustee shall be invested by the
Trustee in marketable obligations issued or fully guaranteed by the United
States government with a maturity not more than three (3) months from the date
of issuance. Upon conversion of Debentures by a holder, the holder will be
entitled to receive, in addition to the Common Stock issuable upon conversion,
an amount of cash equal to the amount such holder would have received if such
holder had, immediately prior to the Record Date for such distribution,
converted its Debenture into Common Stock, along with such holder's pro rata
share of any accrued interest earned as a consequence of the investment of such
funds. Promptly after making an election pursuant to this Section 15.5(o), the
Company shall give or shall cause to be given notice to all Debentureholders of
such election, which notice shall state the amount of cash per $1,000 principal
amount of Debentures such holders shall be entitled to receive (excluding
interest) upon conversion of the Debentures as a consequence of the Company
having made such election.
Section 15.6 RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any
transaction shall occur (including, without limitation (a) any recapitalization
or reclassification of shares of
(76)
<PAGE> 85
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination of Common Stock), (b) any consolidation of the Company with, or
merger of the Company into, any other person, or any merger of another person
into the Company (other than a merger that does not result in a
reclassification, conversion, exchange or cancellation of Common Stock), (c) any
sale, transfer or lease of all or substantially all of the assets of the Company
or (d) any compulsory share exchange) pursuant to which either shares of Common
Stock shall be converted into the right to receive other securities, cash or
other property, or, in the case of a sale or transfer of all or substantially
all of the assets of the Company, the holders of Common Stock shall be entitled
to receive other securities, cash or other property, then the Company, or such
successor or purchasing corporation, as the case may be, shall, as a condition
precedent to such recapitalization, reclassification, change, consolidation,
merger, sale, transfer or share exchange, execute and deliver to the Trustee a
supplemental indenture providing that the holder of each Debenture then
outstanding shall have the right thereafter, to convert such Debenture only
into: (x) in the case of any such transaction that does not constitute a Common
Stock Fundamental Change (as defined in Section 15.11(b)) and subject to funds
being legally available for such purpose under applicable law at the time of
such conversion, the kind and amount of the securities, cash or other property
that would have been receivable upon such recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange by a holder of the
number of shares of Common Stock issuable upon conversion of such Debentures
immediately prior to such recapitalization, reclassification, consolidation,
merger, sale, transfer or share exchange, after giving effect, in the case of
any Non-Stock Fundamental Change (as defined in Section 15.11(b)), to any
adjustment in the Conversion Price in accordance with Section 15.11(a)(i) and
(y) in the case of any such transaction that constitutes a Common Stock
Fundamental Change, common stock of the kind received by holders of Common Stock
as a result of such Common Stock Fundamental Change in an amount determined in
accordance with Section 15.11(a)(ii). Such supplemental indenture shall provide
for adjustments that, for events subsequent to the effective date of such
supplemental indenture shall be as nearly equivalent as may be practicable to
the relevant adjustments provided for in this Article XV. If, in the case of any
such consolidation, merger, transfer or lease, the capital stock and other
securities and assets (including cash) receivable thereupon by a holder of
Common stock includes shares of capital stock or other securities or assets of a
corporation other than the successor or purchasing corporation, as the case may
be, in such consolidation, merger, transfer or lease, then such supplemental
indenture shall also be executed by such other corporation and shall contain
such additional provisions to protect the interests of the holders as the Board
of Directors shall reasonably consider necessary by reason of the foregoing.
The above provisions of this Section shall similarly apply to successive
recapitalizations, consolidations, mergers, sales, transfers or share exchanges.
In the event the Company shall execute a supplemental indenture pursuant to
this Section 15.6, the Company shall promptly file with the Trustee an Officers'
Certificate briefly stating the reasons therefor, the kind or amount of shares
of capital stock or securities or assets
(77)
<PAGE> 86
(including cash) receivable by holders upon the conversion of their Debentures
after any such recapitalization, reclassification, change, consolidation,
merger, sale, transfer or share exchange and any adjustment to be made with
respect thereto.
Section 15.7 TAXES ON SHARES ISSUED. The issue of stock certificates on
conversions of Debentures shall be made without charge to the converting
Debentureholder for any tax in respect of the issue thereof. The Company shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than that
of the holder of any Debenture converted, and the Company shall not be required
to issue or deliver any such stock certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
Section 15.8 RESERVATION OF SHARES; SHARES TO BE FULLY PAID; LISTING OF
COMMON STOCK. The Company shall provide, free from preemptive rights, out of its
authorized but unissued shares or shares held in treasury, sufficient shares to
provide for the conversion of the Debentures from time to time as such
Debentures are presented for conversion, and no Debenture shall be issued unless
such sufficient number of shares has been reserved and are available for
issuance upon conversion of Debentures under this Article XV.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Debentures, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock issued upon
conversion of Debentures will be fully paid and non-assessable by the Company
and free from all taxes, liens and charges with respect to the issue thereof.
The Company covenants that if any shares of Common Stock to be provided for
the purpose of conversion of Debentures hereunder require registration with or
approval of any governmental authority under any Federal or State law before
such shares may be validly issued upon conversion, the Company will in good
faith and as expeditiously as possible endeavor to secure such registration or
approval, as the case may be.
The Company further covenants that if at any time the Common Stock shall be
listed on the Nasdaq National Market or any other national securities exchange
or automated quotation system the Company will, if permitted by the rules of
such exchange or automated quotation system, list and keep listed, so long as
the Common Stock shall be so listed on such exchange or automated quotation
system, all Common Stock issuable upon conversion of the Debentures.
(78)
<PAGE> 87
Section 15.9 RESPONSIBILITY OF TRUSTEE. The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any holder of Debentures to determine whether any facts exist which may require
any adjustment of the Conversion Price, or with respect to the nature or extent
or calculation of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. The Trustee and any other conversion agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, which may at any time
be issued or delivered upon the conversion of any Debenture; and the Trustee and
any other conversion agent make no representations with respect thereto. Subject
to the provisions of Section 8.1, neither the Trustee nor any conversion agent
shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any Debenture for the purpose of
conversion or to comply with any of the duties, responsibilities or covenants of
the Company contained in this Article. Without limiting the generality of the
foregoing, neither the Trustee nor any conversion agent shall be under any
responsibility to determine the correctness of any provisions contained in any
supplemental indenture entered into pursuant to Section 15.6 relating either to
the kind or amount of shares of stock or securities or property (including cash)
receivable by Debentureholders upon the conversion of their Debentures after any
event referred to in such Section 15.6 or to any adjustment to be made with
respect thereto, but, subject to the provisions of Section 8.1, may accept as
conclusive evidence of the correctness of any such provisions, and shall be
protected in relying upon, the Officers' Certificate (which the Company shall be
obligated to file with the Trustee prior to the execution of any such
supplemental indenture) with respect thereto.
Section 15.10 NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS. In case:
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock (that would require an adjustment in the Conversion Price
pursuant to Section 15.5); 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 share of any
class or any other rights or warrants; or
(c) of any reclassification of the Common Stock of the Company (other
than a subdivision or combination of its outstanding Common Stock, or a change
in par value, or from par value to no par value, or from no par value to par
value), or of any consolidation or merger to which the Company is a party and
for which approval of any shareholders of the Company is required, or of the
sale or transfer of all or substantially all of the assets of the Company; or
(79)
<PAGE> 88
(d) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Debentures at his address appearing on the Debenture register,
provided for in Section 2.5 of this Indenture, as promptly as possible but in
any event at least fifteen days prior to the applicable date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up is expected to
become effective or occur, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of such dividend, distribution, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.
Section 15.11 ADJUSTMENTS TO CONVERSION PRICE IN THE EVENT OF A FUNDAMENTAL
CHANGE.
(a) Notwithstanding any other provision in this Article XV to the
contrary, if any Fundamental Change (as defined below) occurs, then the
Conversion Price in effect will be adjusted immediately following such
Fundamental Change as described below. In addition, in the event of a Common
Stock Fundamental Change, each Debenture shall be convertible solely into common
stock of the kind received by holders of Common Stock as a result of such Common
Stock Fundamental Change.
For purposes of calculating any adjustment to be made pursuant to this
Section 15.11 in the event of a Fundamental Change, immediately following such
Fundamental Change (and for such purposes a Fundamental Change shall be deemed
to occur on the earlier of (a) the occurrence of such Fundamental Change, and
(b) the date, if any, fixed for determination of shareholders entitled to
receive the cash, securities, property or other assets distributable in such
Fundamental Change to holders of the Common Stock):
(i) in the case of a Non-Stock Fundamental Change, the Conversion
Price of the Debentures immediately following such Non-Stock Fundamental Change
shall be the lower of (A) the Conversion Price in effect immediately prior to
such Non-Stock Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to this Article XV and (B) the product of (1) the
greater of the Applicable Price (as defined in Section 15.11(b)) and the then
applicable Reference Market Price (as defined in Section 15.11(b)) and (2) a
fraction, the numerator of which is $1000 and the denominator of which is (x)
the amount of the redemption price for one Debenture if the redemption date were
the date of such Non-Stock Fundamental Change (or the date of the period
commencing on the
(80)
<PAGE> 89
first date of original issuance of the Debentures and through February 28, 1999
or the twelve-month periods commencing March 1, 1999 and March 1, 2000, the
product of 106.50%, 105.85% and 105.20%, respectively, times $1000) plus (y) any
accrued interest and unpaid interest thereon to, but excluding, the date of such
Non-Stock Fundamental Change; and
(ii) in the case of a Common Stock Fundamental Change, the
Conversion Price of the Debentures immediately following such Common Stock
Fundamental Change shall be the Conversion Price in effect immediately prior to
such Common Stock Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to Section 15.5 multiplied by a fraction, the
numerator of which is the Purchaser Stock Price (as defined in Section 15.11(b))
and the denominator of which is the Applicable Price; PROVIDED, HOWEVER, that in
the event of a Common Stock Fundamental Change in which (A) 100% of the value of
the consideration received by a holder of Common Stock is common stock of the
successor, acquiror or other third party (and cash, if any, paid with respect to
any fractional interests in such common stock resulting from such Common Stock
Fundamental Change) and (B) all of the Common Stock shall have been exchanged
for, converted into or acquired for, common stock of the successor, acquiror or
other third party (and any cash with respect to fractional interests), the
Conversion Price immediately following such Common Stock Fundamental Change
shall be the Conversion Price in effect immediately prior to such Common Stock
Fundamental Change multiplied by a fraction, the numerator of which is one (1)
and the denominator of which is the number of shares of common stock of the
successor, acquiror or other third party received by a holder of one share of
Company Common Stock as a result of such Common Stock Fundamental Change.
(b) For purposes of this Section 15.11, the following terms shall have
the meaning indicated:
(i) "Applicable Price" means (i) in the event of a Non-Stock
Fundamental Change in which the holders of Common Stock receive only cash, the
amount of cash received by a holder of one share of Common Stock and (ii) in the
event of any other Fundamental Change, the average of the daily Closing Price
(determined as provided in Section 15.5(i)(1)) for one share of Common Stock
during the 10 Trading Days (determined as provided in Section 15.5(i)(5))
immediately prior to the record date for the determination of the holders of
Common Stock entitled to receive cash, securities, property or other assets in
connection with such Fundamental Change or, if there is no such record date,
prior to the date upon which the holders of Common Stock shall have the right to
receive such cash, securities, property or other assets. The Closing Price on
any Trading Day may be subject to adjustment as provided in Section 15.5(i)(1).
(ii) "Common Stock Fundamental Change" means any Fundamental
Change in which more than 50% of the value (as determined in good faith by the
Board of Directors) of the consideration received by holders of Common Stock
consists of common stock that, for the 10 Trading Days immediately prior to such
Fundamental Change,
(81)
<PAGE> 90
has been admitted for listing or admitted for listing subject to notice of
issuance on a national securities exchange or quoted on Nasdaq National Market,
provided, however, that a Fundamental Change shall not be a Common Stock
Fundamental Change unless either (i) the Company continues to exist after the
occurrence of such Fundamental Change and the outstanding Debentures continues
to exist as outstanding Debentures or (ii) not later than the occurrence of such
Fundamental Change, the outstanding Debentures are converted into or exchanged
for debentures have terms substantially similar (but no less favorable) to those
of the Debentures.
(iii) "Fundamental Change" means the occurrence of any
transaction or event or series of transactions or events pursuant to which all
or substantially all of the Common Stock shall be exchanged for, converted into,
acquired for or shall constitute solely the right to receive cash, securities,
property or other assets (whether by means of an exchange offer, liquidation,
tender, offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise); PROVIDED, HOWEVER, in the case of any such
series of transactions or events, for purposes of adjustment of the Conversion
Price, such Fundamental Change shall be deemed to have occurred when
substantially all of the Common Stock shall have been exchanged for, converted
into or acquired for, or shall constitute solely the right to receive, such
cash, securities, property or other assets, but the adjustment shall be based
upon the consideration that the holders of the Common Stock received in the
transaction or event as a result of which more than 50% of the Common Stock
shall have been exchanged for, converted into or acquired for, or shall
constitute solely the right to receive, such cash, securities, property or other
assets.
(iv) "Non-Stock Fundamental Change" means any Fundamental Change
other than a Common Stock Fundamental Change.
(v) "Purchaser Stock Price" means, with respect to any Common
Stock Fundamental Change, the average of the daily Closing Price for one share
of the common stock received by holders of the Common Stock in such Common Stock
Fundamental Change during the 10 Trading Days immediately prior to the date
fixed for the determination of the holders of the Common Stock entitled to
receive such common stock or, if there is no such date, prior to the date upon
which the holders of the Common Stock shall have the right to receive such
common stock.
(vi) "Reference Market Price" shall initially mean $15 2/3 (which
is an amount equal to 66 2/3% of the reported last sale price for Company Common
Stock on the Nasdaq National Market on February 26, 1998) and, in the event of
any adjustment to the Conversion Price other than as a result of a Fundamental
Change, the Reference Market Price shall also be adjusted so that the ratio of
the Reference Market Price to the Conversion Price after giving effect to any
such adjustment shall always be the same as the ratio of the initial Reference
Market Price to the initial Conversion Price.
(82)
<PAGE> 91
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 PROVISIONS BINDING ON COMPANY'S SUCCESSORS. All the covenants,
stipulations, promises and agreements of the Company in this Indenture contained
shall bind its successors and assigns whether so expressed or not.
Section 16.2 OFFICIAL ACTS BY SUCCESSOR CORPORATION. Any act or proceeding
by any provision of this Indenture authorized or required to be done or
performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
Section 16.3 ADDRESSES FOR NOTICES, ETC. Any notice or demand which by any
provision of this Indenture is required or permitted to be given or served by
the Trustee or by the holders of Debentures on the Company shall be deemed to
have been sufficiently given or made, for all purposes if given or served by
being deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Alkermes, Inc., 64 Sidney Street, Cambridge, Massachusetts
02139-4136, Attention: Chief Financial Officer. Any notice, direction, request
or demand hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed to the Corporate Trust Office, which office is, at the date
as of which this Indenture is dated, located at 2 International Place, 4th
Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Division
(Alkermes, Inc. 6 1/2% Convertible Subordinated Debentures).
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Debentureholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Debenture register and shall be sufficiently given to him if so mailed within
the time prescribed.
Failure to mail a notice or communication to a Debentureholder or any
defect in it shall not affect its sufficiency with respect to other
Debentureholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
Section 16.4 GOVERNING LAW. This Indenture and each Debenture shall be
deemed to be a contract made under the laws of New York, and for all purposes
shall be construed in accordance with the laws of New York, without regard to
the conflict of laws provisions thereof.
(83)
<PAGE> 92
Section 16.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT; CERTIFICATES
TO TRUSTEE. Upon any application or demand by the Company to the Trustee to take
any action under any of the provisions of this Indenture, including those
actions set forth in Section 314(c) of the Trust Indenture Act, the Company
shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for by or on behalf of the Company in
this Indenture and delivered to the Trustee with respect to compliance with a
condition or covenant provided for in this Indenture shall include (1) a
statement that the person making such certificate or opinion has read such
covenant or condition; (2) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion contained in
such certificate or opinion is based; (3) a statement that, in the opinion of
such person, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (4) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.
Section 16.6 LEGAL HOLIDAYS. In any case where the date of maturity of
interest on or principal of the Debentures or the date fixed for redemption of
any Debenture will not be a Business Day, then payment of such interest on or
principal of the Debentures need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period from and after such date.
Section 16.7 NO SECURITY INTEREST CREATED. Nothing in this Indenture or in
the Debentures, expressed or implied, shall be construed to constitute a
security interest under the Uniform Commercial Code or similar legislation, as
now or hereafter enacted and in effect, in any jurisdiction.
Section 16.8 TRUST INDENTURE ACT. If any provision hereof limits, qualifies
or conflicts with a provision of the Trust Indenture Act that is required under
the Trust Indenture Act to be a part of and govern this Indenture, 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. Until such time as this Indenture shall
be qualified under the Trust Indenture Act, this Indenture, the Company and the
Trustee shall be deemed for all purposes hereof to be subject to and governed by
the Trust Indenture Act to the same extent as would be the case if this
Indenture were so qualified on the date hereof.
Section 16.9 BENEFITS OF INDENTURE. Nothing in this Indenture or in the
Debentures, expressed or implied, shall give to any person, other than the
parties hereto, any paying agent,
(84)
<PAGE> 93
any authenticating agent, any Debenture registrar and their successors
hereunder, the holders of Debentures and the holders of Senior Indebtedness, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 16.10 TABLE OF CONTENTS, HEADINGS, ETC. The table of contents and
the titles and headings of the articles and sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 16.11 AUTHENTICATING AGENT. The Trustee may appoint an
authenticating agent which shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Debentures in connection
with the original issuance thereof and transfers and exchanges of Debentures
hereunder, including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all
intents and purposes as though the authenticating agent had been expressly
authorized by this Indenture and those Sections to authenticate and deliver
Debentures. For all purposes of this Indenture, the authentication and delivery
of Debentures by the authenticating agent shall be deemed to be authentication
and delivery of such Debentures "by the Trustee" and a certificate of
authentication executed on behalf of the Trustee by an authenticating agent
shall be deemed to satisfy any requirement hereunder or in the Debentures for
the Trustee's certificate of authentication. Such authenticating agent shall at
all times be a person eligible to serve as trustee hereunder pursuant to Section
8.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any paper or any further act on the
part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written notice of
resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any authenticating agent by giving written notice of
termination to such authenticating agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time any
authenticating agent shall cease to be eligible under this Section, the Trustee
shall promptly appoint a successor authenticating agent (which may be the
Trustee), shall give written notice of such appointment to the Company and shall
mail notice of such appointment to all holders of Debentures as the names and
addresses of such holders appear on the Debenture register.
The Trustee agrees to pay to the authenticating agent from time to time
reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the
(85)
<PAGE> 94
Trustee shall be entitled to be reimbursed for such pre-approved payments,
subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 16.11 shall
be applicable to any authenticating agent.
Section 16.12 EXECUTION IN COUNTERPARTS. This Indenture may be executed in
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
State Street Bank and Trust Company hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.
(86)
<PAGE> 95
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
ALKERMES, INC.
By: /s/ Michael Landine
----------------------------------------
Title: Senior Vice President,
Chief Financial Officer
and Treasurer
Attest:
- ----------------------------------------
/s/ Patricia L. Allen
[seal]
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ illegible signature
----------------------------------------
Title: Vice President
Attest:
/s/ illegible signature
- ----------------------------------------
[seal]
(87)
<PAGE> 96
EXHIBIT A - FORM OF DEBENTURE
[FORM OF FACE OF DEBENTURE]
FORM OF LEGEND FOR GLOBAL NOTE: UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE DEBENTURE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS,
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE DEBENTURE
EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT, WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE PREFERRED STOCK OF WHICH THE
DEBENTURE EVIDENCED HEREBY HAS BEEN ISSUED UPON EXCHANGE THEREFOR, RESELL OR
OTHERWISE TRANSFER THE DEBENTURE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE
UPON CONVERSION OF SUCH DEBENTURE WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE, A SIGNED LETTER
(1)
<PAGE> 97
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THE DEBENTURE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM SUCH TRUSTEE), (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE DEBENTURE EVIDENCED
HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(E)) A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THE DEBENTURE EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THE PREFERRED STOCK OF WHICH THE DEBENTURE EVIDENCED HEREBY HAS BEEN ISSUED UPON
EXCHANGE THEREFOR (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(E)), THE HOLDER
MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE
MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE
PROPOSED TRANSFEREE IS A PURCHASER WHO IS NOT A U.S. PERSON OR IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED
UPON THE EARLIER OF THE TRANSFER OF THE DEBENTURE EVIDENCED HEREBY PURSUANT TO
CLAUSE 2(E) ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF
THE PREFERRED STOCK OF WHICH THE DEBENTURE EVIDENCED HEREBY HAS BEEN ISSUED UPON
EXCHANGE THEREFOR.
No. ____________ $_______________
ALKERMES, INC. CUSIP:_______________
6 1/2% Convertible Subordinated Debenture
(2)
<PAGE> 98
Alkermes, Inc., a corporation duly organized and validly existing under the
laws of the Commonwealth of Pennsylvania (herein called the "Company", which
term includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received hereby promises to pay to
____________________, or registered assigns, the principal sum of ______
____________________________________ Dollars on ________________, and to pay
interest on said principal sum semi-annually on March 1 and September 1 of each
year, commencing on the first such date after the Exchange Date (as defined in
the Indenture), at the rate per annum specified in the title of this Debenture,
accrued from the March 1 or September 1, as the case may be, next preceding the
date of this Debenture to which interest has been paid or duly provided for,
unless the date of this Debenture is a date to which interest has been paid or
duly provided for, in which case interest shall accrue from the date of this
Debenture, or unless no interest has been paid or duly provided for on this
Debenture, in which case interest shall accrue from the Exchange Date, until
payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after any February 15 or
August 15, as the case may be, and before the following March 1 or September 1,
this Debenture shall bear interest from such March 1 or September 1,
respectively; PROVIDED, HOWEVER, that if the Company shall default in the
payment of interest due on such March 1 or September 1, then this Debenture
shall bear interest from the next preceding March 1 or September 1 to which
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for on this Debenture, from the Exchange Date. The interest
(including Additional Interest, if any) so payable on any March 1 or September 1
will be paid to the person in whose name this Debenture (or one or more
Predecessor Debentures) is registered at the close of business on the record
date, which shall be the February 15 or August 15 (whether or not a Business
Day) next preceding such March 1 or September 1, respectively, as provided in
the Indenture; PROVIDED THAT any such interest not punctually paid or duly
provided for shall be payable as provided in the Indenture. Payment of the
principal of and interest accrued on this Debenture (including Additional
Interest, if any) shall be made at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City of New York,
which shall initially be the office or agency of State Street Bank and Trust
Company, N.A., an Affiliate of the Trustee, or, at the option of the holder of
this Debenture, at the Corporate Trust Office, in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts; PROVIDED, HOWEVER, that at the option of
the Company, payment of interest (including Additional Interest, if any) may be
made by check mailed to the registered address of the person entitled thereto;
PROVIDED FURTHER that, with respect to any holder of Debentures with an
aggregate principal amount equal to or in excess of $2,000,000, at the request
of such holder in writing to the Company, interest on such holder's Debentures
shall be paid by wire transfer in immediately available funds in accordance with
the wire transfer instruction supplied by such holder to the Trustee and paying
agent (if different from Trustee).
Reference is made to the further provisions of this Debenture set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on this Debenture to
the prior payment in full of all Senior
(3)
<PAGE> 99
Indebtedness as defined in the Indenture and provisions giving the holder of
this Debenture the right to convert this Debenture into Common Stock of the
Company on the terms and subject to the limitations referred to on the reverse
hereof and as more fully specified in the Indenture. Such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Debenture shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of said State.
This Debenture shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by the Trustee or a duly authorized authenticating agent under the Indenture.
(4)
<PAGE> 100
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed under its corporate seal.
ALKERMES, INC.
Dated: By:
---------------------- -------------------------------------
Title:
Attest:
----------------------------------------
Secretary
(5)
<PAGE> 101
[FORM OF CERTIFICATE OF AUTHENTICATION]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-named Indenture.
State Street Bank and Trust Company,
as Trustee
By:
-------------------------------------
Authorized Signatory
<PAGE> 102
[FORM OF REVERSE OF DEBENTURE]
ALKERMES, INC.
6 1/2% Convertible Subordinated Debenture
This Debenture is one of a duly authorized issue of Debentures of the
Company, designated as its 6 1/2% Convertible Subordinated Debentures (herein
called the "Debentures"), limited to the aggregate principal amount of
$115,000,000 all issued or to be issued under and pursuant to an Indenture,
dated as of March 1, 1998 (herein called the "Indenture"), between the Company
and State Street Bank and Trust Company (herein called the "Trustee"), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the
Debentures.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of and accrued interest on all
Debentures may be declared, and upon said declaration shall become, due and
payable, in the manner, with the effect and subject to the conditions provided
in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority of the aggregate
principal amount of the Debentures at the time outstanding, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Debentures; PROVIDED, HOWEVER, that no such supplemental
indenture shall (i) extend the fixed maturity of any Debenture, or reduce the
rate or extend the time of payment of interest thereon, or reduce the principal
amount thereof or premium, if any, thereon, or reduce any amount payable on
redemption thereof, or impair or adversely affect the right of any
Debentureholder to institute suit for the payment thereof, or make the principal
thereof or interest or premium, if any, thereon payable in any coin or currency
other than that provided in the Debentures, or modify the provisions of the
Indenture with respect to the subordination of the Debentures in a manner
adverse to the Debentureholders, or impair, or change in any respect adverse to
the holders of the Debentures, the right to convert the Debentures into Common
Stock subject to the terms set forth in the Indenture, including Section 15.6
thereof, without the consent of the holder of each Debenture so affected or (ii)
reduce the aforesaid percentage of Debentures, the holders of which are required
to consent to any such supplemental indenture, without the consent of the
holders of all Debentures then outstanding. It is also provided in the Indenture
that, prior to any declaration accelerating the maturity of the Debentures, the
holders of a majority in aggregate principal amount of the Debentures at the
time outstanding may on behalf of the holders of all of the Debentures waive any
past default or Event of Default under the Indenture and its consequences except
a default
<PAGE> 103
in the payment of interest or any premium on or the principal of or any
redemption price of any of the Debentures or a failure by the Company to convert
any Debentures into Common Stock of the Company. Any such consent or waiver by
the holder of this Debenture (unless revoked as provided in the Indenture) shall
be conclusive and binding upon such holder and upon all future holders and
owners of this Debenture and any Debentures which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Debenture or such other Debentures.
The indebtedness evidenced by the Debentures is, to the extent and in the
manner provided in the Indenture, expressly subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
as defined in the Indenture, whether outstanding at the date of the Indenture or
thereafter incurred, and this Debenture is issued subject to the provisions of
the Indenture with respect to such subordination. Each holder of this Debenture,
by accepting the same, agrees to and shall be bound by such provisions and
authorizes the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
his attorney in fact for such purpose.
No reference herein to the Indenture and no provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Debenture at the place, at the respective times, at the rate and in the
coin or currency herein prescribed.
Interest on the Debentures shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Debentures are issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. At the
office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration or exchange of Debentures, Debentures may be exchanged for a like
aggregate principal amount of Debentures of other authorized denominations.
The Debentures will not be redeemable at the option of the Company prior to
March 6, 2001. On or after such date and prior to maturity the Debentures may be
redeemed at the option of the Company as a whole, or from time to time in part,
upon mailing a notice of such redemption not less than 20 nor more than 60 days
before the date fixed for redemption to the holders of Debentures at their last
registered addresses, all as provided in the Indenture, at the following
optional redemption prices (expressed as percentages of the principal amount),
together in each case with accrued interest to, but excluding, the date fixed
for redemption.
-8-
<PAGE> 104
If redeemed during the 12-month period beginning March 1 (beginning March
6, 2001 and ending on February 28, 2002, in the case of the first such period):
<TABLE>
<CAPTION>
Year Percentage
<S> <C>
2001 104.55%
2002 103.90
2003 103.25
2004 102.60
2005 101.95
2006 101.30
2007 100.65
</TABLE>
and 100% at March 1, 2008 and thereafter; PROVIDED, THAT if the date fixed for
redemption is a March 1 or September 1, then the interest payable on such date
shall be paid to the holder of record on the next preceding February 15 or
August 15.
The Debentures are not subject to redemption through the operation of any
sinking fund.
Subject to the provisions of the Indenture, the holder hereof has, at its
option, the right, at any time or on or prior to the close of business on the
tenth anniversary of the Exchange Date (or, as to all or any portion hereof
called for redemption, prior to the close of business on the next Business Day
preceding the date fixed for redemption (unless the Company shall default in
payment due upon redemption)), to convert the principal hereof or any portion of
such principal which is $1,000 or an integral multiple thereof, into that number
of fully paid and non-assessable shares of Company's Common Stock, as said
shares shall be constituted at the date of conversion, obtained by dividing the
principal amount of this Debenture or portion thereof to be converted by the
conversion price, upon surrender of this Debenture, together with a conversion
notice as provided in the Indenture and this Debenture, to the Company at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York, or at the option of such holder, the Corporate
Trust Office, and, unless the shares issuable on conversion are to be issued in
the same name as this Debenture, duly endorsed by, or accompanied by instruments
of transfer in form satisfactory to the Company duly executed by, the holder or
by his duly authorized attorney. The initial conversion price shall mean the
dollar amount obtained by dividing $50.00 by 1.6878. The conversion price of the
Debenture is subject to adjustment as provided in the Indenture under certain
circumstances, including in the event of a Non-Stock Fundamental Change or a
Common Stock Fundamental Change. No adjustment in respect of interest or
dividends will be made upon any conversion; PROVIDED, HOWEVER, that if this
Debenture shall be surrendered for conversion during the period from the close
of business on any record date for the payment of interest through the close of
business on the Business Day next preceding the following interest payment date,
this Debenture (unless it or the portion being converted shall have been called
for redemption and a notice of
-9-
<PAGE> 105
redemption has been mailed to the holders of the Debentures pursuant to Section
3.2 of the Indenture) must be accompanied by an amount, in funds acceptable to
the Company, equal to the interest otherwise payable on such interest payment
date on the principal amount being converted. No fractional shares of Common
Stock will be issued upon any conversion, but an adjustment in cash will be paid
to the holder, as provided in the Indenture, in respect of any fraction of a
share which would otherwise be issuable upon the surrender of any Debenture or
Debentures for conversion.
Any Debentures called for redemption, unless surrendered for conversion on
or before the close of business on the date fixed for redemption, may be deemed
to be purchased from the holder of such Debentures at an amount equal to the
applicable redemption price, together with accrued interest to the date fixed
for redemption, by one or more investment bankers or other purchasers who may
agree with the Company to purchase such Debentures from the holders thereof and
convert them into Common Stock of the Company and to make payment for such
Debentures as aforesaid to the Trustee in trust for such holders.
Upon due presentment for registration of transfer of this Debenture at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, which shall initially be State Street Bank and Trust Company, N.A., an
Affiliate of the Trustee, or at the option of the holder of this Debenture, at
the Corporate Trust Office, a new Debenture or Debentures of authorized
denominations for an equal aggregate principal amount will be issued to the
transferee in exchange thereof, subject to the limitations provided in the
Indenture, without charge except for any tax or other governmental charge
imposed in connection therewith, and bearing restrictive legends required by the
Indenture.
The Company, the Trustee, any authenticating agent, any paying agent, any
conversion agent and any Debenture registrar may deem and treat the registered
holder hereof as the absolute owner of this Debenture (whether or not this
Debenture shall be overdue and notwithstanding any notation of ownership or
other writing hereon made by anyone other than the Company or any Debenture
registrar), for the purpose of receiving payment hereof, or on account hereof,
for the conversion hereof and for all other purposes, and neither the Company
nor the Trustee nor any other authenticating agent nor any paying agent nor any
other conversion agent nor any Debenture registrar shall be affected by any
notice to the contrary. All payments made to or upon the order of such
registered holder shall, to the extent of the sum or sums paid, satisfy and
discharge liability for monies payable on this Debenture.
No recourse for the payment of the principal of or any premium or interest
on this Debenture, or for any claim based hereon or otherwise in respect hereof,
and no recourse under or upon any obligation, covenant or agreement of the
Company in the Indenture or any indenture supplemental thereto or in any
Debenture, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, shareholder, employee, agent, officer,
director or subsidiary, as such, past, present or future, of the Company or of
any successor corporation, either directly or through the Company or any
successor corporation,
-10-
<PAGE> 106
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
Terms used in this Debenture and defined in the Indenture are used herein
as therein defined.
-11-
<PAGE> 107
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of
this Debenture, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - __________Custodian _________
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with Act________________________________________________
right of survivorship (State)
and not as tenants in
common
</TABLE>
Additional abbreviations may also be used
though not in the above list.
<PAGE> 108
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: Alkermes, Inc.
The undersigned registered owner of this Debenture hereby irrevocably
exercises the option to convert this Debenture, or the portion hereof (which is
$1,000 principal amount or an integral multiple thereof) below designated, into
shares of Common Stock in accordance with the terms of the Indenture referred to
in this Debenture, and directs that the shares issuable and deliverable upon
such conversion, together with any check in payment for fractional shares and
any Debentures representing any unconverted principal amount hereof, be issued
and delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Debenture not converted are to
be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto. Any amount required to
be paid to the undersigned on account of interest accompanies this Debenture.
Dated:
---------------------
---------------------------------------
---------------------------------------
Signature(s)
Signature(s) must be guaranteed by
an eligible Guarantor Institution
(banks, Stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule
17Ad-15 if shares of Common Stock are to
be issued, or Debentures to be
delivered, other than to and in the name
of the registered holder.
- ---------------------------------------
Signature Guarantee
<PAGE> 109
Fill in for registration of shares
if to be issued, and Debentures if to be
delivered, other than to and in the name
of the registered holder:
- ---------------------------------------
(Name)
- ---------------------------------------
(Street Address)
- ---------------------------------------
(City, State and Zip Code)
Please print name and address
Principal amount to be converted
(if less than all): $______,000
---------------------------------------
Social Security or Other Taxpayer
Identification Number
<PAGE> 110
[FORM OF ASSIGNMENT]
For value received _______________________________ hereby sell(s),
assign(s) and transfer(s) unto __________________________(Please insert social
security or Taxpayer Identification Number of assignee) the Debenture, and
hereby irrevocably constitutes and appoints ____________________ attorney to
transfer the said Debenture on the books of the Company, with full power of
substitution in the premises.
In connection with any transfer of the Debenture within the United States
or to, or for the account or benefit of, U.S. Persons occurring within two years
of the original issuance of such Debenture (unless such Debenture is being
transferred pursuant to a registration statement that has been declared
effective under the Securities Act), the undersigned confirms that such
Debenture is being transferred:
|_| To Alkermes, Inc. or a subsidiary thereof; or
|_| Pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
|_| To an Institutional Accredited Investor pursuant to and in compliance
with the Securities Act of 1933, as amended; or
|_| Pursuant to and in compliance with Rule 144 under the Securities Act
of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such
Debenture is not being transferred to an "affiliate" of the Company as defined
in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate").
|_| The transferee is an Affiliate of the Company.
Dated:
-----------------------------
- -----------------------------------
- -----------------------------------
Signature(s)
<PAGE> 111
Signature(s) must be guaranteed by
an eligible Guarantor Institution
(banks, stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule
17AD-15 if shares of Common Stock are to
be issued, or Debentures are to be
delivered, other than to and in the name
of the registered holder.
- ----------------------------------------
Signature Guarantee
NOTICE: The signature on the conversion notice, or the assignment must
correspond with the name as written upon the face of the Debenture in every
particular without alteration or enlargement or any change whatever.
<PAGE> 112
EXHIBIT B
[FORM OF INSTITUTIONAL ACCREDITED INVESTOR LETTER]
Alkermes, Inc.
64 Sidney Street
Cambridge, Massachusetts
Ladies and Gentlemen:
The undersigned is delivering this letter in connection with the sale or
transfer to the undersigned of Convertible Subordinated Debentures (the
"Debentures), which are convertible into shares of Common Stock, $.01 par value
(the "Common Stock"), of Alkermes, Inc. (the "Company").
The undersigned hereby confirm that:
1. The undersigned is an "accredited investor" within the meaning of
Rule 501(a)(1), (2) or (3) under the Securities Act of 1933 (the
"Securities Act") or an entity in which all of the equity owners are
accredited investors within the meaning of Rule 501(a)(1), (2) or (3) under
the Securities Act (an "Institutional Accredited Investor"):
2. (A) Any purchase of Debentures by the undersigned will be for the
undersigned's own account or for the account of one or more other
Institutional Accredited Investors or as fiduciary for the account of one
or more trusts, each of which is an "accredited investor" within the
meaning of Rule 501(a)(7) under the Securities Act and for each of which
the undersigned exercises sole investment discretion or (B) the undersigned
is a "bank," within the meaning of Section 3(a)(2) of the Securities Act,
or a "savings and loan association" or other institution described in
Section 3(5)(a) of the Securities Act that is acquiring Debentures as
fiduciary for the account of one or more institutions for which the
undersigned exercises sole investment discretion;
3. In the event that the undersigned purchases any Debentures, the
undersigned will acquire Debentures having a minimum principal amount of
not less than $100,000 for the undersigned's own account or for any
separate account for which the undersigned is acting;
4. The undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits
and risks of purchasing the Debentures; and
<PAGE> 113
5. The undersigned is not acquiring Debentures with a view to
distribution thereof or with any present intention of offering or selling
Debentures or the Common Stock issuable upon conversion thereof, except as
permitted below; provided that the disposition of the undersigned's
property and property of any accounts for which the undersigned is acting
as fiduciary shall remain at all times within the undersigned's control.
The undersigned understands that the Debentures are being offered in a
transaction not involving any public offering within the United States within
the meaning of the Securities Act and that the Debentures and the shares of
Common Stock issuable upon conversion thereof (collectively, the "Securities")
have not been registered under the Securities Act or any applicable state
securities laws, and the undersigned agrees, on its own behalf and on behalf of
each account for which the undersigned acquires any Debentures, that if in the
future the undersigned decides to resell or otherwise transfer such Securities
may be resold or otherwise transferred within the United States or to, or for
the account or benefit of, U.S. persons, only (i) to the Company or any
subsidiary thereof, or (ii) to a person who is a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act) in a transaction meeting the
requirements of Rule 144A, or (iii) to an Institutional Accredited Investor
that, prior to such transfer, furnishes to the Trustee for the Debentures or
transfer agent for the Common Stock, as the case may be, a signed letter
containing certain representations and agreements relating to the restrictions
on transfer of such securities (the form of which letter can be obtained from
such Trustee or transfer agent, as the case may be), or (iv) pursuant to the
exemption from registration provided by Rule 144 under the Securities Art (if
applicable), or (v) pursuant to a registration statement which has been declared
effective under the Securities Act. The undersigned agrees that any such
transfer of Securities referred to in this paragraph shall be in accordance with
applicable securities laws of any State of the United States or any other
applicable jurisdiction and in accordance with the legends set forth on the
Securities. The undersigned further agrees to provide any person purchasing any
of the Securities from the undersigned a notice advising such purchaser that
resales of such Securities are restricted as stated herein (unless such
Securities have been sold or are being transferred pursuant to a registration
statement that has been declared effective under the Securities Act or otherwise
in a transaction which permits the restrictive legends initially set forth
thereon to be removed). The undersigned understands that the Trustee and
transfer agent for the Securities will not be required to accept for
registration of transfer any Securities (unless such Securities have been sold
or are being transferred pursuant to a registration statement that has been
declared effective under the Securities Act or otherwise in a transaction which
permits the restrictive legends initially set forth thereon to be removed),
except upon presentation of evidence satisfactory to the Company that the
foregoing restrictions on transfer have been complied with. The undersigned
further understands that any Securities will be in the form of definitive
physical certificates and that such certificates will bear a legend (unless the
sale of the Securities has been registered under the Securities Act) reflecting
the substance of this paragraph (unless such Securities have been sold or are
being transferred pursuant to a registration statement that has
<PAGE> 114
been declared effective under the Securities Act or otherwise in a transaction
which permits the restrictive legends initially set forth thereon to be
removed).
The undersigned acknowledges that the Company, others and you will rely
upon the undersigned's confirmations, acknowledgments and agreements set forth
herein, and the undersigned agrees to notify you promptly in writing if any of
our representations or warranties herein ceases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK
----------------------------------------
(Name of Purchaser)
By:
-------------------------------------
Name:
Title:
Address:
<PAGE> 1
EXHIBIT 5
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103
April 15, 1998
Alkermes, Inc.
64 Sidney Street
Cambridge, Massachusetts 02139
Re: Registration Statement on Form S-3 for Alkermes, Inc.
-----------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Alkermes, Inc., a Pennsylvania corporation (the
"Company"), and are rendering this opinion in connection with the filing of a
Registration Statement on Form S-3 (the "Registration Statement") by the Company
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, relating to the registration by the Company of (i) 2,300,000 shares of
the Company's $3.25 Convertible Exchangeable Preferred Stock, par value $.01 per
share (the "Preferred Stock"), (ii) $115,000,000 principal amount of its 6 1/2%
Convertible Subordinated Debentures (the "Debentures") and (iii) 3,881,940
shares of the Company's common stock, par value $.01 share (the "Common Stock"),
issuable upon conversion of the Preferred Stock or the Debentures if issued (the
"Conversion Shares"), all of which are to be sold by certain holders of the
Preferred Stock, the Debentures, if issued, or the Conversion Shares as
described in the Registration Statement (the "Selling Shareholders"). The
Debentures will be issued, if at all, under an Indenture dated as of March 1,
1998 (the "Indenture") by and between the Company and State Street Bank and
Trust Company, as Trustee (the "Trustee").
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of (i) the Registration Statement and all exhibits thereto,
(ii) the Second Amended and Restated Articles of Incorporation, as amended, of
the Company (the "Articles"), (iii) the Indenture, (iv) the specimen Preferred
Stock Certificate and (v) the form of Debenture. We have also examined such
corporate records and other agreements, documents and instruments, and such
certificates or comparable documents of public officials and officers and
representatives of the Company and have made such inquiries of such officers
and representatives and have considered such matters of law as we have deemed
appropriate as the basis for the opinions hereinafter set forth, including the
Company's By-laws, as amended, certain resolutions adopted by the Board of
Directors of the Company relating to the issuance of the Preferred Stock, the
Debentures and the Conversion Shares and statements from certain officers of the
Company. In delivering this opinion, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to originals of all
documents submitted to us as certified, photostatic or conformed copies, the
authenticity of originals of all such latter documents, and the accuracy and
completeness of all records, information and statements submitted to us by
officers and representatives of the Company. In making our examination of
documents executed by parties other than the Company, we have assumed that such
parties had the power, corporate or other, to enter into and perform all
obligations thereunder and have also assumed the due authorization of all
requisite action, corporate or other, and execution and delivery by such parties
of such documents and the validity and binding effect thereof with respect to
such parties.
Based upon and subject to the limitations, qualifications, exceptions and
assumptions set forth herein, we are of the opinion that:
1. The shares of Preferred Stock to be sold by the Selling Shareholders are
duly authorized, legally issued, fully paid and nonassessable.
2. The Debentures, when issued, executed and delivered in exchange for the
Preferred Stock in accordance with the terms of the Articles and the Indenture,
and when authenticated and delivered by the Trustee
<PAGE> 2
Alkermes, Inc.
April 15, 1998
Page Two
in accordance with the Indenture and assuming no change in the law from the date
of this opinion, will be legally issued and binding obligations of the Company.
3. The Conversion Shares have been duly authorized by the Company and, when
issued and delivered in accordance with the terms of the Articles or the
Indenture, as the case may be, will be validly issued, fully paid and
nonassessable, assuming no change in applicable law.
We express no opinion as to the law of any jurisdiction other than the
federal law of the United States and the law of the Commonwealth of
Pennsylvania.
We hereby consent to the sole use of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Prospectus included therein. This opinion is not to be used,
circulated, quoted, referred to or relied upon by any other person or for any
other purpose without our prior written consent.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll, LLP
<PAGE> 1
EXHIBIT 12
ALKERMES, INC.
COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months
Year Ended March 31, Ended
------------------------------------------------------------- December 31,
1993 1994 1995 1996 1997 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Fixed charges and preferred stock dividends:
Interest expense $119 $334 $608 $1,044 $1,381 $1,242
Estimated interest portion of rent expense* 342 702 777 732 1,003 806
Preferred stock dividends -- -- -- -- -- --
-------- -------- -------- -------- -------- -------
Total fixed charges and preferred stock dividends $461 $1,036 $1,385 $1,776 $2,384 $2,048
======== ======== ======== ======== ======== =======
Net loss ($40,147) ($17,275) ($11,904) ($13,747) ($18,798) ($7,996)
Add: fixed charges and preferred stock dividends 461 1,036 1,385 1,776 2,384 2,048
-------- -------- -------- -------- -------- -------
Deficiency of earnings to cover fixed charges
and preferred stock dividends ($39,686) ($16,239) ($10,519) ($11,971) ($16,414) ($5,948)
======== ======== ======== ======== ======== =======
Ratio of earnings to fixed charges and preferred
stock dividends(1) -- -- -- -- -- --
</TABLE>
* This amount is the portion of rental expense under operating leases which
management of the Company believes to approximate the interest factor
(approximately one-third of rental expenses).
(1) For the fiscal years ended March 31, 1993, 1994, 1995, 1996 and 1997 and
for the nine months ended December 31, 1997, earnings were insufficient to
cover fixed charges. There were no preferred stock dividends declared or
paid by the Company during any of the fiscal years in the five year period
ended March 31, 1997 nor for the nine months ended December 31, 1997. For
these reasons, no ratios are provided.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Alkermes, Inc. on Form S-3 of our report dated May 23, 1997 appearing in the
Annual Report on Form 10-K of Alkermes, Inc. for the year ended March 31, 1997
and to the reference to us under the heading "Experts" in the Prospectus, which
is part of the Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 15, 1998
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
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)
----------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
(Exact Name of Trustee as Specified in its Charter)
04-1867445
(I.R.S. Employer Identification No.)
MASSACHUSETTS
(Jurisdiction of Incorporation if not a U.S. National Bank)
225 FRANKLIN STREET, BOSTON, MASSACHUSETTS
(Address of Principal Executive Offices)
02110
(Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston Massachusetts 02110
(617) 654-3253
(Name, Address and Telephone Number of Agent for Service)
ALKERMES, INC.
(Exact Name of Obligor as Specified in its Charter)
PENNSYLVANIA
(State or Other Jurisdiction of Incorporation or Organization)
23-2472830
(I.R.S. Employer Identification No.)
64 SIDNEY STREET, CAMBRIDGE, MASSACHUSETTS
(Address of Principal Executive Offices)
02139
(Zip Code)
6-1/2% CONVERTIBLE SUBORDINATED DEBENTURES
(Title of Indenture Securities)
----------------------------------------------------------------------
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT:
Department of Banking and Insurance of The Commonwealth of Massachusetts
100 Cambridge Street
Boston, Massachusetts
Board of Governors of the Federal Reserve System
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent, State
Street Corporation (see note on page 7).
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING SECURITIES OF
THE TRUSTEE:
Not applicable.
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY OTHER
SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING INFORMATION:
2
<PAGE> 3
Not applicable.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICERS OF THE TRUSTEE
IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR REPRESENTATIVE OF THE
OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY EACH SUCH PERSON HAVING
ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH CONNECTION.
Not applicable.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER, AND
EXECUTIVE OFFICER OF THE OBLIGOR:
Not applicable.
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER, AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER:
Not applicable.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO SECURITIES OF THE OBLIGOR OWNED
BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY THE
TRUSTEE:
Not applicable.
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
3
<PAGE> 4
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR, FURNISH
THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY
OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE:
Not applicable.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF
THE TRUSTEE (1) OWNS 10 PERCENT OR MORE OF THE VOTING STOCK OF THE OBLIGOR OR
(2) IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE
FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON:
Not applicable.
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE
TRUSTEE, OWNS 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR,
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH PERSON
ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE:
Not applicable.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
Not applicable.
ITEM 13. DEFAULTS BY THE OBLIGOR.
4
<PAGE> 5
(a) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
None.
(b) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR MORE THAN ONE
OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE HAS
BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE INDENTURE OR
SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
None.
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not applicable.
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE TRUSTEE IS AUTHORIZED TO
ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED UNDER THE ACT.
Not applicable - trustee is a banking association organized under the
laws of The Commonwealth of Massachusetts.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
__1. A copy of articles of association of the trustee as now in effect.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated
herein by reference thereto.
5
<PAGE> 6
__2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of Massachusetts
that no certificate of authority for the trustee to commence business
was necessary or issued is on file with the Securities and Exchange
Commission as Exhibit 2 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22- 17940) and is
incorporated herein by reference thereto.
__3. A copy of the authorization of the trustee to exercise corporate trust
powers, if such authorization is not contained in the documents specified in
paragraph (1) or (2) above.
A copy of the authorization of the trustee to exercise corporate trust
powers is on file with the Securities and Exchange Commission as
Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated
herein by reference thereto.
__4. A copy of the existing by-laws of the trustee or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1) filed
with the Registration Statement of Eastern Edison Company (File No.
33-37823) and is incorporated herein by reference thereto.
__5. A copy of each indenture referred to in Item 4, if the obligor is in
default.
Not Applicable.
X 6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
6
<PAGE> 7
X 7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
__8. A copy of any order pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to be qualified
under the Act.
Not Applicable.
__9. Consent to service of process required of foreign trustees pursuant to
Rule 10a-4 under the Act.
Not Applicable.
NOTE
The trustee disclaims responsibility for the accuracy or completeness of
information contained in this Statement of Eligibility and Qualification not
known to the trustee and not obtainable by it through reasonable investigation
and as to which information it has obtained from the obligor and has had to rely
or will obtain from the principal underwriters and will have to rely.
The answer furnished to Item 2. of this Form T-1 will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, State Street Bank and Trust Company, a corporation organized and
existing under the laws of The Commonwealth of Massachusetts, has duly caused
this Statement of Eligibility and Qualification to be signed on its behalf by
the undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 15th day of April, 1998.
STATE STREET BANK AND TRUST COMPANY
/s/ Paul G. Grenier
By: ____________________________________
Name: Paul G. Grenier
Title: Vice President
7
<PAGE> 8
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, and in connection with the issue by Alkermes, Inc. of its 6-1/2%
Convertible Subordinated Debentures, State Street Bank and Trust Company hereby
consents that reports of examinations by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
/s/ Paul G. Grenier
By: ____________________________________
Name: Paul G. Grenier
Title: Vice President
Boston, Massachusetts
Dated: April 15, 1998
<PAGE> 9
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business DECEMBER 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ............................... 2,220,829
Interest-bearing balances ........................................................ 10,076,045
Securities ......................................................................... 10,373,821
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary .............................................. 5,124,310
Loans and lease financing receivables:
Loans and leases, net of unearned income .............................. 6,270,348
Allowance for loan and lease losses ................................... 82,820
Allocated transfer risk reserve ....................................... 0
Loans and leases, net of unearned income and allowances .......................... 6,187,528
Assets held in trading accounts .................................................... 1,241,555
Premises and fixed assets .......................................................... 410,029
Other real estate owned ............................................................ 100
Investments in unconsolidated subsidiaries ......................................... 38,831
Customers' liability to this bank on acceptances outstanding ....................... 44,962
Intangible assets .................................................................. 224,049
Other assets ....................................................................... 1,507,650
-----------
Total assets ....................................................................... 37,449,709
===========
LIABILITIES
Deposits:
In domestic offices .............................................................. 10,115,205
Noninterest-bearing ................................................. 7,739,136
Interest-bearing .................................................... 2,376,069
In foreign offices and Edge subsidiary ........................................... 14,791,134
Noninterest-bearing ................................................. 71,889
Interest-bearing .................................................... 14,719,245
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary .............................................. 7,603,920
Demand notes issued to the U.S. Treasury and Trading Liabilities ................... 194,059
Trading liabilities ................................................................ 1,036,905
Other borrowed money ............................................................... 459,252
Subordinated notes and debentures .................................................. 0
Bank's liability on acceptances executed and outstanding ........................... 44,962
Other liabilities .................................................................. 972,782
Total liabilities .................................................................. 35,218,219
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ...................................... 0
Common stock ....................................................................... 29,931
Surplus ............................................................................ 444,620
Undivided profits and capital reserves/Net unrealized holding gains (losses) ....... 1,763,076
Cumulative foreign currency translation adjustments ................................ (6,137)
Total equity capital ............................................................... 2,231,490
----------
Total liabilities and equity capital ............................................... 37,449,709
==========
</TABLE>
<PAGE> 10
I, Rex S. Schuette, 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.
Rex S. Schuette
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.
David A. Spina
Marshall N. Carter
Truman S. Casner
2
