Registration No. 333-
As filed with the Securities and Exchange Commission on October 17, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
CAREMATRIX CORPORATION
(Exact name of registrant as specified in charter)
Delaware 04-3069586
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
197 First Avenue
Needham, MA 02194
(781) 433-1000
(Address, including zip code, and telephone number, including area code of
registrant's principal executive offices)
-------------------------
Robert M. Kaufman Copies to:
Chief Executive Officer Michael J. Bohnen, Esq.
CareMatrix Corporation Nutter, McClennen & Fish, LLP
197 First Avenue One International Place
Needham, MA 02194 Boston, MA 02110-2699
(781) 433-1000 (617) 439-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------------
Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this Registration Statement, as
determined by market conditions.
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 a post-effective amendment filed pursuant to Rule
426(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
-------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
Title of Each Class of Amount to be Proposed Maximum Proposed Amount of
Securities to be Registered Registered Offering Price Maximum Aggregate Registration Fee
Per Share(1) Offering Price(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6-1/4% Convertible
Subordinated Notes due 2004 $115,000,000 100% $115,000,000 $34,849
Shares of Common Stock, $.05
par value 3,982,683 shares(2) not applicable not applicable None
====================================================================================================================
</TABLE>
(1) Determined pursuant to Rule 457(i) under the Securities Act of 1933, as
amended, solely for the purpose of calculating the registration fee.
(2) Includes the number of shares of Common Stock into which the Notes
being registered hereunder may be converted at the initial conversion
price, together with such additional indeterminate number of shares as
may become issuable upon conversion by reason of adjustments to the
conversion price. No registration fee is required for Common Stock
reserved for conversion, because such shares will be issued for no
additional consideration.
-------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 17, 1997
PROSPECTUS
CareMatrix Corporation
$115,000,000
6-1/4% Convertible Subordinated Notes due 2004
3,982,684 Shares of Common Stock, par value $.05 per share
-------------------------
This Prospectus relates to the resale of $115,000,000 aggregate
principal amount of 6-1/4% Convertible Subordinated Notes due 2004 (the "Notes")
of CareMatrix Corporation, a Delaware corporation (sometimes referred to herein
as the "Company"), issued to the initial purchasers of the Notes (the "Initial
Purchasers") in private placements consummated on August 18, 1997 and October 1,
1997 (the "Debt Offering"), and the resale of up to 3,982,684 shares of the
common stock, par value $.05 per share (the "Common Stock"), of the Company
which are initially issuable upon conversion of Notes by any holders of Notes
that did not purchase the Notes under this Registration Statement (of which this
Prospectus is a part). The Notes and such shares of Common Stock issued upon
conversion of the Notes may be offered from time to time for the accounts of
holders of Notes named herein or in supplements to this Prospectus (the "Selling
Securityholders"). See "Plan of Distribution." Information concerning the
Selling Securityholders may change from time to time and will be set forth in
Supplements to this Prospectus. The Company will not receive any proceeds from
the sale of the Notes and shares of Common Stock offered under this Prospectus.
The Notes are convertible into Common Stock of CareMatrix Corporation
at any time through the close of business on the final maturity date, unless
previously redeemed, at a conversion price of $28.875 per share, subject to
adjustment in certain events. The Common Stock of the Company is traded on the
American Stock Exchange under the symbol "CMD." On October 15, 1997, the closing
price of the Common Stock as reported by the American Stock Exchange was $26.00
per share.
The Notes do not provide for a sinking fund. The Notes are not
redeemable by the Company prior to August 18, 2000. Thereafter, the Notes are
redeemable at the option of the Company, in whole or in part, at anytime, at
declining redemption prices set forth in this Prospectus, together with accrued
and unpaid interest. Upon a Repurchase Event (as defined herein), each holder
may require the Company to repurchase all or a portion of such holder's Notes
for cash or, at the Company's option, Common Stock (valued at 95% of the average
closing price for the five trading days immediately preceding and including the
third trading day prior to the repurchase date) at a repurchase price equal to
100% of the principal amount thereof, plus accrued and unpaid interest to the
repurchase date. See "Description of Notes--Repurchase at Option of Holders Upon
a Repurchase Event."
The Notes are unsecured obligations of the Company and are subordinated
to all present and future Senior Indebtedness (as defined herein) of the
Company, and effectively subordinated to all liabilities of the Company's
subsidiaries. As of June 30, 1997, the Company had approximately $2.4 million of
Senior Indebtedness and the Company's subsidiaries had approximately $10.7
million of indebtedness and other liabilities to which the Notes would have been
effectively subordinated. The Indenture contains no limitation on the incurrence
of any other indebtedness or liabilities by the Company or its subsidiaries. See
"Description of Notes--Subordination."
All of the Notes were issued initially pursuant to an exemption from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), provided by Section 4(2) thereof or Regulation D thereunder
and, to the Company's knowledge, were transferred to the Selling Securityholders
pursuant to Rule 144A or Regulation S under the Securities Act or to Selling
Securityholders meeting the definition of institutional accredited investors
under Rule 501(a)(1),(2),(3) or (7) under the Securities Act. Notes resold
pursuant to the
<PAGE>
Registration Statement (of which this Prospectus is a part) will no longer be
eligible for trading in Private Offerings, Resales and Trading through Automated
Linkages ("PORTAL") Market.
The Selling Securityholders, acting as principals for their own
account, directly, through agents designated from time to time, or through
brokers, dealers, agents or underwriters also to be designated, may sell all or
a portion of the Notes or shares of Common Stock which may be offered hereby by
them from time to time on terms to be determined at the time of sale. The
aggregate proceeds to the Selling Securityholders from the sale of Notes and
Common Stock which may be offered hereby by the Selling Securityholders will be
the purchase price of such Notes or Common Stock less commissions, if any. For
information concerning indemnification arrangements between the Company and the
Selling Securityholders, see "Plan of Distribution."
The Selling Securityholders and any brokers, dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Notes or shares of Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act, in which event any
commissions received by such broker-dealers, agents or underwriters and any
profit on the resale of the Notes or shares of Common Stock purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act.
The Company intends that the Registration Statement of which this
Prospectus is a part will remain effective until August 18, 1999 or such earlier
date as of which such Registration Statement is no longer required for the
transfer of the subject securities. The Company has agreed to bear certain
expenses in connection with the registration and sale of the Notes and Common
Stock being offered by the Selling Securityholders.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The Date of this Prospectus is __________, 1997
-2-
<PAGE>
No dealer, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus, and, if given or made, such information and representations
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer to sell or a solicitation of any offer
to buy the securities described herein by anyone in any jurisdiction in which
such offer or solicitation is not authorized, or in which the person making the
offer or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. Under no circumstances shall the
delivery of this Prospectus or any sale made pursuant to this Prospectus create
any implication that the information contained in this Prospectus is correct as
of any time subsequent to the date of this Prospectus.
---------------
TABLE OF CONTENTS
Page
----
Available Information....................................................... 3
Documents Incorporated by Reference......................................... 4
Risk Factors................................................................ 4
The Company.................................................................12
Use of Proceeds.............................................................12
Ratio of Earnings to Fixed Charges..........................................12
Selling Securityholders.....................................................13
Plan of Distribution........................................................15
Description of Notes........................................................15
Certain United States Federal Income Tax Consequences.......................27
Legal Matters...............................................................29
Experts.....................................................................29
AVAILABLE INFORMATION
The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-3 (together
with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act covering the shares of Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, and the exhibits and schedules thereto. For further
information, with respect to the Company and the Common Stock, reference is made
to the Registration Statement, and the exhibits and schedules thereto, which can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and the Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained at prescribed rates from the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Reports, proxy statements and information statements and
other information filed electronically by the Company with the Commission are
available at the Commission's worldwide web site at http://www.sec.gov. The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and information statements and other information
with the Commission. Such reports, proxy statements and information statements
and other information may be inspected and copied at the public reference
facilities maintained by the Commission referenced above.
-3-
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The Company hereby incorporates by reference (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 1996, as amended by the Company's
Annual Report on Form 10-K/A filed with the Commission on April 14, 1997
(including those portions of the Company's definitive proxy statement for the
Annual Meeting of Stockholders held on June 16, 1997 incorporated by reference
therein), (ii) the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997, as amended by the Company's Quarterly Report on
Form 10-Q/A filed with the Commission on August 12, 1997, (iii) the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997, (iv)
the Company's Current Report on Form 8-K filed August 5, 1997, (v) the Company's
current report on Form 8-K filed August 19, 1997 and (vi) the description of the
Company's Common Stock contained in the Company's Registration Statement on Form
8-A, declared effective October 23, 1996.
All reports filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to any
termination of the offering of the Notes and shares of Common Stock covered by
this Prospectus are deemed to be incorporated by reference into this Prospectus
and to be a part hereof from the respective dates of filing. Any statement
contained 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 is also incorporated 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.
Copies of all documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents) will be provided without charge to each person
who receives a copy of this Prospectus on written or oral request to Investor
Relations, CareMatrix Corporation, 197 First Avenue, Needham, MA 02194, or by
telephone at (781) 433-1000.
RISK FACTORS
In addition to the other information contained in this Prospectus, before
purchasing the Notes and shares of Common Stock offered hereby, prospective
purchasers should carefully consider the factors set forth below. Such factors
could cause the Company's actual results or other events to differ materially
from the results or events anticipated in certain forward-looking statements
contained or incorporated by reference herein. Such forward-looking statements
involve risks and uncertainties.
History of Losses From Operations; Accumulated Deficit. Although the
Company recorded net earnings for the six months ended June 30, 1997 of
$2,042,964, from its inception on June 24, 1994 through December 31, 1996, the
Company experienced significant losses from operations. Through December
31,1996, the Company's accumulated deficit was $16.4 million. For the year ended
December 31, 1996, the Company incurred losses from operations of $6.0 million.
As of June 30, 1997, the Company's accumulated deficit was $14.4 million. There
can be no assurance that the Company will be able to continue to generate income
from operations or net income at any time, whether from its existing operations
or from any facilities that are operated in the future. Failure of the Company
to achieve profitability could have a material adverse effect on the future
viability of the Company.
Dependence by the Company on Related Party Agreements. The Company has
entered and expects to continue to enter into agreements with related parties in
connection with a significant number of transactions, including development,
management and lease agreements. Generally, the Company will enter into
development agreements whereby construction financing is obtained by the related
or third parties. The Company expects that risks related to construction and the
initial operation of the facilities it develops will be borne primarily by such
related
-4-
<PAGE>
or third parties. The Company has not, and expects in the future that it will
not, enter into agreements with these parties until six months prior to
completion of the construction of such facilities or upon acquisition of
completed facilities. These management agreements would generally be for a
ten-year period, with annual fees approximating 5% of gross revenues (less
contractual adjustments for uncollectible accounts). The Company has and expects
in the future to have the option to convert such management agreements into fair
market value leases (which will be a negotiated percentage of total project
costs) for a 15-year initial term with three to four five-year fair market value
renewal options. Abraham D. Gosman is the principal owner, and certain members
of the Company's senior management and stockholders also have an ownership
interest in, Chancellor Senior Housing Group, Inc. and certain like entities
(collectively referred to herein as "Chancellor"), with which the Company has
entered and expects to enter into most such agreements. Failure of the Company
to continue to enter into such agreements with Chancellor or other such related
parties, or the inability of Chancellor to secure all necessary financing at
acceptable terms, could have a material adverse effect on the Company. See
"---Need for Additional Financing."
Need for Additional Financing. The Company's development and acquisition
strategy will require substantial capital resources. The estimated cumulative
cost to complete approximately 60 new facilities, with an aggregate capacity of
approximately 7,200 residents, targeted for completion over the next three years
is between $700 million and $800 million, which substantially exceeds the
financial resources of the Company and Chancellor. The Company's future growth
will depend primarily on the ability of related parties, such as Chancellor, for
whom the Company develops facilities to obtain financing on acceptable terms. To
finance its capital needs, the Company plans both to incur indebtedness and to
issue, from time to time, additional debt or equity securities, including Common
Stock or convertible notes, in connection with its acquisitions and
affiliations. If additional funds are raised through the issuance of equity
securities, dilution to the Company's stockholders may result, and if additional
funds are raised through the incurrence of debt, the Company would likely become
subject to certain covenants that impose restrictions on its operations and
finances. There can be no assurance that the Company or such related parties
will be able to raise additional capital when needed, on satisfactory terms or
at all. Prior to its secondary offering in October 1996, the Company had relied
upon equity and loans provided primarily by Abraham D. Gosman, the Company's
Chairman of the Board and principal stockholder, or companies affiliated with
him. See "--Substantial Debt and Lease Obligations." There can be no assurance
that any additional financing from Mr. Gosman, Chancellor or any other sources
will be available in the future. Any limitation on the Company's ability to
obtain additional financing could have a material adverse effect on the Company.
Substantial Debt and Lease Obligations; Increased Leverage. At June 30,
1997, the Company's debt was $9.3 million. Debt service and annual operating
lease payment obligations are expected to increase significantly as the Company
pursues its growth strategy. There can be no assurance that the Company will
generate sufficient cash flow to meet its obligations. Any payment default or
other default with respect to such obligations could cause a lender to foreclose
upon any collateral securing the indebtedness or, in the case of an operating
lease, could terminate the lease, with a consequent loss of income and asset
value to the Company. Moreover, because certain of the Company's mortgages, debt
instruments and leases may contain cross-default and cross-collateralization
provisions, a default by the Company on one of its payment obligations could
result in acceleration of other obligations and adversely affect a significant
number of the Company's other facilities.
In connection with the Debt Offering, the Company incurred $115 million in
additional indebtedness which increased the ratio of its long-term debt to its
total capitalization from 6.6% at June 30, 1997, to 56.7%, on a pro forma basis.
As a result of this increased leverage, the Company's principal and interest
obligations increased substantially. The degree to which the Company is
leveraged could adversely affect the Company's ability to obtain additional
financing for working capital, acquisitions or other purposes and could make it
more vulnerable to economic downturns and competitive pressures. The Company's
increased leverage could also adversely affect its liquidity, as a substantial
portion of available cash from operations may have to be applied to meet debt
service requirements and, in the event of a cash shortfall, the Company could be
forced to reduce other expenditures and forego potential acquisitions to be able
to meet such requirements.
-5-
<PAGE>
Subordination. The Notes are unsecured obligations of the Company and
subordinated in right of payment in full to all existing and future Senior
Indebtedness (as defined) of the Company. As a result of such subordination, in
the event of any insolvency, liquidation or reorganization of the Company,
payment default on Senior Indebtedness and certain other events, the assets of
the Company will be available to pay obligations on the Notes only after all
Senior Indebtedness has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Notes then outstanding.
The Notes are effectively subordinated to the liabilities, including trade
payables, of the Company's subsidiaries. The Indenture does not prohibit or
limit the incurrence of Senior Indebtedness or the incurrence of other
indebtedness and other liabilities by the Company or its subsidiaries, and the
incurrence of additional indebtedness and other liabilities by the Company or
its subsidiaries could have a material adverse effect on the Company's ability
to pay its obligations on the Notes. As of June 30, 1997, the Company had
approximately $2.4 million of outstanding indebtedness which would have
constituted Senior Indebtedness, and the subsidiaries of the Company had
approximately $10.7 million of indebtedness and other liabilities (excluding
intercompany liabilities) to which the Notes would have been effectively
subordinated. The Company anticipates that, from time to time, it and its
subsidiaries will incur additional indebtedness, including Senior Indebtedness.
Moreover, the cash flow and consequent ability of the Company to service debt,
including the Notes, is partially dependent upon the earnings from the business
conducted by the Company through its subsidiaries and the distribution of those
earnings, or upon loans or other payments of funds, by those subsidiaries to the
Company. The subsidiaries of the Company are separate and distinct legal
entities and have no obligation to pay any amounts due pursuant to the Notes
(which are obligations exclusively of the Company) or to make any funds
available therefor, whether by dividends, loans or other payments. In addition,
the payment of dividends or distributions and the making of loans or other
payments to the Company by any such subsidiaries could be subject to statutory
and contractual restrictions, are dependent upon the earnings of such
subsidiaries and are subject to various business considerations. See
"Description of Notes--Subordination."
Development and Construction Risks. During the next three years, the
Company plans to develop approximately 60 new facilities with a resident
capacity of approximately 7,200 residents. The Company's ability to achieve its
development goals will depend upon a variety of factors, many of which are
beyond the Company's control. There can be no assurance that the Company will
not suffer delays in its development program. The successful development of
additional facilities will involve a number of risks, including the possibility
that the Company may be unable to locate suitable sites at acceptable prices or
may be unable to obtain, or may experience delays in obtaining, necessary
certificates of need, zoning, land use, building, occupancy, licensing and other
required governmental permits and authorizations. The Company may also incur
construction costs that exceed original estimates or even so-called guaranteed
maximum cost construction contracts, and may not complete construction projects
on schedule. The Company will rely on third-party general contractors to
construct its new facilities. There can be no assurance that the Company will
not experience difficulties in working with general contractors and
subcontractors, which could result in increased construction costs and delays.
Further, facility development is subject to a number of contingencies over which
the Company will have little control and that could have a material adverse
effect on project cost and completion time, including shortages of, or the
inability to obtain, labor or materials, the inability of the general contractor
or subcontractors to perform under their contracts, strikes, adverse weather
conditions and changes in applicable laws or regulations or in the method of
applying such laws and regulations. Failure of the Company to achieve its
development goals could have a material adverse effect on the Company.
Accordingly, there can be no assurance that the Company's facilities in
development or under construction will ultimately be completed.
Risks Related to Acquisition Strategy. The Company's strategy includes
growth through acquisition. The Company is subject to various risks associated
with its acquisition growth strategy, including the risk that the Company will
be unable to identify or acquire suitable acquisition candidates or to integrate
the acquired companies into the Company's operations. Any failure of the Company
to identify and consummate economically feasible acquisitions could have a
material adverse effect on the Company. There can be no assurance that the
Company will be able to achieve and manage its planned acquisition growth, that
the liabilities assumed by the Company in any
-6-
<PAGE>
acquisition will not have a material adverse effect on the Company or that the
addition of facilities will be profitable for the Company.
Dependence on Attracting Seniors with Sufficient Resources to Pay. The
Company expects to rely primarily on the ability of its residents to pay for
services from their own and their families' financial resources. Generally, only
seniors with income or assets meeting or exceeding the comparable median in the
regions where the Company's assisted living facilities are located can afford
the applicable fees for its facilities for an extended period of time. Any
difficulty in attracting seniors with adequate resources to pay for the
Company's services could have a material adverse effect on the Company.
Inflation or other circumstances which adversely affect the ability of the
Company's residents and potential residents to pay for assisted living services
could also have a material adverse effect on the Company.
Dependence Upon Key Personnel. The Company is dependent upon the ability
and experience of its executive officers, including its Chairman, and there can
be no assurance that the Company will be able to retain all of such officers.
The failure of such officers to remain active in the Company's management could
have a material adverse effect on the Company. There can be no assurance that
the anticipated contributions of senior management will be realized, and the
failure of such contributions to be realized could have a material adverse
effect on the Company.
Risks Related to Goodwill. At June 30, 1997, the Company's total assets
were approximately $108.2 million, of which approximately $25.4 million, or
approximately 23.5% of total assets, was goodwill. Goodwill is the excess of
cost over the fair value of the net assets of businesses acquired. There can be
no assurance that the value of such goodwill will ever be realized by the
Company. This goodwill is being amortized on a straight-line basis over 25
years. The Company evaluates on a regular basis whether events and circumstances
have occurred that indicate all or a portion of the carrying amount of goodwill
may no longer be recoverable, in which case an additional charge to earnings
would become necessary. Although at June 30, 1997 the net unamortized balance of
goodwill is not considered to be impaired, any such future determination
requiring the write-off of a significant portion of unamortized goodwill could
have a material adverse effect on the Company.
Competition. The assisted living industry is highly competitive and, given
the relatively low barriers to entry and continuing healthcare cost containment
pressures, the Company expects that it will become increasingly competitive in
the future. The Company competes with other companies providing assisted living
services as well as numerous other companies providing similar service and care
alternatives, such as home health care agencies, congregate care facilities,
retirement communities and skilled nursing facilities. While the Company
believes there is a need for additional assisted living residences in the
markets where it intends to develop facilities, the Company expects that, as
assisted living facilities receive increased attention, competition will
increase from new market entrants. Moreover, in implementing its growth
strategy, the Company expects to face competition for development and
acquisition opportunities from local developers and regional and national
assisted living companies. Some of the Company's present and potential
competitors have, or may have access to, greater financial resources than those
of the Company. Consequently, increased competition in the future could limit
the Company's ability to attract and retain residents, to maintain or increase
resident service fees or to expand its business. As a result, any increased
competition could have a material adverse effect on the Company.
Limited Experience with New Service Models and Facility Designs. The
Company's success is dependent, in part, on its ability to develop and offer new
service models and facility designs to prospective residents of its facilities.
Currently, the Company does not have extensive operating experience with these
new service models and facility designs, and the failure of the Company to
successfully implement and integrate these new service models and facility
designs could have a material adverse effect on the Company.
Potential Conflicts of Interest. Abraham D. Gosman, the Company's
principal stockholder and Chairman, and certain members of the Company's senior
management, have a controlling ownership interest in Chancellor with which the
Company has entered and expects to enter into development, management and lease
agreements. These
-7-
<PAGE>
agreements are and will be on terms that the Company believes will be fair and
no less favorable to the Company than those which the Company could have
obtained from unaffiliated third parties. Such ownership interests in Chancellor
and other healthcare entities that compete with the Company, however, may create
actual or potential conflicts of interest on the part of these members of the
Company's management. In the case of such related party transactions, it is the
Company's policy to require that any such transactions be approved by a majority
of the disinterested members of the Executive Committee of the Board of
Directors.
Control by Management. As of September 30, 1997, members of the Board of
Directors and management are the beneficial owners of approximately 47.9% of the
outstanding Common Stock of the Company. As of June 30, 1997, Abraham D. Gosman,
together with his sons, Andrew D. Gosman and Michael M. Gosman, all of whom are
members of the Board of Directors and executive officers of the Company, are the
beneficial owners of approximately 44.6% of the outstanding Common Stock.
Accordingly, management and the Gosmans may have the ability, by voting shares
of Common Stock, to determine (i) the election of the Company's Board of
Directors and, thus, the direction and future operations of the Company, and
(ii) the outcome of all other matters submitted to the Company's stockholders,
including mergers, consolidations and the sale of all or substantially all of
the Company's assets.
Residence Staffing and Labor Costs. The Company competes with other
providers of assisted living services with respect to attracting and retaining
qualified and skilled personnel. The Company is dependent upon its ability to
attract and retain management personnel responsible for the day-to-day
operations of each of the Company's facilities. In addition, a possible shortage
of nurses or other trained personnel may require the Company to enhance its wage
and benefits package in order to compete in the hiring and retention of such
personnel or to hire more expensive temporary personnel. The Company will also
be dependent upon the available labor pool of semi-skilled and unskilled
employees in each of the markets in which it will operate. Any significant
failure by the Company to attract and retain qualified management and staff
personnel, to control its labor costs or to pass on any increased labor costs to
residents through rate increases could have a material adverse effect on the
Company.
Government Regulation. Health care is an area of extensive and frequent
regulatory change. The assisted living industry is relatively new, and,
accordingly, the manner and extent to which it is regulated at the Federal and
state levels are evolving. Changes in the laws or new interpretations of
existing laws may have a significant impact on the Company's methods and costs
of doing business. The Company is subject to varying degrees of regulation and
licensing by health or social service agencies and other regulatory authorities
in the various states and localities where it operates or intends to operate.
The Company's success will depend in part upon its ability to satisfy
applicable regulations and requirements and to procure and maintain required
licenses in rapidly changing regulatory environments. Any failure to satisfy
applicable regulations or to procure or maintain a required license could have a
material adverse effect on the Company. Furthermore, certain regulatory
developments such as revisions in building code requirements for assisted living
facilities, mandatory increases in the scope and quality of care to be offered
to residents and revisions in licensing and certification standards could have a
material adverse effect on the Company. There can be no assurance that Federal,
state or local laws or regulations will not be imposed or expanded which would
have a material adverse effect on the Company. The Company's operations are also
subject to health and other state and local government regulations.
In addition, in most states in which the Company participates in
government reimbursement programs, the Company's operations are subject to
Federal and/or state requirements or provisions which prohibit certain business
practices and relationships that might affect the provision and cost of health
care services reimbursable under Medicaid. The Company's failure to comply with
the regulations and requirements applicable to a facility could result in the
imposition of significant fines and increased costs, a revocation of the
Company's license to operate that facility, and, if sufficiently serious in
nature, the inability of the Company to maintain or obtain licenses to operate
other facilities. Any such event could have a material adverse effect on the
Company.
-8-
<PAGE>
Federal and state anti-remuneration laws, such as the Medicare/Medicaid
anti-kickback law, govern certain financial arrangements among health care
providers and others who may be in a position to refer or recommend patients to
such providers. These laws prohibit, among other things, certain direct and
indirect payments that are intended to induce the referral of patients to, the
arranging for services by, or the recommending of, a particular provider of
healthcare items or services. The Medicare/Medicaid anti-kickback law has been
broadly interpreted to apply to certain contractual relationships between
healthcare providers and sources of patient referral. Similar state laws vary
from state to state, are sometimes vague and seldom have been interpreted by
courts or regulatory agencies. Violation of these laws can result in loss of
licensure, civil and criminal penalties, and exclusion of healthcare providers
or suppliers from participation in (i.e., furnishing covered items or services
to beneficiaries of) the Medicare and Medicaid programs. It is expected that the
Company will be subject to these laws. There can be no assurance that such laws
will be interpreted in a manner consistent with the practices of the Company,
and any interpretation inconsistent with the practices of the Company could have
a material adverse effect on the Company.
Environmental Risks. Under various Federal, state and local environmental
laws, ordinances and regulations, a current or previous owner or operator of
real property may be held liable for the cost of removal or remediation of
certain hazardous or toxic substances, including, without limitation,
asbestos-containing materials, that could be located on, in or under such
property. As a result, the presence, with or without the Company's knowledge, of
hazardous or toxic substances at any property held or operated by the Company,
or acquired or operated by the Company in the future, could have a material
adverse effect on the Company. Environmental audits performed on properties
leased or managed by the Company have not revealed any significant environmental
liability that management believes would have a material adverse effect on the
Company; however, there can be no assurance that existing environmental audits
with respect to any of the properties leased or managed by the Company have
revealed all environmental liabilities.
Liability and Insurance. The Company's business entails an inherent risk
of liability. In recent years, participants in the assisted living and long-term
care industry, including the Company, have become subject to an increasing
number of lawsuits alleging negligence or related legal theories, many of which
involve large claims and significant legal costs. The Company is from time to
time subject to such suits as a result of the nature of its business. The
Company currently maintains insurance policies in amounts and with such coverage
and deductibles as it believes are adequate, based on the nature and risks of
its business, historical experience and industry standards. The Company
currently maintains professional liability insurance and general liability
insurance. There can be no assurance that claims will not arise which are in
excess of the Company's insurance coverage or are not covered by the Company's
insurance. Any successful claim against the Company not covered by, or in excess
of, the Company's insurance could have a material adverse effect on the Company.
Claims against the Company, regardless of their merit or eventual outcome, may
also have a material adverse effect on the Company's ability to attract
residents or expand its business and would require management to devote time to
matters unrelated to the operation of the Company's business. In addition, the
Company's insurance policies must be renewed annually, and there can be no
assurance that the Company will be able to continue to obtain liability
insurance coverage in the future or, if available, that such coverage will be
available on acceptable terms. Any failure of the Company to retain liability
insurance coverage or to obtain such coverage on acceptable terms could have a
material adverse effect on the Company.
Dependence on Reimbursement by Third-Party Payors. The Company's revenues
from the services it provides for skilled nursing facilities are dependent upon
reimbursement from third-party payors, including Medicare, state Medicaid
programs and private insurers. There can be no assurance that such revenues will
fully pay the cost of providing services to residents covered by Medicare and
Medicaid. Although in 1996 a substantial portion of the Company's revenue was
derived from Medicare and Medicaid payments, the Company anticipates that in
1997 and going forward, revenue from sources other than Medicare and Medicaid
will constitute a substantially greater portion of overall revenue. The revenues
and profitability of the Company will be affected by the continuing efforts of
governmental and private third-party payors to contain or reduce the costs of
health care by attempting to lower reimbursement rates, increasing case
management review of services and negotiating reduced contract pricing. In an
attempt to reduce the Federal and certain state budget deficits, there have
been, and management expects that there will
-9-
<PAGE>
continue to be, a number of proposals to limit Medicare and Medicaid
reimbursement in general. Adoption of any such proposals at either the Federal
or the state level could have a material adverse effect on the Company.
Certain Anti-takeover Provisions. Certain provisions of the Company's
Restated Certificate of Incorporation and By-laws and of Delaware General
Corporation Law could, together or separately, discourage potential acquisition
proposals, delay or prevent a change in control of the Company and limit the
price that certain investors might be willing to pay in the future for shares of
the Common Stock. Certain of these provisions provide for the issuance, without
further stockholder approval, of preferred stock with rights and privileges
which could be senior to the Common Stock, the payment of a "fair" price (or
Board approval by continuing directors) in connection with certain business
combinations with interested stockholders, no right of the stockholders to call
a special meeting of stockholders, restrictions on the ability of stockholders
to nominate directors and submit proposals to be considered at stockholders'
meetings, and a super-majority voting requirement in connection with the removal
of directors and the adoption of stockholders' amendments to the By-laws. The
Company also is subject to Section 203 of the Delaware General Corporation Law
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any of a broad range of business combinations with any "interested"
stockholder for a period of three years following the date that such stockholder
became an interested stockholder.
Limitations on Repurchase of Notes. If a Repurchase Event (as defined)
were to occur, there can be no assurance that the Company would have sufficient
financial resources, or would be able to arrange financing to pay the repurchase
price in cash for all Notes tendered by holders thereof. The Company's ability
to repurchase Notes with cash may also be limited or prohibited by the terms of
its then-existing borrowing arrangements due to dividend restrictions. Moreover,
although under the Indenture the Company may elect, subject to satisfaction of
certain conditions, to pay the repurchase price for the Notes using shares of
Common Stock, any future credit agreements or other agreements relating to other
indebtedness (including other Senior Indebtedness) to which the Company becomes
a party may contain restrictions on or prohibitions of the repurchase of the
Notes by the Company that apply even if the purchase price is paid with shares
of capital stock. In the event a Repurchase Event occurs at a time when the
Company is prohibited from repurchasing Notes, the Company could seek the
consent of its lenders to the repurchase of the Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company dos not
obtain such a consent or repay such borrowings, the Company would remain
prohibited from repurchasing Notes. In such case, the Company's failure to
repurchase the Notes would constitute an Event of Default under the Indenture
whether or not payment of the repurchase price is permitted by the subordination
provisions of the Indenture. Any such default may, in turn, cause a default
under Senior Indebtedness of the Company. Moreover, the occurrence of a
Repurchase Event in and of itself may constitute an event of default under
Senior Indebtedness of the Company. As a result, in either case, payment of the
repurchase price of the Notes with cash would, absent a waiver, be prohibited
under the subordination provisions of the Indenture until the Senior
Indebtedness is paid in full. See "Description of Notes--Subordination" and
"--Subordination."
No Notes may be repurchased at the option of holders upon a Repurchase
Event if there has occurred and is continuing an Event of Default described
under "Description of Notes--Events of Default and Remedies" (other than a
default in the payment of the repurchase price with respect to such Notes on the
repurchase date).
Possible Volatility of Notes and Stock Price. Economic or other external
factors may have a significant impact on CareMatrix's business and on the market
price of the Notes and the Common Stock into which the Notes are convertible.
Fluctuations in financial performance from period to period also may have a
significant impact on the market price of the Notes and the Common Stock.
Absence of Active Public Market for the Notes. There is currently no
active public market for the Notes. Although the Initial Purchasers have advised
the Company that they currently intend to make a market in the Notes, they are
not obligated to do so and may discontinue such market making at any time
without notice. In addition, such market making activity will be subject to the
limits imposed by the Securities Act and the Exchange Act. Accordingly, there
can be no assurance that any active market for the Notes will develop or that
any market which does develop will be
-10-
<PAGE>
maintained. The failure of an active market for the Notes to develop or to be
sustained could have a material adverse effect on the trading price of such
Notes could be adversely affected. Prior to the resale thereof pursuant to this
Prospectus each of the Notes was eligible for trading in Private Offerings,
Resales and Trading through the PORTAL Market. Notes sold pursuant to this
Prospectus will no longer be eligible for trading in PORTAL Market. The Company
does not intend to apply for listing of the Notes on any securities exchange.
-11-
<PAGE>
THE COMPANY
The Company is a provider of assisted living services, and owns, leases or
manages its facilities. The Company's strategy is to provide a full range of
assisted living and related services across a range of pricing options. The
Company expects its assisted-living facilities to serve as the foundation from
which it will provide a continuum of care for its residents. When its assisted
living facilities are integrated with supportive independent living facilities,
skilled nursing/rehabilitation facilities and Alzheimer's care programs, the
Company believes that it will have the ability to provide a less stressful
transition for those of its residents who need a higher degree of care to more
supportive environments either within the same facility, in a campus setting or
in a nearby facility.
The Company's principal place of business is 197 First Avenue, Needham,
Massachusetts 02194; and its telephone number at that address is (781) 433-1000.
Unless otherwise indicated or required by the context, references to the
"Company" include its consolidated subsidiaries.
USE OF PROCEEDS
The Notes and shares of Common Stock offered by the Selling
Securityholders are not being sold by the Company, and the Company will not
receive any proceeds from the sale thereof.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year ended December, 31 June 24, 1994
Six months ended ----------------------- (inception) to
June 30, 1997 1996 1995 December 31, 1994
---------------- ---- ---- -----------------
<S> <C> <C> <C> <C>
Ratio 3.13 (less than)1.0 (less than)1.0 (less than)1.0
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings
represent income from operations before income taxes, plus fixed charges.
Earnings also includes interest, amortization of financing costs, and the
portion of operating rental expense which management believes is representative
of the interest component of rental expense. For the period from June 24, 1994
(inception) to December 31, 1994, and the years ended December 31, 1995 and
1996, for the purposes of computing the ratio of earnings to fixed charges, the
Company had earnings deficiencies of $2.6 million, $7.2 million, and $6.6
million, respectively.
-12-
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth information concerning the principal amount
of Notes beneficially owned by each Selling Securityholder or record holder of
Notes and the number of shares of Common Stock issuable upon conversion of the
Notes (the "Conversion Shares") which may be offered from time to time pursuant
to this Prospectus. Other than their ownership of the Company's securities, none
of the Selling Securityholders has had any material relationship with the
Company within the past three years, other than Morgan Stanley & Co.
Incorporated, Natwest Securities Corporation, PaineWebber Incorporated and
BancAmerica Robertson Stephens, each of which has acted as an Initial Purchaser
and/or underwriter for the Company. In addition, BancAmerica Robertson Stephens
has entered into a Securities Loan Agreement with certain shareholders of the
Company with respect to their shares of Commmon Stock of the Company, which
shares of Common Stock may become registered under the Securities Act. The table
has been prepared based on information furnished to the Company by the
Depository Trust Company and/or by or on behalf of the Selling Securityholders.
<TABLE>
<CAPTION>
Principal Amount of Number of
Debentures Percentage of Conversion Percentage of
Beneficially Owned Debentures Shares That Common Stock
Name(1) That May Be Sold(1) Outstanding(1) May Be Sold(2) Outstanding(3)
- ------- ------------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BancAmerica Robertson Stephens 3,000,000 2.6% 103,896 0.6%
Bank of New York 14,600,000 12.7% 505,627 2.9%
Bankers Trust Company 3,045,000 2.6% 105,454 0.6%
Bear, Stearns Securities Corp. 7,800,000 6.8% 270,129 1.5%
Bank of America Personal Trust 390,000 0.3% 13,506 0.1%
BOST & CO 250,000 0.2% 8,658 0.1%
Boston Safe Deposit
and Trust Company 9,395,000 8.2% 325,367 1.9%
Brown Brothers Harriman & Co. 4,000,000 3.5% 138,528 0.8%
Chase Manhattan Bank 3,974,000 3.5% 137,627 0.8%
Chase Manhattan Bank/Chemical 420,000 0.4% 14,545 0.1%
Chase Manhattan Bank, Trust 1,150,000 1.0% 39,826 0.2%
Chase Manhattan Bank
Trust Co. of California 1,000,000 0.9% 34,632 0.2%
Citibank, N.A. 1,530,000 1.3% 52,987 0.3%
Corestates Bank, N.A. 1,740,000 1.5% 60,259 0.3%
Donaldson, Lufkin and Jenrette
Securities Corp. 1,500,000 1.3% 51,948 0.3%
First National Bank of
Maryland, N.A. 160,000 0.1% 5,541 0.0%
Fleet Bank of Massachusetts, N.A. 65,000 0.1% 2,251 0.0%
Forest Convertible Opportunity Fund 250,000 0.2% 8,658 0.1%
Forest Fulcrum FD LP 2,800,000 2.4% 96,969 0.6%
Forest Global Convertible Fund
Series A5 1,555,000 1.4% 53,852 0.3%
Fox Family Portfolio Partnership 200,000 0.2% 6,926 0.0%
Goldman, Sachs & Co. 6,850,000 6.0% 237,229 1.4%
Lehman Brothers International 50,000 0.0% 1,731 0.0%
Lewco Securities Corp. 100,000 0.1% 3,463 0.0%
Lehman Brothers International (Europe)
--Prime Broker (LBI) 6,500,000 5.7% 225,108 1.3%
LLT Limited 200,000 0.2% 6,926 0.0%
Mercantile Safe Deposit & Trust 3,615,000 3.1% 125,194 0.7%
-13-
<PAGE>
Principal Amount of Number of
Debentures Percentage of Conversion Percentage of
Beneficially Owned Debentures Shares That Common Stock
Name(1) That May Be Sold(1) Outstanding(1) May Be Sold(2) Outstanding(3)
- ------- ------------------- -------------- -------------- --------------
Morgan Stanley & Co. 5,900,000 5.1% 204,329 1.2%
Incorporated
Natwest Securities Corporation 3,500,000 3.0% 121,212 0.7%
The Northwestern Mutual Life
Insurance Company 3,000,000 2.6% 103,896 0.6%
Northern Trust Company 1,217,000 1.1% 42,147 0.2%
PaineWebber Incorporated 300,000 0.3% 10,389 0.1%
PNC Bank, National Association 1,214,000 1.1% 42,043 0.2%
Q Investments, L.P. 1,600,000 1.4% 55,411 0.3%
R2 Investments, L.P. 400,000 0.3% 13,852 0.1%
Shepherd Investments International, Ltd. 2,500,000 2.2% 86,580 0.5%
Societe Generale Securities Corp. 600,000 0.5% 20,779 0.1%
Spear, Leeds & Kellogg 520,000 0.5% 18,008 0.1%
SSB - Custodian 17,587,000 15.3% 609,073 3.5%
Suntrust Bank, Atlanta 153,000 0.1% 5,298 0.0%
Wachovia Bank of
North Carolina, N.A. 375,000 0.3% 12,987 0.1%
</TABLE>
- -----------------------------------
(1) The information set forth herein is as of October 9, 1997, is based upon
$115,000,000 aggregate principal amount of Notes outstanding.
(2) Assumes conversion of the full amount of Notes held by such holder at the
initial rate of $28.875 in principal amount of Notes per share of Common
Stock. Under the terms of the Indenture (as defined herein), fractional
shares will not be issued upon conversion of the Notes; cash will be paid
in lieu of fractional shares, if any.
(3) Based on the 17,205,412 shares of Common Stock outstanding as of October
1, 1997, treating as outstanding the number of Conversion Shares shown as
being issuable upon the assumed conversion by the named holder of the full
amount of such holder's Notes, but not assuming the conversion of the
Notes of any other holder.
The information concerning the Selling Securityholders may
change from time to time and will be set forth in supplements to this
Prospectus. In addition, the per share conversion price and, therefore,
the number of shares of Common Stock issuable upon conversion of the Notes
is subject to adjustment under certain circumstances as specified in the
Indenture. Accordingly, the number of shares of Common Stock issuable upon
conversion of the Notes may change. In addition, the aggregate principal
amount of the Notes is subject to change as a result of redemptions and
conversions under the terms of the Indenture. As of the date of this
Prospectus, the aggregate principal amount of Debentures outstanding is
$115,000,000, which may be converted into 3,982,684 shares of Common
Stock.
Because the Selling Securityholders may offer all or some of
the Notes and shares of Common Stock issued upon conversion thereof
pursuant to the offering contemplated by this Prospectus, and to the
Company's knowledge there are currently no agreements, arrangements or
understandings with respect to the sale of any of the Notes or shares of
Common Stock that may be held by the Selling Securityholders after
completion of this offering, no estimate can be given as to the principal
amount of the Notes or shares of Common Stock that will be held by Selling
Securityholders after completion of this offering. See "Plan of
Distribution."
-14-
<PAGE>
PLAN OF DISTRIBUTION
The Selling Securityholders may sell all or a portion of the Notes and
shares of Common Stock beneficially owned by them and which may be offered
hereby from time to time on any exchange or market on which the securities are
listed or quoted, as applicable, on terms to be determined at the times of such
sales. The Selling Securityholders may also make private sales directly or
through a broker or brokers. Alternatively, any of the Selling Securityholders
may from time to time offer the Notes or shares of Common Stock which may be
offered hereby through underwriters, dealers or agents, who may receive
compensation in the form of underwriting discounts, commissions or concessions
from the Selling Securityholders and the purchasers of the Notes or shares of
Common Stock for whom they may act as agent. Such underwriters, dealers or
agents may include the Initial Purchasers of the Notes, which may perform
investment banking or other services for or engage in other transactions with
the Company from time to time in the future.
To the extent required, the aggregate principal amount of Notes and number
of shares of Common Stock to be sold hereby, the names of the Selling
Securityholders, the purchase price, the name of any such agent, dealer or
underwriter and any applicable commissions, discounts or other terms
constituting compensation with respect to a particular offer will be set forth
in an accompanying Prospectus Supplement. The aggregate proceeds to the Selling
Securityholders from the sale of the Notes or shares of Common Stock offered by
them hereby will be the purchase price of such Notes or shares of Common Stock
less discounts and commissions, if any.
The Notes and the shares of Common Stock which may be offered hereby may
be sold from time to time in one or more transactions at fixed offering prices,
which may be changed, or at varying prices determined at the time of sale or at
negotiated prices. Such prices will be determined by the holders of such
securities or by agreement between such holders and underwriters or dealers who
receive fees or commissions in connection therewith.
The outstanding Common Stock is listed for trading on the American Stock
Exchange, and the shares of Common Stock issuable upon conversion of the Notes
have been authorized for listing on the American Stock Exchange. There is no
assurance as to the development or liquidity of any trading market that may
develop for the Notes.
In order to comply with the securities laws of certain states, if
applicable, the Notes and shares of Common Stock offered hereby will be sold in
such jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states, the Notes and shares of Common Stock offered hereby
may not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and compliance with same is effected.
The Selling Securityholders and any broker-dealers, agents or underwriters
that participate with the Selling Securityholders in the distribution of the
Notes or shares of Common Stock offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act, in which event any
commissions or discounts received by such broker-dealers, agents or underwriters
and any profit on the resale of the Notes or shares of Common Stock offered
hereby and purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
BancAmerica Robertson Stephens has entered into a Securities Loan Agreement
with certain shareholders of the Company with respect to their shares of Common
Stock of the Company, which shares of Common Stock may become registered under
the Securities Act.
The Company has agreed to indemnify the Selling Securityholders against
certain liabilities arising under the Securities Act. The Company has agreed to
pay all expenses incident to the offer and sale of the Notes and Common Stock
offered hereby by the Selling Securityholders to the public, other than selling
commissions and fees.
DESCRIPTION OF NOTES
The Notes were initially issued under an indenture dated as of August 15,
1997 (the "Indenture"), between the Company and State Street Bank and Trust
Company, as trustee (the "Trustee"). The terms of the Notes include those stated
in the Indenture and those stated in the Registration Rights Agreement dated
August 15, 1997 (the "Registration Rights Agreement") between the Company and
Initial Purchasers. The following summaries of certain provisions of
-15-
<PAGE>
the Notes, the Indenture and the Registration Rights Agreement do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Notes, the Indenture and the Registration Rights
Agreement, including the definitions therein of certain terms which are not
otherwise defined in this Prospectus. Wherever particular provisions or defined
terms of the Indenture (or of the form of Note which is a part thereof) or the
Registration Rights Agreement are referred to, such provisions or defined terms
are incorporated herein by reference. Copies of the Indenture, Note and
Registration Rights Agreement are available from the Company upon request. As
used in this Description of Notes, the "Company" refers only to CareMatrix
Corporation and does not, unless the context otherwise indicates, include any of
its subsidiaries.
General. The Notes represent unsecured, general obligations of the Company
subordinate in right of payment to certain other obligations of the Company as
described under "--Subordination," and convertible into Common Stock as
described under "--Conversion." The Notes are limited to $115,000,000 aggregate
principal amount, issued in fully registered form only in denominations of
$1,000 or any multiple thereof and will mature on August 15, 2004, unless
earlier redeemed at the option of the Company or repurchased by the Company at
the option of the holder upon a Repurchase Event (as defined).
The Notes bear interest from August 18, 1997 at the annual rate set forth
on the cover page hereof, payable semi-annually on February 15 and August 15,
commencing on February 15, 1998, to holders of record at the close of business
on the preceding February 1 and August 1, respectively (subject to certain
exceptions in the case of conversion, redemption or repurchase of such Notes
prior to the applicable interest payment date). Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
Principal and premium, if any, will be payable, and the Notes may be
presented for conversion, registration of transfer and exchange, without service
charge, at the office of the Company maintained by the Company for such purposes
in the Borough of Manhattan, The City of New York, which is currently an office
or agency of the Trustee. In addition, interest may, at the Company's option, be
paid by check mailed to such holder, provided that a holder of Notes 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. Reference is made
to "--Form, Denomination and Registration" for information as to Notes held by
"qualified institutional buyers" and "Non-U.S. persons."
The Indenture does not contain any financial covenants or any restrictions
on the payment of dividends, the repurchase of securities of the Company or the
incurrence of Senior Indebtedness or other indebtedness. The Indenture contains
no covenants or other provisions to afford protection to holders of Notes in the
event of a highly leveraged transaction or a change in control of the Company
except to the limited extent described under "--Repurchase at Option of Holders
Upon a Repurchase Event" below.
No service charge will be made for any registration or transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith. The
Company is not required to exchange or register the transfer of: (i) any Note
for a period of 15 days next preceding any selection of Notes to be redeemed,
(ii) any Note or portion thereof selected for redemption, (iii) any Note or
portion thereof surrendered for conversion, or (iv) any Note or portion thereof
surrendered for repurchase (and not withdrawn) in connection with a Repurchase
Event.
Conversion. The holders of Notes will be entitled at any time through the
close of business on the final maturity date of the Notes, subject to prior
redemption or repurchase, to convert any Notes or portions thereof (in
denominations of $1,000 or multiples thereof) into Common Stock of the Company,
at the conversion price set forth on the cover page of this Prospectus, subject
to adjustment as described below. Except as described below, no adjustment will
be made on conversion of any Notes for interest accrued thereon or for dividends
on any Common Stock issued. If Notes are converted after a record date for the
payment of interest and prior to the next succeeding interest payment date, such
Notes, other than Notes called for redemption pursuant to a redemption notice
mailed to the holders by the Company in accordance with the Indenture, must be
accompanied by funds equal to the interest payable on such succeeding
-16-
<PAGE>
interest payment date on the principal amount so converted. The Company is not
required to issue fractional shares of Common Stock upon conversion of Notes
and, in lieu thereof, will pay a cash adjustment based upon the market price of
the Common Stock on the last business day prior to the date of conversion. In
the case of Notes 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. A Note for which
a holder has delivered a Repurchase Event purchase notice exercising the option
of such holder to require the Company to repurchase such Note may be converted
only if such notice is withdrawn by a written notice of withdrawal delivered by
the holder to the Company prior to the close of business on the business day
immediately preceding the date fixed for repurchase.
The right of conversion attaching to any Note may be exercised by the
holder by delivering the Note 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 Note, 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. A holder delivering a
Note for conversion will not be required to pay any taxes or duties payable in
respect of the issuance 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 issuance or delivery of the Common Stock in a name other than
that of the holder of the Note. 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.
The initial conversion price of $28.875 per share of Common Stock is
subject to adjustment (under formulae set forth in the Indenture) in 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 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 then 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; and (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. 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 transaction described below in "--Consolidation,
Merger or Assumption."
-17-
<PAGE>
The Indenture provides that if the Company implements a stockholders'
rights plan, such rights plan must provide that upon conversion of the Notes 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.
In the case of (i) any reclassification or change of the Common Stock
(other than changes in par value or resulting from a subdivision or combination)
or (ii) a consolidation, merger or combination involving the Company or a sale
or conveyance to another corporation of the property and assets of the Company
as an entirety or substantially as an entirety, in each case as a result of
which holders of Common Stock shall be entitled to receive stock, other
securities, other property or assets (including cash) with respect to or in
exchange for such Common Stock, the holders of the Notes then outstanding will
be entitled thereafter to convert such Notes into the kind and amount of shares
of stock, other securities or other property or assets (including cash) which
they would have owned or been entitled to receive upon such reclassification,
change, consolidation, merger, combination, sale or conveyance had such Notes
been converted into Common Stock immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance (assuming, in a
case in which the Company's stockholders may exercise rights of election, that a
holder of Notes would not have exercised any rights of election as to the stock,
other securities or other property or assets (including cash) receivable in
connection therewith and received per share the kind and amount received per
share by a plurality of non-electing shares).
In the event of a taxable distribution to holders of Common Stock (or
other transaction) which results in any adjustment of the conversion price, the
holders of Notes may, in certain circumstances, be deemed to have received a
distribution subject to United States income tax as a dividend; in certain other
circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain Federal Income Tax
Considerations."
The Company from time to time may, to the extent permitted by law, reduce
the conversion price of the Notes by any amount for any period of at least 20
days, in which case the Company shall give at least 15 days' notice of such
decrease, if the Board of Directors has made a determination that such decrease
would be in the best interests of the Company, which determination shall be
conclusive. The Company may, at its option, make such reductions in the
conversion price, in addition to those set forth above, as the 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. See
"Certain Federal Income Tax Considerations."
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least l% 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.
Optional Redemption by the Company. The Notes are not redeemable at the
option of the Company prior to August 18, 2000. At any time on or after that
date, the Notes 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 holder of record
as of the relevant record date.
-18-
<PAGE>
If redeemed during the 12-month period beginning August 15 (August 18,
2000 through August 14, 2001 in the case of the first such period):
Year Redemption Price
---- ----------------
2000 ............................................................. 103.571%
2001 ............................................................. 102.679
2002 ............................................................. 101.786
2003 ............................................................. 100.893
and 100% at August 15, 2004.
If fewer than all the Notes are to be redeemed, the Trustee will select
the Notes to be redeemed in principal amounts of $1,000 or multiples thereof by
lot or on a pro rata basis or by a method the Trustee considers fair and
appropriate (as long as such method is not prohibited by the rules of any United
States national securities exchange or of an established automated
over-the-counter trading market in the United States on which the Notes are then
listed). If any Note is to be redeemed in part only, a new Note or Notes in
principal amount equal to the unredeemed principal portion thereof will be
issued. If a portion of a holder's Notes is selected for partial redemption and
such holder converts a portion of such Notes, such converted portion shall be
deemed to be taken from the portion selected for redemption.
No sinking fund is provided for the Notes.
Repurchase at Option of Holders Upon a Repurchase Event. The Indenture
provides that if a Repurchase Event (as defined) occurs, each holder of Notes
shall have the right, at the holder's option, to require the Company to
repurchase all of such holder's Notes, or any portion thereof that is an
integral multiple of $1,000, on the date (the "repurchase date") that is 40
calendar days (or, if such 40th day is not a Business Day, the next succeeding
Business Day) after the date of the Company Notice (as defined), for cash at a
price equal to 100% of the principal amount of the Notes, together with accrued
interest, if any, to the repurchase date (the "repurchase price"), provided,
however, that if a repurchase date is an interest payment date, the semi-annual
payment of interest becoming due on such date shall be payable to the holder of
record as of the relevant record date.
The Company may, at its option, in lieu of paying the repurchase price in
cash, pay the repurchase price in Common Stock valued at 95% of the average of
the closing prices of the Common Stock for the five consecutive trading days
ending on and including the third trading day preceding the repurchase date.
Payment may not be made in Common Stock unless the Company satisfies certain
conditions with respect to such payment as provided in the Indenture.
Within 15 calendar days after the occurrence of a Repurchase Event, the
Company is obligated to mail to all holders of record of the Notes a notice (the
"Company Notice") of the occurrence of such Repurchase Event and of the
repurchase right arising as a result thereof. The Company must deliver a copy of
the Company Notice to the Trustee and cause a copy or a summary of such notice
to be published in a newspaper of general circulation in the city of New York.
To exercise the repurchase right, a holder of such Notes must deliver, on or
before the 35th day after the Company Notice, written notice to the Company (or
an agent designated by the Company for such purpose) and the Trustee of the
holder's exercise of such right, together with the Notes with respect to which
the right is being exercised, duly endorsed for transfer.
"Repurchase Event" means a Change in Control (as defined) or a Termination
of Trading (as defined).
"Change in Control" will be deemed to have occurred when (i) any "person"
or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and
-19-
<PAGE>
13d-5 under the Exchange Act) of shares representing more than 50% of the
combined voting power of the then outstanding securities entitled to vote
generally in elections of directors of the Company ("Voting Stock"); (ii)
approval by stockholders of the Company of any plan or proposal for the
liquidation, dissolution or winding up of the Company; (iii) the Company (A)
consolidates with or merges into any other corporation or any other corporation
merges into the Company, and in the case of any such transaction, the
outstanding Common Stock of the Company is changed or exchanged into or for
other assets or securities as a result, unless the stockholders of the Company
immediately before such transaction own, directly or indirectly immediately
following such transaction, at least 51% of the combined voting power of the
outstanding voting securities of the corporation resulting from such transaction
in substantially the same proportion as their ownership of the Voting Stock
immediately before such transaction or (B) conveys, transfers or leases all or
substantially all of its assets to any person; or (iv) any time Continuing
Directors (as defined) do not constitute a majority of the Board of Directors of
the Company (or, if applicable, a successor corporation to the Company);
provided that a Change in Control shall not be deemed to have occurred if either
(x) the last sale price of the Common Stock for any five trading days during the
ten trading days immediately preceding the Change in Control is at least equal
to 105% of the conversion price in effect on such day or (y) in the case of a
merger or consolidation otherwise constituting a Change in Control, all of the
consideration (excluding cash payments for fractional shares) in such merger or
consolidation constituting the Change in Control consists of common stock traded
on a United States national securities exchange or quoted on the Nasdaq National
Market (or which will be so traded or quoted when issued or exchanged in
connection with such Change in Control) and as a result of such transaction or
transactions such Notes become convertible solely into such common stock. A
Change in Control also shall not be deemed to have occurred if Abraham D. Gosman
or a group (within the meaning of Section 13(d) of the Exchange Act) that
includes Abraham D. Gosman (a "Permitted Investor") becomes the beneficial owner
of more than 50% of the Voting Stock, provided that, if as a consequence of any
transaction involving a Permitted Investor, or in which a Permitted Investor has
an interest, less than 30% of the number of shares of Common Stock outstanding
upon the issuance of the Notes are neither listed for trading upon a national
securities exchange nor approved for trading or quoted for trading on the Nasdaq
National Market, then a Change in Control shall be deemed to have occurred upon
the consummation of such transaction.
"Continuing Director" means at any date a member of the Company's Board of
Directors (i) who was a member of such board on August 18, 1997 or (ii) who was
nominated or elected by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election or whose election to the
Company's Board of Directors was recommended or endorsed by at least a majority
of the directors who were Continuing Directors at the time of such nomination or
election or such lesser number comprising a majority of a nominating committee
if authority for such nominations or elections has been delegated to a
nominating committee whose authority and composition has been approved by at
least a majority of the directors who were continuing directors at the time such
committee was formed. (Under this definition, if the current Board of Directors
of the Company were to approve a new director or directors and then resign, no
Change in Control would occur even though the current Board of Directors would
thereafter cease to be in office).
The phrase "all or substantially all" of the assets of the Company, as
included in the definition of Change in Control, is likely to be interpreted by
reference to applicable state law at the relevant time, and will be dependent on
the facts and circumstances existing at such time. As a result, there may be a
degree of uncertainty in ascertaining whether a sale or transfer of "all or
substantially all" of the assets of the Company has occurred.
A "Termination of Trading" shall have occurred if the Common Stock (or
other common stock into which the Notes are then convertible) is neither listed
for trading on a United States national securities exchange nor approved for
trading on an established automated over-the-counter trading market in the
United States.
If a Repurchase Event were to occur, there can be no assurance that the
Company would have sufficient financial resources, or would be able to arrange
financing, to pay the repurchase price in cash for all Notes tendered by holders
thereof. The Company's ability to repurchase Notes with cash may also be limited
or prohibited by the terms of its then-existing borrowing arrangements due to
dividend restrictions. Moreover, although under the Indenture the Company may
elect, subject to satisfaction of certain conditions, to pay the repurchase
price for the Notes using shares
-20-
<PAGE>
of Common Stock, any future credit agreements or other agreements relating to
other indebtedness (including other Senior Indebtedness) to which the Company
becomes a party may contain restrictions on or prohibitions of the repurchase of
the Notes by the Company that apply even if the purchase price is paid with
shares of capital stock. In the event a Repurchase Event occurs at a time when
the Company is prohibited from repurchasing Notes, the Company could seek the
consent of its lenders to repurchase the Notes or could attempt to refinance the
borrowings that contain such prohibition. If the Company does not obtain such a
consent or repay such borrowings, the Company would remain prohibited from
repurchasing Notes. In such case, the Company's failure to repurchase the Notes
would constitute an Event of Default under the Indenture whether or not payment
of the repurchase price is permitted by the subordination provisions of the
Indenture. Any such default may, in turn, cause a default under Senior
Indebtedness of the Company. Moreover, the occurrence of a Repurchase Event may,
in turn, cause a default under Senior Indebtedness of the Company. As a result,
in either case, payment of the repurchase price of the Notes with cash would,
absent a waiver, be prohibited under the subordination provisions of the
Indenture until the Senior Indebtedness is paid in full. See "--Subordination"
below and "Risk Factors--Subordination."
No Notes may be repurchased at the option of holders upon a Repurchase
Event if there has occurred and is continuing an Event of Default described
under "--Events of Default and Remedies" below (other than a default in the
payment of the repurchase price with respect to such Notes on the repurchase
date).
The foregoing provisions would not necessarily afford holders of the Notes
protection in the event of a highly leveraged transaction, a change in control
of the Company or other transactions involving the Company that may adversely
affect holders. The Company could, in the future, enter into certain
transactions, including certain recapitalizations of the Company, that would not
constitute a Change in Control but that would increase the amount of Senior
Indebtedness (or other indebtedness) outstanding at such time. There are no
restrictions in the Indenture or the Notes on the creation of additional Senior
Indebtedness (or any other indebtedness of the Company or any of its
subsidiaries) and the incurrence of significant amounts of additional
indebtedness could have an adverse impact on the Company's ability to service
its debt, including the Notes. The Notes are subordinate in right of payment to
all existing and future Senior Indebtedness as described under "--Subordination"
below.
Certain leveraged transactions sponsored by the Company's management or an
affiliate of the Company could constitute a Change in Control that would give
rise to the repurchase right. The Indenture does not provide the Company's Board
of Directors with the right to limit or waive the repurchase right in the event
of any such leveraged transaction. The right to require the Company to
repurchase Notes as a result of a Repurchase Event could have the effect of
delaying, deferring or preventing a Change in Control or other attempts to
acquire control of the Company unless arrangements have been made to enable the
Company to repurchase all of the Notes at the repurchase date. Consequently, the
right may render more difficult or discourage a merger, consolidation or tender
offer (even if such transaction is supported by the Company's Board of Directors
or is favorable to the stockholders), the assumption of control by a holder of a
large block of the Company's shares and the removal of incumbent management. The
Repurchase Event repurchase right, however, is not the result of management's
knowledge of any specific effort to accumulate shares of Common Stock or to
obtain control of the Company by means of a merger, tender offer, solicitation
or otherwise. Instead, the Repurchase Event repurchase right is a standard term
contained in other similar debt offerings and the terms of such feature have
resulted from negotiations between the Company and the Initial Purchasers.
Rule 13e-4 under the Exchange Act requires, among other things, the
dissemination of certain information to security holders in the event of an
issuer tender offer and may apply in the event that the repurchase option
becomes available to holders of the Notes. The Company will comply with this
rule to the extent applicable at that time.
Subordination. The indebtedness evidenced by the Notes is, to the extent
provided in the Indenture, subordinate to the prior payment in full of all
Senior Indebtedness (as defined) whether presently outstanding or hereafter
incurred or created. Upon any distribution of assets of the Company upon any
dissolution, winding up, liquidation or reorganization of the Company, the
payment of the principal of, or premium, if any, and interest on the Notes is to
-21-
<PAGE>
be subordinated to the extent provided in the Indenture in right of payment to
the prior payment in full, in cash or in such other form of payment as may be
acceptable to the holders thereof, of all Senior Indebtedness. Moreover, in the
event of any acceleration of the Notes because of an Event of Default, the
holders of any Senior Indebtedness then outstanding would be entitled to payment
in full of all obligations in respect of such Senior Indebtedness before the
holders of the Notes are entitled to receive any payment or distribution in
respect thereof.
The Company may also not make any payment upon or in respect of the Notes
if (i) a default in the payment of principal of, premium, if any, interest, or
other payment due on 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 related to
accelerate its maturity and the Trustee and the Company receive a notice of such
default (a "Payment Blockage Notice") from a person permitted to give such
notice under the Indenture. Payments on the Notes may and shall be resumed (a)
in case of payment default, on the date on which such default is cured or waived
or ceases to exist and (b) in case of a nonpayment default with respect to
Designated Senior Indebtedness, on the earlier of the date on which such
nonpayment default is cured or waived or ceases to exist or 179 days after the
date on which the applicable Payment Blockage Notice is received. No new period
of payment blockage may be commenced pursuant to a Payment Blockage Notice
unless (i) 365 days have elapsed since the first day of the effectiveness of the
immediately prior Payment Blockage Notice, and (ii) all scheduled payments of
principal, premium, if any, and interest on the Notes that have become due have
been paid in full in cash. No default (whether or not such event of default is
on the same issue of Designated Senior Indebtedness) that existed or was
continuing on the date of delivery of any Payment Blockage Notice shall be, or
shall be made, the basis for a subsequent Payment Blockage Notice.
The term "Senior Indebtedness" means the principal of, premium, if any,
interest on (including 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), and any
other payment due pursuant to, any of the following, whether outstanding on the
date of the Indenture or thereafter incurred or created: (a) all indebtedness of
the Company for money borrowed or evidenced by notes, debentures, bonds or other
securities (including, but not limited to, those which are convertible or
exchangeable for securities of the Company) and all other obligations of the
Company constituting the deferred purchase price of property or assets; (b) all
indebtedness of the Company due and owing with respect to letters of credit
(including, but not limited to, reimbursement obligations with respect thereto);
(c) all indebtedness or other obligations of the Company due and owing with
respect to interest rate and currency swap agreements, cap, floor and collar
agreements, currency spot and forward contracts and other similar agreements and
arrangements; (d) all indebtedness consisting of commitment or standby fees due
and payable to lending institutions with respect to credit facilities or letters
of credit available to the Company; (e) all obligations of the Company under
leases required or permitted to be capitalized 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; (f) all indebtedness or obligations of
others of the kinds described in any of the preceding clauses (a), (b), (c), (d)
or (e) assumed by or guaranteed in any manner by the Company or in effect
guaranteed (directly or indirectly) by the Company through an agreement to
purchase, contingent or otherwise, and all obligations of the Company under any
such guarantee or other arrangements; and (g) all renewals, extensions,
refundings, deferrals, amendments or modifications of indebtedness or
obligations of the kinds described in any of the preceding clauses (a), (b),
(c), (d), (e) or (f); unless in the case of any particular indebtedness,
obligation, renewal, extension, refunding, amendment, modification or
supplement, the instrument or other document creating or evidencing the same or
the assumption or guarantee of the same expressly provides that such
indebtedness, obligation, renewal, extension, refunding, amendment, modification
or supplement is subordinate to, or is not superior to, or is pari passu with,
the Notes; provided that Senior Indebtedness shall not include (i) any
indebtedness of any kind of the Company to any subsidiary of the Company, a
majority of the voting stock of which is owned, directly or indirectly, by the
Company, (ii) indebtedness for trade payables or constituting the deferred
purchase price of assets or services incurred in the ordinary course of
business, or (iii) the Notes.
-22-
<PAGE>
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 the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of holders of such Senior Indebtedness to exercise the
rights of Designated Senior Indebtedness).
Notwithstanding the foregoing, in the event that the Trustee or any holder
of Notes 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 Notes 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 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
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.
The Notes are obligations exclusively of the Company. Since the
consolidated operations of the Company are partially conducted through
subsidiaries, the cash flow and the consequent ability to service debt,
including the Notes of the Company, are partially dependent upon the earnings of
such subsidiaries and the distribution of those earnings to, or upon loans or
other payments of funds by those subsidiaries to the Company. The subsidiaries
of the Company are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Notes or to make
any funds available therefor, whether by dividends, loans or other payments. In
addition, the payment of dividends and the making of loans and other payments to
the Company by any such subsidiaries could be subject to statutory and
contractual restrictions, are dependent upon the earnings of such subsidiaries
and are subject to various business considerations. Any right of the Company to
receive assets of its subsidiaries upon their liquidation or reorganization (and
the consequent right of the holders of the Notes to participate in these assets)
will be effectively subordinated to the claims of that subsidiary's creditors
(including trade creditors), except to the extent that the Company is itself
recognized as a creditor of such subsidiary, in which case the claims of the
Company would still be subordinate to any security interests in the assets of
such subsidiary and any indebtedness of such subsidiary senior to that held by
the Company.
As of June 30, 1997, the Company had approximately $2.4 million of
indebtedness outstanding (excluding accrued interest) that would have
constituted Senior Indebtedness. As of June 30, 1997, there was also outstanding
approximately $10.7 million in liabilities of subsidiaries of the Company
(excluding intercompany liabilities and liabilities of a type not required to be
reflected as liabilities on the balance sheet of such subsidiaries in accordance
with generally accepted accounting principles). 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.
No provision contained in the Indenture or the Notes will affect the
obligation of the Company, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, and interest on, the Notes. The
subordination provisions of the Indenture and the Notes will not prevent the
occurrence of any default or Event of Default or limit the rights of any holder
of Notes to pursue any other rights or remedies with respect to the Notes.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceedings or an assignment for the benefit of the creditors of the Company or
a marshaling of assets or liabilities of the Company and its subsidiaries,
holders of the Notes may receive ratably less than other creditors.
-23-
<PAGE>
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 Notes (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 Notes (whether or not 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)
default in the payment of the repurchase price in respect of the Note on the
repurchase date therefor (whether or not such payment in cash of the repurchase
price is prohibited by the subordination provisions of the Indenture); (v)
failure to provide timely notice of a Repurchase Event; (vi) failure of the
Company or any Significant Subsidiary (as defined) to make any payment at
maturity, including any applicable grace period, in respect of Indebtedness
(which term as used in the Indenture means obligations of, or guaranteed or
assumed by, the Company or any Significant Subsidiary for borrowed money), in an
amount in excess of $5,000,000 and continuance of such failure for 30 days after
notice given in accordance with the Indenture; (vii) default by the Company or
any Significant Subsidiary with respect to any Indebtedness, which default
results in the acceleration of Indebtedness in an amount 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 (viii) certain events involving bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary.
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default, give to the registered holders of the Notes 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 Notes when due or in the payment of any redemption or
repurchase obligation.
The Indenture provides that if any Event of Default shall have occurred
and be continuing, the Trustee or the holders of not less than 25% in principal
amount of the Notes then outstanding may declare the principal of and premium,
if any, on the Notes to be due and payable immediately, but if the Company shall
cure all defaults (except the nonpayment of interest on, premium, if any, and
principal of any Notes which shall have become due by acceleration) and certain
other conditions are met, such declaration may be canceled and past defaults may
be waived by the holders of a majority in principal amount of Notes then
outstanding. 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 Notes will become due and payable immediately
without any declaration or other act on the part of the Trustee or any holders
of Notes, subject to certain limitations.
The Indenture provides that the holders of a majority in principal amount
of the outstanding Notes 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. 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 principal amount
of the outstanding Notes 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 Notes when due
and to convert such Notes.
The holders of not less than a majority in principal amount of the
outstanding Notes may on behalf of the holders of all Notes waive any past
defaults, except (i) a default in payment of the principal of, or premium, if
any, or interest on, any Note when due, (ii) a failure by the Company to convert
any Notes into Common Stock, or (iii) a default in respect of certain provisions
of the Indenture which cannot be modified or amended without the consent of the
holder of each outstanding Note affected thereby.
-24-
<PAGE>
The Company is required to furnish to the Trustee annually within 120 days
of the end of the fiscal year a statement of certain officers of the Company
stating whether or not to the best of their knowledge the Company is in default
in the performance and observation of certain terms of the Indenture and, if
they have knowledge that the Company is in default, specifying such default. The
Company is also required, upon becoming aware of any default or Event of
Default, to deliver to the Trustee a statement specifying such default or Event
of Default and the action the Company has taken, is taking or proposes to take
with respect thereto.
Consolidation, Merger or Assumption. The Indenture provides that the
Company may not, directly or indirectly, consolidate with or merge with or into
another person or sell, lease, convey or transfer all or substantially all of
its assets, 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 merger or consolidation that does not involve a transfer of all or
substantially all of the Company's assets, 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 Notes 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 Notes at the time outstanding,
to modify the Indenture or any supplemental indenture or the rights of the
holders of the Notes, except that no such modification shall (i) extend the
fixed maturity of any Note, reduce the rate or extend the time or payment of
interest thereon, reduce the principal amount thereof or premium, if any,
thereon, reduce any amount payable upon redemption or repurchase thereof,
impair, or change in any respect adverse to the holders of Notes, the obligation
of the Company to repurchase any Note upon the happening of a Repurchase Event,
impair or adversely affect the right of a holder to institute suit for the
payment thereof, change the currency in which the Notes are payable, or impair,
or change in any respect adverse to the holder of the Notes, the right to
convert the Notes 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 Notes in a manner adverse to the holders of the Notes,
without the consent of the holder of each Note so affected, or (ii) reduce the
aforesaid percentage of Notes, without the consent of the holders of all of the
Notes then outstanding.
Registration Rights. The Company has filed a Registration Statement, of
which this Prospectus forms a part (the "Registration Statement"), pursuant to
the terms of the Registration Rights Agreement. Under the Registration Rights
Agreement, the Company agreed to file, at its expense, with the Commission as
promptly as practicable after the earliest date of initial issuance of any of
the Notes, the Registration Statement (of which this Prospectus forms a part)
covering resales of Transfer Restricted Securities by the holders thereof and to
use all commercially reasonable efforts to cause the Registration Statement to
become effective as promptly as is practicable and to keep the Registration
Statement effective until the earlier of such date that is two years after the
latest date of initial issuance of any of the Notes or until the Registration
Statement is no longer required for transfer of any Transfer Restricted
Securities. For purposes of the foregoing, "Transfer Restricted Securities"
means each Note and share of Common Stock issued upon conversion thereof until
the date on which such Note or share of Common Stock has been effectively
registered under the Securities Act and disposed of in accordance with this
Shelf Registration Statement or the date on which such Note or share of Common
Stock is distributed to the public pursuant to Rule 144 under the Securities Act
or is salable pursuant to Rule 144(k) under the Securities Act (or any similar
provisions then in force) or the date on which such Note or share of Common
Stock ceases to be outstanding, whichever date is earliest.
The Registration Rights Agreement provides that if the Registration
Statement, of which this prospectus is a part, ceases to be effective or usable
(without being succeeded immediately by an additional shelf registration
statement filed and declared effective which is then available for effecting
resales of Transfer Restricted Securities) for a period of time which shall
exceed 90 days in the aggregate in any period of 365 consecutive days (a
"Registration Default"), the Company will pay liquidated damages to each holder
of Securities, during the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to $0.05 per week per
$1,000 principal amount of Notes
-25-
<PAGE>
and, if applicable, on an equivalent basis per share (subject to adjustment in
the event of stock splits, stock recombinations, stock dividends and the like)
of Common Stock constituting Transfer Restricted Securities held by such holder.
The rate of accrual of the liquidated damages will increase by an additional
$0.05 per week per $1,000 principal amount of Notes and, if applicable, by an
equivalent amount per week per share (subject to adjustment as set forth above)
of Common Stock constituting Transfer Restricted Securities for each subsequent
90-day period following the occurrence of such Registration Default until the
applicable registration statement is filed, the applicable registration
statement is declared effective and becomes available for effecting sales of
securities, or the Registration Statement again becomes effective and becomes
available for effecting sales of securities, as the case may be, up to a maximum
amount of liquidated damages of $0.25 per week per $1,000 principal amount of
Notes or if applicable, an equivalent amount per week per share (subject to
adjustment as set forth above) of Common Stock constituting Restricted
Securities. Following the cure of a Registration Default, liquidated damages
will cease to accrue with respect to such Registration Default (without in any
way limiting the effect of any subsequent Registration Default). All accrued
liquidated damages shall be paid to the holders of Notes or shares of Common
Stock (as applicable) in the same manner as interest payments on the Notes on
semiannual payment dates which correspond to interest payment dates for the
Notes. The use of the Registration Statement for effecting resales of Transfer
Restricted Securities may be suspended in certain circumstances described in the
Registration Rights Agreement upon notice by the Company to the holders of the
Transfer Restricted Securities, subject to the rights of the holders of Transfer
Restricted Securities to receive liquidated damages if the aggregate number of
days of such suspensions in any year exceeds the periods described above.
Taxation of Notes. See "Certain Federal Income Tax Considerations" for a
discussion of certain federal tax aspects which will apply to holders of Notes.
Satisfaction and Discharge. The Company may discharge its obligations
under the Indenture while Notes remain outstanding if (i) all outstanding Notes
will become due and payable at their scheduled maturity within one year or (ii)
all outstanding Notes are scheduled for redemption within one year, and, in
either case, the Company has deposited with the Trustee an amount sufficient to
pay and discharge all outstanding Notes on the date of their scheduled maturity
or the scheduled date of redemption.
Governing Law. The Indenture, the Registration Rights Agreement and the
Notes are governed by and construed in accordance with the laws of the State of
New York.
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 Notes. 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.
The Indenture and the Trust Indenture Act of 1939, as amended (the "TIA"),
contains certain limitations on 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 in respect of any such claim as security or
otherwise. Subject to the TIA, the Trustee will be permitted to engage in other
transactions, provided, however, that if it acquires any conflicting interest
(as described in the TIA), it must eliminate such conflict or resign.
-26-
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain United States federal
income tax considerations relevant to holders of the Notes. This discussion is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions now
in effect, all of which are subject to change (possibly with retroactive effect)
or different interpretations. This discussion does not purport to deal with all
aspects of federal income taxation that may be relevant to a particular
investor's decision to purchase the Notes, and it is not intended to be wholly
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations and non-United
States persons, may be subject to special rules. In addition, this discussion is
limited to persons that purchase the Notes in this offering and hold the Notes
as a "capital asset" within the meaning of Section 1221 of the Code.
ALL PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK.
Conversion of Notes into Common Stock. In general, no gain or loss will be
recognized for federal income tax purposes on a conversion of the Notes into
shares of Common Stock. However, cash paid in lieu of a fractional share of
Common Stock will likely result in taxable gain (or loss), which will be capital
gain (or loss), to the extent that the amount of such cash exceeds (or is
exceeded by) the portion of the adjusted basis of the Note allocable to such
fractional share. The adjusted basis of shares of Common Stock received on
conversion will equal the adjusted basis of the Note converted, reduced by the
portion of adjusted basis allocated to any fractional share of Common Stock
exchanged for cash. The holding period of an investor in the Common Stock
received on conversion will include the period during which the converted Notes
were held.
The conversion price of the Notes is subject to adjustment under certain
circumstances. See "Description of Notes--Conversion." Section 305 of the Code
and the Treasury Regulations issued thereunder may treat the holders of the
Notes as having received a constructive distribution, resulting in ordinary
income (subject to a possible dividends received deduction in the case of
corporate holders) to the extent of the Company current earnings and profits as
of the end of the taxable year to which the constructive distribution relates
and/or accumulated earnings and profits, if and to the extent that certain
adjustments in the conversion price that may occur in limited circumstances
(particularly an adjustment to reflect a taxable dividend to holders of Common
Stock) increase the proportionate interest of a holder of Notes in the fully
diluted Common Stock, whether or not such holder ever exercises its conversion
privilege. Moreover, if there is not a full adjustment to the conversion price
of the Notes to reflect a stock dividend or other event increasing the
proportionate interest of the holders of outstanding Common Stock in the assets
or earnings and profits of the Company, then such increase in the proportionate
interest of the holders of the Common Stock generally will be treated as a
distribution to such holders, taxable as ordinary income (subject to a possible
dividends received deduction in the case of corporate holders) to the extent of
the Company current earnings and profits as of the end of the taxable year to
which the constructive distribution relates and/or accumulated earnings and
profits.
Market Discount. Investors acquiring Notes pursuant to this Prospectus
should note that the resale of such Notes may be adversely affected by the
market discount provisions of sections 1276 through 1278 of the Code. Under the
market discount rules, if a holder of a Note purchases it at market discount
(i.e., at a price below its stated redemption price at maturity) in excess of a
statutorily-defined de minimis amount and thereafter recognizes gain upon a
disposition or retirement of the Note, then the lesser of the gain recognized or
the portion of the market discount that accrued on a ratable basis (or, if
elected, on a constant interest rate basis) generally will be treated as
ordinary income at the time of the disposition. Moreover, any market discount on
a Note may be taxable to an investor to the extent of appreciation at the time
of certain otherwise non-taxable transactions (e.g., gifts). Any accrued market
discount not previously taken into income prior to a conversion of a Note,
however, is likely to carry over to the Common Stock received on conversion and
be treated as ordinary income upon a subsequent disposition of such Common Stock
to the extent of any gain recognized on such disposition. In addition, absent an
election to include market discount in income as it
-27-
<PAGE>
accrues, a holder of a market discount debt instrument may be required to defer
a portion of any interest expense that otherwise may be deductible on any
indebtedness incurred or maintained to purchase or carry such debt instrument
until the holder disposes of the debt instrument in a taxable transaction.
Taxation of Interest. Interest paid on the Notes will be included in the
income of a holder as ordinary income at the time it is treated as received or
accrued, in accordance with the holder's regular method of tax accounting.
Failure of the Company to file, cause to be declared effective or maintain
effective a Shelf Registration Statement as described under "Description of
Notes--Registration Rights" will cause additional interest to accrue on the
Notes in the manner described therein. According to Treasury Regulations, the
possibility of a change in the interest rate will not affect the amount of
interest income recognized by a holder (or the timing of such recognition) if
the likelihood of the change, as of the date the Notes are issued, is remote.
The Company believes that the likelihood of a change in the interest rate on the
Notes is remote and does not intend to treat the possibility of a change in the
interest rate as affecting the yield to maturity of any Note. In the unlikely
event that the interest rate on the Notes is increased, then such increased
interest may be treated as original issue discount, includible by a holder in
income as such interest accrues, in advance of receipt of any cash payment
thereof.
Sale, Exchange or Retirement of Notes. Each holder of Notes generally will
recognize gain or loss upon the sale, exchange, redemption, repurchase,
retirement or other disposition of those Notes measured by the difference (if
any) between (i) the amount of cash and the fair market value of any property
received (except to the extent that such cash or other property is attributable
to the payment of accrued interest not previously included in income, which
amount will be taxable as ordinary income) and (ii) the holder's adjusted tax
basis in those Notes (including any market discount previously included in
income by the holder). Each holder of Common Stock into which the Notes are
converted, in general, will recognize gain or loss upon the sale, exchange,
redemption, or other disposition of the Common Stock measured under rules
similar to those described in the preceding sentence for the Notes. Special
rules may apply to redemptions of Common Stock which may result in different
treatment. Any such gain or loss recognized on the sale, exchange, redemption,
repurchase, retirement or other disposition of a Note or share of Common Stock
should be capital gain or loss (except as discussed under "--Market Discount"
above), and would be long-term capital gain or loss if the Note or the Common
Stock or the combined holding period of both the Notes and the Common Stock into
which such Notes were converted had been held for or equalled more than one year
at the time of the sale or exchange. An investor's initial basis in a Note will
be the cash price paid therefor.
Back-Up Withholding. A holder of Notes or Common Stock may be subject to
"back-up withholding" from a reportable payment at a rate of 31 percent if,
among other things, (i) the holder fails to furnish a social security number or
other taxpayer identification number ("TIN") to the Company certified under
penalties of perjury within a reasonable time after the request therefor; (ii)
the IRS notifies the Company that the TIN furnished by the holder is incorrect;
(iii) the IRS notifies the Company that backup withholding should be commenced
because the holder has failed to properly report interest or dividends; or (iv)
when required to do so, the holder fails to certify under penalties of perjury
that such holder is not subject to backup withholding or that the TIN provided
to the Company is correct. Reportable payments include interest payments,
dividend payments and, under certain circumstances, principal payments on the
Notes. A holder who does not provide the Company with its correct TIN also may
be subject to penalties imposed by the IRS. Any amount withheld from a payment
to a holder under the back-up withholding rules is creditable against the
holder's federal income tax liability, provided the required information is
furnished to the IRS. Back-up withholding will not apply, however, with respect
to payments made to certain holders, including corporations, tax-exempt
organizations and certain Non-U.S. persons, provided their exemption from
back-up withholding is properly established.
The Company will report to the holders of Notes and Common Stock and to
the IRS the amount of any "reportable payments" for each calendar year and the
amount of tax withheld, if any, with respect to such payments.
-28-
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the Notes and the shares of
Common Stock being offered hereby will be passed upon by Nutter, McClennen &
Fish, LLP, Boston, MA 02110. Michael J. Bohnen, an attorney at Nutter, McClennen
& Fish, LLP, is the Assistant Secretary of the Company.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and for the year then ended, and the combined financial statements of the
Company as of December 31, 1995 and for the year ended December 31, 1995 and the
period from June 24, 1994 (inception) to December 31, 1994, incorporated by
reference in this Prospectus, have been incorporated herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in accounting and auditing.
-29-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses in connection with the offering to which this Registration
Statement relates, other than commissions, are to be borne by the Company. All
of the amounts shown are estimated except the Securities and Exchange Commission
registration fee:
Securities and Exchange Commission
Registration Fee..................................... $34,849
Accounting Fees...................................... 15,000
Legal Fees........................................... 35,000
Printing Expenses.................................... 35,000
Miscellaneous Expense................................ 20,151
------
Total ............................................ $140,000
Item 15. Indemnification of Directors and Officers.
The Company is a Delaware corporation. Reference is made to Section 145
of the Delaware General Corporation Law, as amended, which provides that a
corporation may indemnify any person who was or is a party to or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Delaware Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite an adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Article 11 of the Company's Third Restated Certificate of Incorporation
eliminates the personal liability of directors to the Company or its
stockholders for monetary damages for breach of fiduciary duty to the full
extent
II-1
<PAGE>
permitted by Delaware law. Article VII of the Company's By-Laws provides that
the Company indemnify its officers and directors to the full extent permitted by
the Delaware General Corporation Law.
The Company has entered into indemnification agreements with each of
its directors. The Company may also enter into similar agreements with certain
of its officers who are not also directors. Generally, the Company's By-Laws and
the indemnification agreements attempt to provide the maximum protection
permitted by Delaware law with respect to indemnification of directors and
officers.
The indemnification agreements provide that the Company will pay
certain amounts incurred by a director or officer in connection with any civil
or criminal action or proceeding, and specifically including actions by or in
the name of the Company (derivative suits), where the individual's involvement
is by reason of the fact that he is or was a director or officer of the Company.
Such amounts include, to the maximum extent permitted by law, attorney's fees,
judgments, civil or criminal fines, settlement amounts, and other expenses
customarily incurred in connection with legal proceedings. Under the
indemnification agreements and the Company's By-Laws, a director or officer will
not receive indemnification if he is found not to have acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Company.
The Company maintains an indemnification insurance policy covering all
directors and officers of the Company and its subsidiaries.
Item 16. List of Exhibits.
Exhibit No.
+ 4.1 Indenture dated as of August 15, 1997
+ 4.2 Registration Rights Agreement dated as of August 15, 1997
+ 5.1 Opinion of Nutter, McClennen & Fish, LLP
+ 12.1 Computation of Ratios
+ 23.1 Consent of Coopers & Lybrand L.L.P.
+ 23.2 Consent of Nutter, McClennen & Fish, LLP (included in
Exhibit 5.1)
+ 24.1 Power of Attorney (contained in Page II-4)
+ 25.1 Statement of Eligibility of Trustee
- ------------------
+ Filed herewith.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the 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 Commission such indemnification is against
public policy as expressed in the 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
II-2
<PAGE>
successful defense of any action, suit or proceeding) is asserted against 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 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 offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Act.
(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 ow 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.
(iii) To include any material information with respect to the
plan of distrubition not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment 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;
(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; and
(4) That, for purposes of determining any liability under the Act, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Needham, Commonwealth of Massachusetts on this 17th
day of October 1997.
CAREMATRIX CORPORATION
By: /s/ Robert M. Kaufman
---------------------------------------
Robert M. Kaufman
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below on this Registration Statement hereby constitutes and appoints
Robert M. Kaufman, James M. Clary, III, Michael J. Bohnen and Alexander S.
Glovsky, and each of them, with full power to act without the other, his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (until revoked in writing) to sign any and all amendments (including
post-effective amendments and amendments thereto) to this Registration Statement
on Form S-3 of the Registrant, 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 do an perform each and every act and thing requisite
and necessary fully to all intents and purposes as he or she might or could do
in person thereby ratifying and confirming all that said attorney's-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
/s/ Abraham D. Gosman October 17, 1997
- ---------------------------------------
Abraham D. Gosman,
Chairman of the Board of Directors
/s/ Andrew D. Gosman October 17, 1997
- ---------------------------------------
Andrew D. Gosman,
Director and President
/s/ Michael M. Gosman October 17, 1997
- ---------------------------------------
Michael M. Gosman,
Director, Executive Vice President and
Vice Chairman of the Board of Directors
/s/ Robert Cataldo October 17, 1997
- ---------------------------------------
Robert Cataldo,
Director
II-4
<PAGE>
/s/ Donald J. Amaral October 17, 1997
- ---------------------------------------
Donald J. Amaral,
Director
/s/ H. Loy Anderson, Jr. October 17, 1997
- ---------------------------------------
H. Loy Anderson, Jr.,
Director
/s/ Bedros Baharian October 17, 1997
- ---------------------------------------
Bedros Baharian,
Director
/s/ Stephen E. Ronai October 17, 1997
- ---------------------------------------
Stephen E. Ronai,
Director
/s/ Robert M. Kaufman October 17, 1997
- ---------------------------------------
Robert M. Kaufman,
Chief Executive Officer and
Principal Accounting Officer
II-5
Exhibit 4.1
-----------
CAREMATRIX CORPORATION
STATE STREET BANK AND TRUST COMPANY
as Trustee
INDENTURE
Dated as of August 15, 1997
6 1/4% Convertible Subordinated Notes due 2004
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I DEFINITIONS....................................................................................................1
Section 1.1 Definitions....................................................................................1
ARTICLE II ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES.............................................8
Section 2.1 Designation, Amount and Issue of Notes.........................................................8
Section 2.2 Form of Notes..................................................................................8
Section 2.3 Date and Denomination of Notes; Payments of Interest...........................................9
Section 2.4 Execution of Notes............................................................................10
Section 2.5 Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary..........11
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes....................................................20
Section 2.7 Temporary Notes...............................................................................20
Section 2.8 Cancellation of Notes Paid, Etc...............................................................21
ARTICLE III REDEMPTION OF NOTES.........................................................................................21
Section 3.1 Redemption Prices.............................................................................21
Section 3.2 Notice of Redemption; Selection of Notes......................................................21
Section 3.3 Payment of Notes Called for Redemption........................................................23
Section 3.4 Conversion Arrangement on Call for Redemption.................................................24
ARTICLE IV SUBORDINATION OF NOTES.......................................................................................25
Section 4.1 Agreement of Subordination....................................................................25
Section 4.2 Payments to Noteholders.......................................................................25
Section 4.3 Bankruptcy and Dissolution, Etc...............................................................26
Section 4.4 Subrogation of Notes..........................................................................28
Section 4.5 Authorization by Noteholders..................................................................29
Section 4.6 Notice to Trustee.............................................................................29
Section 4.7 Trustee's Relation to Senior Indebtedness.....................................................30
Section 4.8 No Impairment of Subordination................................................................31
Section 4.9 Certain Conversions Deemed Payment............................................................31
ARTICLE V PARTICULAR COVENANTS OF THE COMPANY...........................................................................31
Section 5.1 Payment of Principal, Premium and Interest....................................................31
Section 5.2 Maintenance of Office or Agency...............................................................31
Section 5.3 Appointments to Fill Vacancies in Trustee's Office............................................32
Section 5.4 Provisions as to Paying Agent.................................................................32
Section 5.5 Existence.....................................................................................33
Section 5.6 Rule 144A Information Requirement.............................................................33
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 5.7 Stay, Extension and Usury Laws................................................................34
Section 5.8 Compliance Certificate........................................................................34
Section 5.9 Further Instruments and Acts..................................................................34
ARTICLE VI NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE................................................34
Section 6.1 Noteholders' Lists............................................................................34
Section 6.2 Preservation and Disclosure of Lists..........................................................35
Section 6.3 Reports by Trustee............................................................................35
Section 6.4 Reports by Company............................................................................35
ARTICLE VII DEFAULTS AND REMEDIES.......................................................................................36
Section 7.1 Events of Default.............................................................................36
Section 7.2 Payments of Notes on Default; Suit Therefor...................................................39
Section 7.3 Application of Monies Collected by Trustee....................................................40
Section 7.4 Proceedings by Noteholder.....................................................................41
Section 7.5 Proceedings by Trustee........................................................................42
Section 7.6 Remedies Cumulative and Continuing............................................................42
Section 7.7 Direction of Proceedings and Waiver of Defaults by Majority of Noteholders. ..................42
Section 7.8 Notice of Defaults............................................................................43
Section 7.9 Undertaking to Pay Costs......................................................................43
Section 7.10 Delay or Omission Not Waiver..................................................................43
ARTICLE VIII CONCERNING THE TRUSTEE.....................................................................................44
Section 8.1 Duties and Responsibilities of Trustee........................................................44
Section 8.2 Reliance on Documents, Opinions, Etc..........................................................45
Section 8.3 No Responsibility for Recitals, Etc...........................................................46
Section 8.4 Trustee, Paying Agents, Conversion Agents or Registrar May Own Notes..........................46
Section 8.5 Monies to Be Held in Trust....................................................................46
Section 8.6 Compensation and Expenses of Trustee..........................................................47
Section 8.7 Officers' Certificate as Evidence.............................................................47
Section 8.8 Conflicting Interests of Trustee..............................................................48
Section 8.9 Eligibility of Trustee........................................................................48
Section 8.10 Resignation or Removal of Trustee.............................................................48
Section 8.11 Acceptance by Successor Trustee...............................................................49
Section 8.12 Succession by Merger, Etc.....................................................................50
Section 8.13 Limitation on Rights of Trustee as Creditor...................................................50
ARTICLE IX CONCERNING THE NOTEHOLDERS...................................................................................51
Section 9.1 Action by Noteholders.........................................................................51
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 9.2 Proof of Execution by Noteholders.............................................................51
Section 9.3 Who Are Deemed Absolute Owners................................................................51
Section 9.4 Company-Owned Notes Disregarded...............................................................51
Section 9.5 Revocation of Consents; Future Holders Bound..................................................52
ARTICLE X NOTEHOLDERS' MEETINGS.........................................................................................52
Section 10.1 Purpose of Meetings...........................................................................52
Section 10.2 Call of Meetings by Trustee...................................................................53
Section 10.3 Call of Meetings by Company or Noteholders....................................................53
Section 10.4 Qualifications for Voting.....................................................................53
Section 10.5 Regulations...................................................................................54
Section 10.6 Voting........................................................................................54
Section 10.7 No Delay of Rights by Meeting.................................................................55
ARTICLE XI SUPPLEMENTAL INDENTURES......................................................................................55
Section 11.1 Supplemental Indentures Without Consent of Noteholders........................................55
Section 11.2 Supplemental Indentures With Consent of Noteholders...........................................56
Section 11.3 Effect of Supplemental Indentures.............................................................57
Section 11.4 Notation on Notes.............................................................................57
Section 11.5 Evidence of Compliance of Supplemental Indenture to Be Furnished Trustee......................57
ARTICLE XII CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE...........................................................58
Section 12.1 Company May Consolidate, Etc. on Certain Terms................................................58
Section 12.2 Successor Corporation to Be Substituted.......................................................58
Section 12.3 Opinion of Counsel to Be Given Trustee........................................................59
ARTICLE XIII SATISFACTION AND DISCHARGE OF INDENTURE....................................................................59
Section 13.1 Discharge of Indenture........................................................................59
Section 13.2 Deposited Monies to Be Held in Trust by Trustee...............................................60
Section 13.3 Paying Agent to Repay Monies Held.............................................................60
Section 13.4 Return of Unclaimed Monies....................................................................60
Section 13.5 Reinstatement.................................................................................60
ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS.............................................61
Section 14.1 Indenture and Notes Solely Corporate Obligations..............................................61
ARTICLE XV CONVERSION OF NOTES..........................................................................................61
Section 15.1 Right to Convert..............................................................................61
</TABLE>
-iii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 15.2 Exercise of Conversion Privilege; Issuance of Common Stock on Conversion;
No Adjustment for Interest or Dividends......................................................62
Section 15.3 Cash Payments in Lieu of Fractional Shares....................................................63
Section 15.4 Conversion Price..............................................................................64
Section 15.5 Adjustment of Conversion Price................................................................64
Section 15.6 Effect of Reclassification, Consolidation, Merger or Sale.....................................74
Section 15.7 Taxes on Shares Issued........................................................................75
Section 15.8 Reservation of Shares; Shares to Be Fully Paid; Listing of Common Stock.......................76
Section 15.9 Responsibility of Trustee.....................................................................76
Section 15.10 Notice to Holders Prior to Certain Actions....................................................77
ARTICLE XVI REPURCHASE UPON A REPURCHASE EVENT..........................................................................78
Section 16.1 Repurchase Right..............................................................................78
Section 16.2 Notices; Method of Exercising Repurchase Right, Etc...........................................78
Section 16.3 Conditions to the Company's Election to Pay the Repurchase Price in
Common Stock..................................................................................81
Section 16.4 Certain Definitions...........................................................................82
ARTICLE XVII MISCELLANEOUS PROVISIONS...................................................................................83
Section 17.1 Provisions Binding on Company's Successors....................................................83
Section 17.2 Official Acts by Successor Corporation........................................................84
Section 17.3 Addresses for Notices, Etc....................................................................84
Section 17.4 Governing Law.................................................................................84
Section 17.5 Evidence of Compliance with Conditions Precedent; Certificates to Trustee.....................84
Section 17.6 Legal Holidays................................................................................85
Section 17.7 No Security Interest Created..................................................................85
Section 17.8 Trust Indenture Act...........................................................................85
Section 17.9 Benefits of Indenture.........................................................................85
Section 17.10 Table of Contents, Headings, Etc..............................................................86
Section 17.11 Authenticating Agent..........................................................................86
Section 17.12 Execution in Counterparts.....................................................................87
</TABLE>
-iv-
<PAGE>
INDENTURE dated as of August 15, 1997 between CareMatrix Corporation, a
Delaware corporation (hereinafter sometimes called the "Company", as more fully
set forth in Section 1.1), and State Street Bank and Trust Company, a banking
corporation duly organized and existing under the laws of The Commonwealth of
Massachusetts, as trustee (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 1/4% Convertible Subordinated Notes due 2004
(hereinafter sometimes called the "Notes"), in an aggregate principal amount not
to exceed $115,000,000 and, to provide the terms and conditions upon which the
Notes are to be authenticated, issued and delivered, the Company has duly
authorized the execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be borne by
the Notes, a form of assignment, a form of option to elect repayment upon a
Repurchase Event, a form of conversion notice and a certificate of transfer to
be borne by the Notes are to be substantially in the forms hereinafter provided
for; and
WHEREAS, all acts and things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute these presents a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes
are, and are to be, authenticated, issued and delivered, and in consideration of
the premises and of the purchase and acceptance of the Notes by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The terms defined in this Section 1.1 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture, 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 terms in said Trust Indenture Act and in said
Securities Act as in force at the
<PAGE>
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.
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.
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, or duly authorized
committee thereof (to the extent permitted by applicable law), and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
Business Day: The term "Business Day" 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.
close of business: The term "close of business" means 5 p.m. (New York
City time).
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 liquany. Subject to the
provisions of Section 15.6, however, shares issuable on conversion of Notes
shall include only shares of the class designated as common stock of the Company
at the date of this Indenture or shares of any class or classes resulting from
any reclassification or reclassifications thereof and 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.
-2-
<PAGE>
Company: The term "Company" shall mean CareMatrix Corporation, a
Delaware 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 Two
International Place, 4th Floor, Boston, Massachusetts 02110, Attention:
Corporate Trust Division (CareMatrix Corporation 6 1/4% Convertible Subordinated
Notes due 2004).
Custodian: The term "Custodian" means State Street Bank and Trust
Company, as custodian with respect to the Notes in global form, or any successor
entity thereto.
default: The term "default" shall mean any event that is, or after
notice or passage of time, or both, would be, an Event of Default.
Depositary: The term "Depositary" means, with respect to the Notes
issuable or issued in whole or in part in global form, the person specified in
Section 2.5(d) as the Depositary with respect to such Notes, until a successor
shall have been appointed and become such pursuant to the applicable provisions
of this Indenture, and thereafter, "Depositary" shall mean or include such
successor.
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.
Indebtedness: The term "Indebtedness" shall mean any obligations of, or
guaranteed or assumed by, the Company or any Significant Subsidiary for borrowed
money.
-3-
<PAGE>
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 Robertson,
Stephens & Company LLC, Morgan Stanley & Co. Incorporated, PaineWebber
Incorporated, Salomon Brothers Inc. and Smith Barney Inc.
Liquidated Damages: The term "Liquidated Damages" means all liquidated
damages then owing pursuant to Section 3 of the Registration Rights Agreement.
Note or Notes: The terms "Note" or "Notes" shall mean any Note or
Notes, as the case may be, authenticated and delivered under this Indenture.
Noteholder; holder: The terms "Noteholder" or "holder" as applied to
any Note, or other similar terms (but excluding the term "beneficial holder"),
shall mean any person in whose name at the time a particular Note is registered
on the Note register.
Note register: The term "Note register" shall have the meaning
specified in Section 2.5.
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 17.5 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
17.5 if and to the extent required by the provisions of such Section.
outstanding: The term "outstanding," when used with reference to Notes,
shall, subject to the provisions of Section 9.4, mean, as of any particular
time, all Notes authenticated and delivered by the Trustee under this Indenture,
except
(a) Notes theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) Notes, or portions thereof, for 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
-4-
<PAGE>
segregated in trust by the Company (if the Company
shall act as its own paying agent); provided that if
such Notes are to be redeemed, as the case may be,
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) Notes in lieu of which, or in substitution for which,
other Notes shall have been authenticated and
delivered pursuant to the terms of Section 2.6 unless
proof satisfactory to the Trustee is presented that
any such Notes are held by bona fide holders in due
course; and
(d) Notes converted into Common Stock pursuant to Article
XV and Notes deemed not outstanding pursuant to
Section 3.2.
person: The term "person" shall mean an individual, 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 Note: The term "Predecessor Note" of any particular Note
shall mean every previous Note evidencing all or a portion of the same debt as
that evidenced by such particular Note; and, for the purposes of this
definition, any Note authenticated and delivered under Section 2.6 in lieu of a
lost, destroyed or stolen Note shall be deemed to evidence the same debt as the
lost, destroyed or stolen Note that it replaces.
QIB: The term "QIB" shall mean a "qualified institutional buyer" as
defined in Rule 144A.
Registration Rights Agreement: The term "Registration Rights Agreement"
means that certain Registration Rights Agreement, dated as of August 15, 1997,
between the Company and the Initial Purchasers.
Regulation S: The term "Regulation S" shall mean Regulation S as
promulgated under the Securities Act.
Repurchase Event: The term "Repurchase Event" shall have the meaning
specified in Section 16.3.
Repurchase Price: The term "Repurchase Price" has the meaning specified
in Section 16.1.
-5-
<PAGE>
Responsible Officer: The term "Responsible Officer", when used with
respect to the Trustee, shall mean an officer of the Trustee in the Corporate
Trust Office assigned and duly authorized by the Trustee to administer its
obligations under this Indenture.
Restricted Securities: The term "Restricted Securities" has the meaning
specified in Section 2.5(d).
Rule 144A: The term "Rule 144A" shall mean Rule 144A as promulgated
under the Securities Act.
Securities Act: The term "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
Senior Indebtedness: The term "Senior Indebtedness" means the principal
of, premium, if any, interest on (including 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) and any other payment due pursuant to, any of the following,
whether outstanding on the date of this Indenture or thereafter incurred or
created:
(a) All indebtedness of the Company for money borrowed or
evidenced by notes, debentures, bonds or other
securities (including, but not limited to, those
which are convertible or exchangeable for securities
of the Company) and all other obligations of the
Company constituting the deferred purchase price of
property or assets;
(b) All indebtedness and other obligations of the Company
due and owing with respect to letters of credit
(including, but not limited to, reimbursement
obligations with respect thereto);
(c) All indebtedness or other obligations of the Company
due and owing with respect to interest rate and
currency swap agreements, cap, floor and collar
agreements, currency spot and forward contracts and
other similar agreements and arrangements;
(d) All indebtedness consisting of commitment or standby
fees due and payable to lending institutions with
respect to credit facilities or letters of credit
available to the Company;
(e) All obligations of the Company under leases required
or permitted to be capitalized under generally
accepted accounting principles or under any lease or
related document (including a purchase agreement)
that provides 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;
-6-
<PAGE>
(f) All indebtedness or obligations of others of the
kinds described in any of the preceding clauses (a),
(b), (c), (d) or (e) assumed by or guaranteed in any
manner by the Company or in effect guaranteed
(directly or indirectly) by the Company through an
agreement to purchase, contingent or otherwise, and
all obligations of the Company under any such
guarantee or other arrangements; and
(g) All renewals, extensions, refundings, deferrals,
amendments or modifications of indebtedness or
obligations of the kinds described in any of the
preceding clauses (a), (b), (c), (d), (e) or (f);
unless in the case of any particular indebtedness, obligation, renewal,
extension, refunding, amendment, modification or supplement, the instrument or
other document creating or evidencing the same or the assumption or guarantee of
the same expressly provides that such indebtedness, obligation, renewal,
extension, refunding, amendment, modification or supplement is subordinate to,
or is not superior to, or is pari passu with, the Notes; provided that Senior
Indebtedness shall not include (i) any indebtedness of any kind of the Company
to any subsidiary of the Company, a majority of the voting stock of which is
owned, directly or indirectly, by the Company, (ii) indebtedness for trade
payables or constituting the deferred purchase price of assets or services
incurred in the ordinary course of business, or (iii) the Notes.
Significant Subsidiary: The term "Significant Subsidiary" means, with
respect to any person, a Subsidiary of such person that would constitute a
"significant subsidiary" as such term is defined under Rule 1-02 of Regulation
S-X of the Securities and Exchange Commission.
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(h)(5).
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.
-7-
<PAGE>
The definitions of certain other terms are as specified in Article XV
and Article XVI.
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1 Designation, Amount and Issue of Notes. The Notes shall be
designated as "6 1/4% Convertible Subordinated Notes due 2004". Notes 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
August 12, 1997 (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, 15.2 and 16.2) 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 Notes 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.
Section 2.2 Form of Notes. The Notes and the Trustee's certificate of
authentication to be borne by such Notes 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 Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed or designated for issuance, or to conform to usage.
Any Note in global form shall represent such of the outstanding Notes
as shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be increased or reduced to reflect transfers or exchanges permitted
hereby. Any endorsement of a Note in global form to reflect the amount of any
increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee or the Custodian, at the direction of the Trustee,
in such manner and upon instructions given by the holder of such Notes in
accordance with this Indenture. Payment of principal of and interest and
premium, if any (including any redemption price), on any Note in global form
shall be made to the holder of such Note.
-8-
<PAGE>
The terms and provisions contained in the form of Note attached as
Exhibit A hereto shall constitute, and is hereby expressly made, a part of this
Indenture and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.3 Date and Denomination of Notes; Payments of Interest. The
Notes shall be issuable in registered form without coupons in denominations of
$1,000 principal amount and integral multiples thereof. Every Note shall be
dated the date of its authentication, shall bear interest from the applicable
date and accrued interest shall be payable semiannually on each February 15 and
August 15, commencing February 15, 1998 as specified on the face of the form of
Note, attached as Exhibit A hereto.
The person in whose name any Note (or its Predecessor Note) is
registered at the close of business on any record date with respect to any
interest payment date (including any Note that is converted after the record
date and on or before the interest payment date) shall be entitled to receive
the interest payable on such interest payment date notwithstanding the
cancellation of such Note upon any transfer, exchange or conversion subsequent
to the record date and on or prior to such interest payment date; provided that,
in the case of any Note, or portion thereof, called for redemption pursuant to
Article III on a redemption date, or repurchased by the Company pursuant to
Article XVI on a repurchase date, during the period from the close of business
on the record date to the close of business on the Business Day next preceding
the following interest payment date, interest shall not be paid to the person in
whose name the Note, or portion thereof, is registered on the close of business
on such record date, and the Company shall have no obligation to pay interest on
such Note or portion thereof except to the extent required to be paid upon such
redemption or repurchase in accordance with Article III or Article XVI. 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 Notes 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 Notes shall be paid by wire transfer in immediately available
funds in accordance with the wire transfer instruction supplied by such holder
from time to time to the Trustee and paying agent (if different from Trustee) at
least two days prior to the applicable record date. The term "record date" with
respect ll mean the February 1 or August 1 preceding said February 15 or August
15.
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months compounded semi-annually.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any said February 15 or August 15 (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Noteholder on
the relevant record date by virtue of his having been such Noteholder; and such
Defaulted Interest shall be paid by the Company, at its election in each case,
as provided in clause (1) or (2) below:
-9-
<PAGE>
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest to be paid on each Note and
the date of the payment (which shall be not less than 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 f9 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 Noteholder as of such special record date at
his address as it appears in the Note 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 Notes (or their respective Predecessor Notes) were
registered at the close of business on such special record date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Notes
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.
Section 2.4 Execution of Notes. The Notes 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
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 Notes as shall bear thereon a certificate of
authentication substantially in the form set forth on the form of Note attached
as Exhibit A hereto, manually executed by the Trustee (or an authenticating
agent appointed by the Trustee as provided by Section 17.11), shall be entitled
to
-10-
<PAGE>
the benefits of this Indenture or be valid or obligatory for any purpose. Such
certificate by the Trustee (or such an authenticating agent) upon any Note
executed by the Company shall be conclusive evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company; and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.
Section 2.5 Exchange and Registration of Transfer of Notes;
Restrictions on Transfer; Depositary.
(a) The Company shall cause to be kept at the Corporate Trust
Office 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 "Note
register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Notes and
of transfers of Notes. Such register shall be in written form or in any
form capable of being converted into written form within a reasonable
period of time. The Trustee is hereby appointed "Note registrar" for
the purpose of registering Notes and transfers of Notes as herein
provided. The Company may appoint one or more co-registrars in
accordance with Section 5.2.
Upon surrender for registration of transfer of any Note to the
Note registrar or any co-registrar, and satisfaction of the
requirements for such transfer set forth in this Section 2.5, the
Company shall execute, and the Trustee shall authenticate and deliver,
in the name of the designated transferee or transferees, one or more
new Notes of any authorized denominations and of a like aggregate
principal amount and bearing such restrictive legends as may be
required by this Indenture.
Notes may be exchanged for other Notes of any authorized
denominations and of a like aggregate principal amount, upon surrender
of the Notes to be exchanged at any such office or agency. Whenever any
Notes are so surrendered for exchange, the Company shall execute, and
the Trustee shall authenticate and deliver, the Notes which the
Noteholder making the exchange is entitled to receive, bearing
registration numbers not contemporaneously outstanding.
All Notes presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company, the
Trustee, the Note registrar or any co-registrar)
-11-
<PAGE>
be duly endorsed, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and duly
executed, by the Noteholder thereof or his attorney-in-fact duly
authorized in writing.
No service charge shall be charged to the Noteholder for any
exchange or registration of transfer of Notes, but the Company may
require payment of a sum sufficient to cover any tax, assessments or
other governmental charges that may be imposed in connection therewith.
None of the Company, the Trustee, the Note registrar or any
co-registrar shall be required to exchange or register a transfer of
(a) any Notes for a period of fifteen (15) days next preceding any
selection of Notes to be redeemed or (b) any Notes called for
redemption or, if a portion of any Note is selected or called for
redemption, such portion thereof selected or called for redemption or
(c) any Notes surrendered for conversion or, if a portion of any Note
is surrendered for conversion, such portion thereof surrendered for
conversion or (d) any Notes, or a portion of any Note, surrendered for
repurchase (and not withdrawn) in connection with a Repurchase Event.
All Notes issued upon any transfer or exchange of Notes 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 Notes surrendered upon such registration of
transfer or exchange.
(b) So long as the Notes are eligible for book-entry
settlement with the Depositary, unless otherwise required by law, all
Notes (i) issued to QIBs pursuant to Rule 144A of the Securities Act to
be traded on The Portal Market or (ii) to a person who is not a U.S.
Person (as defined in Regulation S) who is acquiring the Note in an
offshore transaction (a "Non-U.S. Person") in accordance with
Regulation S shall be represented by a Note in global form registered
in the name of the Depositary or the nominee of the Depositary. The
transfer and exchange of beneficial interests in such Note in global
form, which does not involve the issuance of a definitive Note, shall
be effected through the Depositary (but not the Trustee or the
Custodian) in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the
Depositary therefor.
Notes resold to persons who are neither QIBs nor Non-U.S.
Persons will be issued in definitive registered form and may not be
represented by a Note in global form. In addition, at any time at the
request of a QIB or a Non-U.S. Person that is a beneficial holder of an
interest in a Note in global form, such beneficial holder shall be
entitled to obtain a definitive Note upon written request to the
Trustee and the Custodian in accordance with the standing instructions
and procedures existing between the Depositary and the Custodian for
the issuance thereof. Upon receipt of any such request, the Trustee or
the Custodian, at the direction of the Trustee, will cause, in
accordance with the
-12-
<PAGE>
standing instructions and procedures existing between the Depositary
and the Custodian, the aggregate principal amount of the Note in global
form to be reduced by the principal amount of the definitive Note
issued upon such request to such beneficial holder and, following such
reduction, the Company will execute and the Trustee will authenticate
and deliver to such beneficial holder (or its nominee) a definitive
Note or Notes in the appropriate aggregate principal amount in the name
of such beneficial holder (or its nominee) and bearing such restrictive
legends as may be required by this Indenture.
Any transfer of a beneficial interest in a Note in global form
which cannot be effected through book-entry settlement must be effected
by the delivery to the transferee (or its nominee) of a definitive Note
or Notes registered in the name of the transferee (or its nominee) on
the books maintained by the Trustee in accordance with the transfer
restrictions set forth herein. With respect to any such transfer, the
Trustee or the Custodian, at the direction of the Trustee, will cause,
in accordance with the standing instructions and procedures existing
between the Depositary and the Custodian, the aggregate principal
amount of the Note in global form to be reduced by the principal amount
of the beneficial interest in the Note in global form being transferred
and, following such reduction, the Company will execute and the Trustee
will authenticate and deliver to the transferee (or such transferee's
nominee, as the case may be), a Note or Notes in the appropriate
aggregate principal amount in the name of such transferee (or its
nominee) and bearing such restrictive legends as may be required by
this Indenture.
(c) So long as the Notes are eligible for book-entry
settlement, unless otherwise required by law, upon any transfer of a
definitive Note to a QIB in accordance with Rule 144A or a Non-U.S.
Person in accordance with Regulation S, unless otherwise requested by
the transferor, and upon receipt of the definitive Note or Notes being
so transferred, together with a certification from the transferor that
the transferee is a QIB or a Non-U.S. Person (or other evidence
satisfactory to the Trustee), the Trustee shall make or direct the
Custodian to make, an endorsement on the Note in global form to reflect
an increase in the aggregate principal amount of the Notes represented
by the Note in global form by the principal amount of the Note being
transferred to the QIB or the Non-U.S. Person, the Trustee shall cancel
such definitive Note or Notes and cause, or direct the Custodian to
cause, in accordance with the standing instructions and procedures
existing between the Depositary and the Custodian, the aggregate
principal amount of Notes represented by the Note in global form to be
increased accordingly; provided that no definitive Note, or portion
thereof, in respect of which the Company or an Affiliate of the Company
held any beneficial interest shall be included in such Note in global
form until such definitive Note is freely tradable in accordance with
Rule 144(k); provided further that the Trustee shall authenticate and
deliver Notes in definitive form upon any transfer of a beneficial
interest in the Note in global form to the Company or any Affiliate of
the Company.
-13-
<PAGE>
Any Note in global form may be endorsed with or have
incorporated in the text thereof such legends or recitals or changes
not inconsistent with the provisions of this Indenture as may be
required by the Custodian, the Depositary or by the National
Association of Securities Dealers, Inc. in order for the Notes to be
tradeable on The Portal Market or as may be required for the Notes to
be tradeable on any 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 or automated quotation system upon which the Notes
may be listed or traded or designated for issuance or to conform with
any usage with respect thereto, or to indicate any special limitations
or restrictions to which any particular Notes are subject.
(d) Every Note that bears or is required under this Section
2.5(d) to bear the legend set forth in this Section 2.5(d) (together
with any Common Stock issued upon conversion of the Notes and required
to bear the legend set forth in Section 2.5(e), collectively, the
"Restricted Securities") shall be subject to the restrictions on
transfer set forth in this Section 2.5(d) (including 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
Security, 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 "transfer" encompasses any sale, pledge, transfer or
other disposition whatsoever of any Restricted Security.
Until two (2) years after the original issuance date of any
Note, any certificate evidencing such Note (and all securities issued
in exchange therefor or substitution thereof, other than Common Stock,
if any, issued upon conversion thereof which shall bear the legend set
forth in Section 2.5(e), if applicable) shall bear a legend in
substantially the following form (unless such Notes have been
transferred 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 notice thereof to the Trustee):
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
-14-
<PAGE>
U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY
RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE
COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A)
TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO STATE STREET BANK AND TRUST
COMPANY, AS TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3) AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED
HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE 2(F) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE NOTE
EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE
OF SUCH NOTE (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(F)
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 STATE STREET BANK AND TRUST
COMPANY, AS TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT TO
CLAUSE 2(C) OR 2(E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO STATE STREET BANK AND TRUST COMPANY, AS
TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION
-15-
<PAGE>
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER
OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY PURSUANT TO
CLAUSE 2(F) ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE
ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
Any Note (or security issued in exchange or substitution
therefor) as to which such restrictions on transfer shall have expired
in accordance with their terms may, upon surrender of such Note for
exchange to the Note registrar in accordance with the provisions of
this Section 2.5, be exchanged for a new Note or Notes, of like tenor
and aggregate principal amount, which shall not bear the restrictive
legend required by this Section 2.5(d).
Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in this Section 2.5(d)), a Note in global
form may not be transferred as a whole or in part except by the
Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by
the Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary.
The Depositary shall be a clearing agency registered under the
Exchange Act. The Company initially appoints The Depository Trust
Company to act as Depositary with respect to the Notes in global form.
Initially, the global Note shall be issued to the Depositary,
registered in the name of Cede & Co., as the nominee of the Depositary,
and deposited with the Trustee as custodian for Cede & Co.
If at any time the Depositary for the Note in global form
notifies the Company that it is unwilling or unable to continue as
Depositary for such Note, the Company may appoint a successor
Depositary with respect to such Note. If a successor Depositary for the
Note is not appointed by the Company within ninety (90) days after the
Company receives such notice, the Company will execute, and the
Trustee, upon receipt of an Officers' Certificate for the
authentication and delivery of Notes, will authenticate and deliver,
Notes in definitive form, in an aggregate principal amount equal to the
principal amount of the Note in global form, in exchange for such Note
in global form and upon delivery of such Note in global form to the
Trustee such Note in global form shall be canceled.
Definitive Notes issued in exchange for all or a part of a
Note in global form pursuant to this Section 2.5(d) shall be registered
in such names and in such authorized
-16-
<PAGE>
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 definitive Notes to the persons in whose names such definitive
Notes are so registered.
At such time as all interests in a Note in global form have
been redeemed, converted, canceled, repurchased or transferred, such
Note in global form shall be, upon receipt thereof, canceled by the
Trustee in accordance with standing procedures and instructions
existing between the Depositary and the Custodian. At any time prior to
such cancellation, if any interest in a global Note is exchanged for
definitive Notes, redeemed, converted, canceled, repurchased or
transferred to a transferee who receives definitive Notes therefor or
any definitive Note is exchanged or transferred for part of a Note in
global form, the principal amount of such Note in global form shall, in
accordance with the standing procedures and instructions existing
between the Depositary and the Custodian, be appropriately reduced or
increased, as the case may be, and an endorsement shall be made on such
Note in global form, by the Trustee or the Custodian, at the direction
of the Trustee, to reflect such reduction or increase.
(e) Until two (2) years after the original issuance date of
any Note, any stock certificate representing Common Stock issued upon
conversion of such Note 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 Notes
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 with written notice thereof to the
Trustee and any 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 OR BENEFIT 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
NOTE 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 EXCEPT (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN COMPLIANCE
-17-
<PAGE>
WITH RULE 144A, (C) INSIDE THE UNITED STATES 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 AMERICAN SECURITIES
TRANSFER & TRUST, INC., AS TRANSFER AGENT, A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE COMMON STOCK EVIDENCED
HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRANSFER AGENT), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT (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(F) ABOVE), IT WILL
FURNISH TO AMERICAN SECURITIES TRANSFER & TRUST, INC., AS
TRANSFER AGENT, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT WILL DELIVER TO
EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS
TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(F)
ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER
OF THE COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE 1(F)
ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE ORIGINAL
ISSUANCE OF THE NOTE UPON THE CONVERSION OF WHICH THE COMMON
STOCK EVIDENCED HEREBY WAS ISSUED OR UPON THE EARLIER
SATISFACTION OF AMERICAN SECURITIES TRANSFER & TRUST, INC., AS
TRANSFER AGENT, THAT THE COMMON STOCK HAS BEEN OR IS BEING
OFFERED AND SOLD IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
-18-
<PAGE>
Any such Common Stock as to which such restrictions on
transfer shall have expired in accordance with their terms 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 aggregate number of shares of Common Stock,
which shall not bear the restrictive legend required by this Section
2.5(e).
(f) Any Note or Common Stock issued upon the conversion or
exchange of a Note 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 Notes 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 Notes 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 Notes. The provisions of this Section 2.5(g)
will not be effective until such time as the Opinion of Counsel and
Officers' Certificate have 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.
-19-
<PAGE>
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes. In case any
Note shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its request the Trustee or an authenticating
agent appointed by the Trustee shall authenticate and deliver, a new Note,
bearing a number not contemporaneously outstanding, in exchange and substitution
for the mutilated Note, or in lieu of and in substitution for the Note so
destroyed, lost or stolen. In every case the applicant for a substituted Note
shall furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be required by them to
save each of them harmless 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 Note and of the ownership thereof.
The Trustee or such authenticating agent may authenticate any such
substituted Note and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Note, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Note 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 Note, pay or authorize the payment of or convert or authorize the
conversion of the same (without surrender thereof except in the case of a
mutilated Note), as the case may be, if the applicant for such payment or
conversion shall furnish to the Company, to the Trustee and, if applicable, tent
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 Note and of the
ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section
2.6 by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note 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
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment or conversion of negotiable
instruments or other securities without their surrender.
Section 2.7 Temporary Notes. Pending the preparation of definitive
Notes, the Company may execute and the Trustee or an authenticating agent
appointed by the Trustee shall,
-20-
<PAGE>
upon written request of the Company, authenticate and deliver temporary Notes
(printed or lithographed). Temporary Notes shall be issuable in any authorized
denomination, and substantially in the form of the definitive Notes but with
such omissions, insertions and variations as may be appropriate for temporary
Notes, all as may be determined by the Company. Every such temporary Note shall
be executed by the Company and authenticated by the Trustee or such
authenticating agent upon the same conditions and in substantially the same
manner, and with the same effect, as the definitive Notes. Without unreasonable
delay the Company will execute and deliver to the Trustee or such authenticating
agent definitive Notes (other than in the case of Notes in global form) and
thereupon any or all temporary Notes (other than any such Note in global form)
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 Notes an equal
aggregate principal amount of definitive Notes. Such exchange shall be made by
the Company at its own expense and without any charge therefor. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits and subject to the same limitations under this Indenture as definitive
Notes authenticated and delivered hereunder.
Section 2.8 Cancellation of Notes Paid, Etc. All Notes surrendered for
the purpose of payment, redemption, repurchase, conversion, exchange or
registration of transfer, shall, if surrendered to the Company or any paying
agent or any Note registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be
promptly canceled by it, and no Notes shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. Upon written
instructions of the Company, the Trustee shall destroy canceled Notes and, after
such destruction, shall deliver a certificate of such destruction to the
Company. If the Company shall acquire any of the Notes, such acquisition shall
not operate as a redemption or satisfaction of the indebtedness represented by
such Notes unless and until the same are delivered to the Trustee for
cancellation.
ARTICLE III
REDEMPTION OF NOTES
Section 3.1 Redemption Prices. The Company may, at its option, redeem
all or from time to time any part of the Notes 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 Note attached 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 August 18,
2000.
Section 3.2 Notice of Redemption; Selection of Notes. In case the
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Notes pursuant to Section 3.1, it shall fix a date for
redemption, and it, or at its request (which must be received by
-21-
<PAGE>
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 Notes so to be redeemed as a whole or in part at their last
addresses as the same appear on the Note register (provided that if the Company
shall give such notice, it shall also give such notice, and notice of the Notes
to be redeemed, to the Trustee). Such mailing shall be by first class mail. The
notice if mailed in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the holder receives such notice. In any
case, failure to give such notice by mail or any defect in the notice to the
holder of any Note designated for redemption as a whole or in part shall not
affect the validity of the proceedings for the redemption of any other Note.
Each such notice of redemption shall specify the aggregate principal
amount of Notes to be redeemed, the date fixed for redemption, the redemption
price at which Notes are to be redeemed, the place or places of payment, that
payment will be made upon presentation and surrender of such Notes, that
interest accrued to, 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 Notes or portions thereof into Common Stock will expire. If fewer
than all the Notes are to be redeemed, the notice of redemption shall identify
the Notes to be redeemed. In case any Note is to be redeemed in part only, the
notice of redemption shall state the portion of the principal amount thereof to
be redeemed and shall state that on and after the date fixed for redemption,
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion thereof will be issued.
On or prior to the redemption date specified in the notice of
redemption given as provided in this Section, 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
Notes (or portions thereof) so called for redemption (other than 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 Note called for redemption
is converted pursuant hereto, any money deposited with the Trustee or any paying
agent or so segregated and held in trust for the redemption of such Note shall
be paid to the Company upon its request, or, if then held by the Company shall
be discharged from such trust.
If fewer than all the Notes are to be redeemed, the Company 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
-22-
<PAGE>
aggregate principal amount of Notes to be redeemed. If fewer than all the Notes
are to be redeemed, the Trustee shall select the Notes or portions thereof to be
redeemed (in principal amounts of $1,000 or integral multiples thereof), by lot,
on a pro rata basis, or by a method the Trustee considers fair and appropriate
(as long as such method is not prohibited by the rules of any United States
national securities exchange or of an established automated over-the-counter
trading market in the United States on which the Notes are then listed). If any
Note selected for partial redemption is converted in part after such selection,
the converted portion of such Note shall be deemed (so far as may be) to be the
portion to be selected for redemption. The Notes (or portions thereof) so
selected shall be deemed duly selected for redemption for all purposes hereof,
notwithstanding that any such Note is converted as a whole or in part before the
mailing of the notice of redemption.
Upon any redemption of less than all Notes, the Company and the Trustee
may (but need not) treat as outstanding any Notes 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 Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.
Section 3.3 Payment of Notes Called for Redemption. If notice of
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date and at
the place or places stated in such notice at the applicable redemption price,
together with interest 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 Notes at the redemption price, together with interest accrued to, but
excluding, said date) interest on the Notes or portion of Notes so called for
redemption shall cease to accrue and such Notes shall cease after the close of
business on the Business Day next preceding the date fixed for redemption to be
convertible into Common Stock and, except as provided in Sections 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 Notes 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 Notes at a place of
payment in said notice specified, the said Notes 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 interest
becoming due on such date shall be payable to the holders of such Notes
registered as such on the relevant record date subject to the terms and
provisions of Section 2.3 hereof.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the holder thereof, at
the expense of the Company, a new Note or Notes, of authorized denominations, in
principal amount equal to the unredeemed portion of the Notes so presented.
-23-
<PAGE>
Notwithstanding the foregoing, the Trustee shall not redeem any Notes
or mail any notice of optional redemption during the continuance of a default in
payment of interest or premium on the Notes or of any Event of Default of which,
in the case of any Event of Default other than under Section 7.1(a), (b) or (c),
a Responsible Officer of the Trustee has knowledge. If any Note called for
redemption shall not be so paid upon surrender thereof for redemption, the
principal and premium, if any, shall, until paid or duly provided for, bear
interest from the date fixed for redemption at the rate borne by the Note and
such Note shall remain convertible into Common Stock until the principal and
premium, if any, shall have been paid or duly provided for.
Section 3.4 Conversion Arrangement on Call for Redemption. In
connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more investment
bankers or other purchasers to purchase such Notes by paying to the Trustee in
trust for the Noteholders, on or 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 Notes. Notwithstanding anything to the
contrary contained in this Article III, the obligation of the Company to pay the
redemption price of such Notes, together with interest accrued to, 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, certified as true and correct by the
Secretary or Assistant Secretary of the Company will be filed with the Trustee
prior to the date fixed for redemption, any Notes not duly surrendered for
conversion by the holders thereof may, at the option of the Company, be deemed,
to the fullest extent permitted by law, acquired by such purchasers from such
holders and (notwithstanding anything to the contrary contained in Article 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 Notes shall be deemed to have been extended through such time), subject
to payment of the above amount as aforesaid. At the direction of the Company,
the Trustee shall hold and dispose of any such amount paid to it in the same
manner as it would monies deposited with it by the Company for the redemption of
Notes. Without the Trustee's prior written consent, no arrangement between the
Company and such purchasers for the purchase and conversion of any Notes shall
increase or otherwise affect any of the powers, duties, responsibilities or
obligations of the Trustee as set forth in this Indenture, and the Company
agrees to indemnify the Trustee from, and hold it harmless against, any loss,
liability or expense arising out of or in connection with any such arrangement
for the purchase and conversion of any Notes between the Company and such
purchasers 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.
-24-
<PAGE>
ARTICLE IV
SUBORDINATION OF NOTES
Section 4.1 Agreement of Subordination. The Company covenants and
agrees, and each holder of Notes issued hereunder by his acceptance thereof
likewise covenants and agrees, that all Notes shall be issued subject to the
provisions of this Article IV; and each person holding any Note, 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 on all
Notes (including, but not limited to, the redemption price or repurchase price
with respect to the Notes to be redeemed or repurchased, as provided in this
Indenture) issued hereunder shall, to the extent and in the manner hereinafter
set forth, be subordinated to the prior payment in full, in cash or in such
other form of payment as may be acceptable to the holders of Senior
Indebtedness, of all Senior Indebtedness, whether outstanding at the date of
this Indenture or thereafter incurred or created.
No provision of this Article IV shall prevent the occurrence of any
default or Event of Default hereunder.
Section 4.2 Payments to Noteholders. No payment (including pursuant to
any redemption or repurchase of Notes) shall be made with respect to the
principal of, or premium, if any, or interest (including Liquidated Damages, if
any) on the Notes, except payments and distributions made by the Trustee as
permitted by Section 4.6, if:
(1) a default in the payment of principal, premium, if any, or
interest or other payment due on Senior Indebtedness occurs and is
continuing beyond any applicable period of grace; or
(2) any other default occurs and is continuing with respect to
Designated Senior Indebtedness that then permits holders of the
Designated Senior Indebtedness as to which such default related to
accelerate its maturity and the Trustee and the Company receive a
notice of such default (a "Payment Blockage Notice") from a
representative of Designated Senior Indebtedness or a holder of
Designated Senior Indebtedness or the Company.
The Company may and shall resume payments on the Notes (1) in the case
of a payment default, on the date upon which such default is cured or waived or
ceases to exist, and (2) in the case of a nonpayment default with respect to
Designated Senior Indebtedness, on the earlier of the date on which the
nonpayment default is cured or waived or ceases to exist or 179 days pass after
the date on which the applicable Payment Blockage Notice is received.
-25-
<PAGE>
No new period of payment blockage may be commenced pursuant to a
Payment Blockage Notice unless (A) at least 365 days shall have elapsed since
the first day of effectiveness of the immediately prior Payment Blockage Notice
and (B) all scheduled payments of principal, premium, if any, and interest on
the Notes that have come due have been paid in full in cash, or in such other
form of payment as may be acceptable to the holders of the Notes. No default
(whether or not such event of default is on the same issue of Designated Senior
Indebtedness) 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.
In addition, in the event of any acceleration of the Notes because of
an Event of Default, no payment or distribution (including with respect to any
redemption or repurchase of the Notes) shall be made to the Trustee or any
holder of Notes with respect to the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Notes, except payments and
distributions made by the Trustee as permitted by Section 4.6, 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 Notes is accelerated because
of an Event of Default, the Company shall promptly notify holders of Senior
Indebtedness of the acceleration.
Notwithstanding the foregoing, in the event that the Trustee or any
holder of Notes receives any payment or distribution of assets of the Company of
any kind in contravention of any term of this Indenture, whether in cash,
property or securities, including, without limitation, by way of setoff or
otherwise, before all Senior Indebtedness is paid in full, in cash or such other
form of payment as may be acceptable to the holders of Senior Indebtedness, then
such payment or distribution shall be held by the recipient or recipients in
trust for the benefit of, and shall immediately 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 make payment in full, in cash or such other form of payment
as may be acceptable to the holders of Senior Indebtedness, of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of such Senior
Indebtedness.
Nothing in this Section 4.2 shall apply to claims of, or payments to,
the Trustee pursuant to Section 8.6. This Section 4.2 shall be subject to the
further provisions of Section 4.6.
Section 4.3 Bankruptcy and Dissolution, Etc. 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,
winding-up, 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 in such other form of payment as may be acceptable to the
holders of Senior
-26-
<PAGE>
Indebtedness, before any payment is made on account of the principal or premium,
if any, and interest on the Notes (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, winding-up, 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 Notes 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 Notes or by the Trustee under
this Indenture if received by them or it, directly to the holders of Senior
Indebtedness (pro 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, 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, to the extent necessary to pay all Senior Indebtedness in
full in cash or in such other form of payment as may be acceptable to the
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 Notes or to the Trustee under this
Indenture.
Notwithstanding the foregoing, in the event that, the Trustee or any
holder of Notes receives any payment or distribution of assets of the Company of
any kind in contravention of any term of this Indenture, whether in cash,
property or securities, including, without limitation, by way of setoff or
otherwise, before all Senior Indebtedness is paid in full, in cash or such other
form of payment as may be acceptable to the holders of Senior Indebtedness, then
such payment or distribution shall be held by the recipient or recipients in
trust for the benefit of, and shall immediately 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 make payment in full, in cash or such other form of payment
as may be acceptable to the holders of Senior Indebtedness, of all Senior
Indebtedness remaining unpaid, 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 Section 4.3, 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 Notes) 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
-27-
<PAGE>
Indebtedness (other than leases which are not assumed by the Company or by 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 4.3 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 4.3 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 8.6. This Section 4.3 shall be subject
to the further provisions of Section 4.6.
Section 4.4 Subrogation of Notes. Subject to the payment in full in
cash or in such other form of payment as may be acceptable to the holders of
Senior Indebtedness of all Senior Indebtedness, the rights of the holders of the
Notes 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 Notes 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 on the Notes 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 Notes 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 Notes or the Trustee, shall, as between the Company, its
creditors other than holders of Senior Indebtedness, and the holders of the
Notes, 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 Notes 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 Notes. 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 Notes, on the oneolders of the Senior Indebtedness,
on the other hand.
Nothing contained in this Article IV or elsewhere in this Indenture or
in the Notes is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Notes the principal of, and premium, if any, and interest on the
Notes as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the holders of
the Notes and
-28-
<PAGE>
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 Note
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 Notes 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 Notes, 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 4.5 Authorization by Noteholders. Each holder of a Note 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 4.6 Notice to Trustee. The Company shall give written notice to
the Trustee of the issuance of any Designated Senior Indebtedness. In addition,
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 Notes 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 Notes 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 of Senior Indebtedness
or from any trustee thereof who shall have been certified by the Company or
otherwise established to the reasonable satisfaction of the Trustee to be such
holder or trustee; 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 Note), the
Trustee shall not have received with respect to such monies the notice provided
for in this Section 4.6, then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to
-29-
<PAGE>
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
Noteholders of amounts in connection with a redemption of Notes if (i) notice of
such redemption has been given to the Noteholders 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, (b) any payment by the Company or the Trustee to the
Noteholders of amounts in connection with a repurchase of Notes if (i) notice of
such repurchase has been given pursuant to Article XVI prior to the receipt by
the Trustee of written notice as aforesaid, and (ii) such notice of repurchase
is given not earlier than forty (40) days before the repurchase date, or (c) any
payment by the Trustee to the Noteholders 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 trustee on
behalf of such holder) to establish that such notice has been given by a holder
of Senior Indebtedness or a trustee 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 4.7 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
-30-
<PAGE>
over or deliver to holders of Notes, 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.
Section 4.8 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 4.9 Certain Conversions Deemed Payment. For the purposes of
this Article only, (1) the issuance and delivery of junior securities upon
conversion of Notes 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 Notes or on account of the purchase or other acquisition
of Notes, and (2) the payment, issuance or delivery of cash, property or
securities (other than junior securities) upon conversion of a Note shall be
deemed to constitute payment on account of the principal of such Note. 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 Notes are so
subordinated as provided in this Article. Nothing contained in this Article or
elsewhere in this Indenture or in the Notes is intended to or shall impair, as
among the Company, its creditors other than holders of Senior Indebtedness and
the holders of the Notes, the right, which is absolute and unconditional, of the
holder of any Note to convert such Note in accordance with Article XV.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 Payment of Principal, Premium and Interest. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest on each of the Notes at the
places, at the respective times and in the manner provided herein and in the
Notes.
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
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment or for conversion, redemption or repurchase and where
notices and demands to or upon the Company in respect of the Notes 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
-31-
<PAGE>
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office or the office or agency of the Trustee
in the 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 Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company 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,
Note registrar, Custodian and conversion agent and the Corporate Trust Office
and the office of State Street Bank and Trust Company, N.A., an Affiliate of the
Trustee located at 61 Broadway, Concourse Level, Corporate Trust Window, New
York, New York 10006) as the offices or agencies where the Notes may be
surrendered for transfer or exchange or for presentation for payment or for
conversion, redemption or repurchase and where notices and demands to or upos or
this Indenture may be received.
So long as the Trustee is the Note registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 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.
Section 5.4 Provisions as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the
Trustee or if the Trustee shall appoint such a paying agent, it 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 Notes (whether such sums have been paid to
it by the Company or by any other obligor on the Notes) in
trust for the benefit of the holders of the Notes;
(2) that it will give the Trustee notice of any
failure by the Company (or by any other obligor on the Notes)
to make any payment of the principal of and
-32-
<PAGE>
premium, if any, or interest on the Notes when the same shall
be due and payable; and
(3) that at any time during the continuance of an
Event of Default, upon request of the Trustee, it 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 Notes, deposit with the paying
agent a sum sufficient to pay such principal, premium, if any, or
interest, and (unless such paying agent is the Trustee) the Company
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 Notes, set aside, segregate and hold in trust for the
benefit of the holders of the Notes a sum sufficient to pay such
principal, premium, if any, or interest so becoming due and will notify
the Trustee of any failure to take such action and of any failure by
the Company (or any other obligor under the Notes) to make any payment
of the principal of, premium, if any, or interest on the Notes when the
same shall become due and payable.
(c) Anything in this Section 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.
(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 corporate existence.
Section 5.6 Rule 144A Information Requirement. Within the period prior
to the expiration of the holding period applicable to sales 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 Notes or any Common Stock issued upon conversion thereof,
in each case which continue to be Restricted Securities, in connection with
-33-
<PAGE>
any sale thereof and any prospective purchaser of Notes 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 Notes or such Common Stock and it will take such further action as
any holder or beneficial holder of such Notes 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 Notes 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 Notes or such Common
Stock, the Company will deliver to such holder a written statement as to whether
it has complied with such requirements.
Section 5.7 Stay, Extension and Usury Laws. The Company covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Indenture; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.
Section 5.8 Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on December 31, 1997) an Officers'
Certificate stating whether or not to the best of their knowledge the signers
know of any default or Event of Default that occurred during such period. If
they do, such Officers' Certificate shall describe the default or Event of
Default and its status.
Section 5.9 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.
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 6.1 Noteholders' 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 1 and August 1 in each year beginning
with February 1, 1998, 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
-34-
<PAGE>
reasonably require of the names and addresses of the holders of Notes 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 Note 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 Notes contained in the most recent list furnished to it as provided
in Section 6.1 or maintained by the Trustee in its capacity as Note 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 Noteholders to communicate with other
holders of Notes with respect to their rights under this Indenture or under the
Notes and the corresponding rights and duties of the Trustee, shall be as
provided by the Trust Indenture Act.
(c) Every Noteholder, 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 Notes made
pursuant to the Trust Indenture Act.
Section 6.3 Reports by Trustee.
(a) After this Indenture has been qualified under the Trust
Indenture Act, the Trustee shall transmit to holders of Notes such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of such report shall, at the time of such
transmission to holders of Notes, be filed by the Trustee with each stock
exchange and automated quotation system upon which the Notes are listed and with
the Company. The Company will notify the Trustee when the Notes are listed on
any stock exchange or automated quotation system and when any such listing is
discontinued.
Section 6.4 Reports by Company.
(a) After this Indenture has been qualified under the Trust
Indenture Act, the Company shall file with the Trustee and the Commission, and
transmit to holders of Notes, 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
-35-
<PAGE>
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 the preceding paragraph of this Section 6.4. 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:
(a) default in the payment of the principal of and premium, if
any, on any of the Notes 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 for thirty (30) days in the payment of any
installment of interest or Liquidated Damages, if any, upon any of the
Notes as and when the same shall become due and payable, 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 on the part of the Company in the
Notes or in this Indenture (other than a
-36-
<PAGE>
covenant a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with) and the continuance of such
failure 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 Notes at the
time outstanding determined in accordance with Section 9.4; or
(d) a default in the payment of the Repurchase Price in
respect of any Note on the repurchase date therefor in accordance with
the provisions of Article XVI, whether or not such payment in cash of
the repurchase price is prohibited by the provisions of Article IV; or
(e) failure on the part of the Company to provide a written
notice of a Repurchase Event in accordance with Section 16.2; or
(f) failure on the part of the Company or any Significant
Subsidiary to make any payment at maturity, including any applicable
grace period, in respect of Indebtedness of, or guaranteed or assumed
by, the Company or any Significant Subsidiary, in a principal amount
then outstanding in excess of U.S. $5,000,000, and the continuance of
such failure for a period of thirty (30) days after there shall have
been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding, a
written notice specifying such default and requiring the Company to
cause such default to be cured or waived and stating that such notice
is a "Notice of Default" hereunder; or
(g) default on the part of the Company or any Significant
Subsidiary with respect to any Indebtedness of, or guaranteed or
assumed by, the Company or any Significant Subsidiary, which default
results in the acceleration of Indebtedness in a principal amount then
outstanding in excess of U.S. $5,000,000, and such Indebtedness shall
not have been discharged or such acceleration shall not have been
rescinded or annulled for a period of thirty (30) days after there
shall have been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the holders of not
less than 25% in aggregate principal amount of the Notes then
outstanding, a written notice specifying such default and requiring the
Company to cause such Indebtedness to be discharged or cause such
default to be cured or waived or such acceleration to be rescinded or
annulled and stating that such notice is a "Notice of Default"
hereunder; or
(h) the Company or any Significant Subsidiary 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
-37-
<PAGE>
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as
they become due; or
(i) an involuntary case or other proceeding shall be commenced
against the Company or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of ninety (90) consecutive
days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(h) or (i)), unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding hereunder
determined in accordance with Section 9.4, by notice in writing to the Company
(and to the Trustee if given by Noteholders), may declare the principal of and
premium, if any, on all the Notes and the interest accrued thereon to be due and
payable immediately, and upon any such declaration the same shall become and
shall be immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in
Section 7.1(h) or (i) occurs and is continuing, the principal of all the Notes
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 Notes shall have been so declared due and payable, and before
any judgment or decree for the payment of the monies due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon all Notes and the principal of and premium, if any, on any and all
Notes which shall have become due otherwise than by acceleration (with interest
on overdue installments of interest (to the extent that payment of such interest
is enforceable under applicable law) and on such principal and premium, if any,
at the rate borne by the Notes, to the date of such payment or deposit) and
amounts due to the Trustee pursuant to Section 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 on Notes 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 Notes then
outstanding, by written notice to the Company and to the Trustee, may waive all
defaults or Events of Default and rescind and annul such declaration and its
consequences; but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or Event of Default, or shall impair any
right consequent thereon. The Company shall notify, promptly upon becoming
aware, of any default or Event of Default, shall deliver to the Trustee an
Officer's Certificate specifying such default or Event of Default and the
action, if any, the Company has taken, is taking or proposes to take with
respect thereto.
-38-
<PAGE>
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the holders of Notes, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes, and the Trustee shall
continue as though no such proceeding had been instituted.
Section 7.2 Payments of Notes 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 upon any of the Notes as and when the same shall
become due and payable, and such default shall have continued for a period of
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 Notes as and when the same shall
have become due and payable, whether at maturity of the Notes or in connection
with any redemption or repurchase, 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 Notes, the whole amount that then
shall have become due and payable on all such Notes for principal and premium,
if any, or interest, or both, as the case may be, with interest upon the overdue
principal and premium, if any, and (to the extent that payment of such interest
is enforceable under applicable law) upon the overdue installments of interest
at the rate borne by the Notes; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
any expenses or liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith. Until such demand by the Trustee, the Company may
pay the principal of and premium, if any, and interest on the Notes to the
registered holders, whether or not the Notes are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable. The right of the Trustee to recover such judgments shall not be
affected by, or affect, the exercise of any other right, power or remedy for
tovisions of the Indenture.
In the case there shall be pending proceedings for the bankruptcy or
for the reorganization of the Company or any other obligor on the Notes under
Title 11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other
-39-
<PAGE>
obligor, the property of the Company or such other obligor, or in the case of
any other judicial proceedings relative to the Company or such other obligor
upon the Notes, or to the creditors or property of the Company or such other
obligor, the Trustee, irrespective of whether the principal of the Notes shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand pursuant to the
provisions of this Section 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 owing and unpaid in
respect of the Notes, and, in case of any judicial proceedings, to file such
proofs of claim and other papers or documents and to take such other actions as
it may deem necessary or advisable in order to have the claims of the Trustee
and of the Noteholders allowed in such judicial proceedings relative to the
Company or any other obligor on the Notes, its or their creditors, or its or
their property, and to collect and receive any monies or other property payable
or deliverable on any such claims, and to distribute the same after the
deduction of any amounts due the Trustee under Section 8.6; and any receiver,
assignee or trustee in bankruptcy or reorganization, liquidator, custodian or
similar official is hereby authorized by each of the Noteholders to make such
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of such payments directly to the Noteholders, to pay to the Trustee any
amount due it for reasonable compensation, expenses, advances and disbursements,
including agents and 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 Notes may be entitled to
receive in such proceedings, whether in liquidation or under any plan of
reorganization or arrangement or otherwise.
All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes, or the production thereof on any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Notes, and it shall not be necessary to make any holders of the Notes
parties to any such proceedings.
Section 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 Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
-40-
<PAGE>
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 Notes shall not have become due and be
unpaid, to the payment of interest on the Notes in default in the order
of the maturity of the installments of such interest, with interest (to
the extent that such interest has been collected by the Trustee) upon
the overdue installments of interest at the rate borne by the Notes,
such payments to be made ratably to the persons entitled thereto;
Third: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall have become due, by
declaration or otherwise, and be unpaid, to the payment of the whole
amount then owing and unpaid upon the Notes 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 Notes; and in case such monies shall be insufficient
to pay in full the whole amounts so due and unpaid upon the Notes, then
to the payment of such principal 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 Note over any other Note, 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 Noteholder. No holder of any Note shall have
any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such indemnity as may be
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for sixty (60)
days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding and
no direction inconsistent with such written request shall have been given to the
Trustee pursuant to Section 7.7; it being understood and intended, and being
expressly covenanted by the taker and holder of every Note with every other
taker and holder and the Trustee, that no one or more holders of Notes shall
have any right in any manner whatever by virtue of or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of any
other holder of Notes, or to obtain or seek to obtain priority over or
preference to any other such holder, or to
-41-
<PAGE>
enforce any right under this Indenture, except in the manner herein provided and
for the equal, ratable and common benefit of all holders of Notes (except as
otherwise provided herein). For the protection and enforcement of this Section
7.4, each and every Noteholder and the Trustee shall be entitled to such relief
as can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision
of any Note, the right of any holder of any Note to receive payment of the
principal of and premium, if any, and interest on such Note, on or after the
respective due dates expressed in such Note, or to institute suit for the
enforcement of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of such holder.
Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of either the
Trustee or the holder of any other Note, in his own behalf and for his own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, his rights of conversion as provided herein.
Section 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 Noteholders 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 Notes, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture, and no delay or omission of the Trustee
or of any holder of any of the Notes to exercise any right or power accruing
upon any default or Event of Default occurring and continuing as aforesaid shall
impair any such right or power, or shall be construed to be a waiver of any such
default or any acquiescence 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 Noteholders may be exercised from time to time, and as often as shall
be deemed expedient, by the Trustee or by the Noteholders.
Section 7.7 Direction of Proceedings and Waiver of Defaults by Majority
of Noteholders. The holders of a majority in aggregate principal amount of the
Notes at the time outstanding determined in accordance with Section 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
-42-
<PAGE>
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
Notes at the time outstanding determined in accordance with Section 9.4 may on
behalf of the holders of all of the Notes waive any past default or Event of
Default hereunder and its consequences except (i) a default in the payment of
interest or premium, if any, on, or the principal of, the Notes when due, (ii) a
failure by the Company to convert any Notes into Common Stock or (iii) a default
in respect of a covenant or provisions hereof which under Article XI cannot be
modified or amended without the consent of the holders of all Notes then
outstanding. Upon any such waiver the Company, the Trustee and the holders of
the Notes shall be restored to their former positions and rights hereunder; but
no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon. Whenever any default or Event of
Default hereunder shall have been waived as permitted by this Section 7.7, said
default or Event of Default shall for all purposes of the Notes and this
Indenture be deemed to have been cured and to be not continuing; but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
Section 7.8 Notice of Defaults. The Trustee shall, within ninety (90)
days after the occurrence of a default, mail to all Noteholders, as the names
and addresses of such holders appear upon the Note register, notice of all
defaults known to a Responsible Officer, unless such defaults shall have been
cured or waived before the giving of such notice; and provided that, except in
the case of default in the payment of the principal of, or premium, if any, or
interest on any of the Notes, the Trustee shall be protected in withholding such
notice if and so long as a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interests of the Noteholders.
Section 7.9 Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may, in its discretion, require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, 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 Noteholder, or
group of Noteholders, holding in the aggregate more than 10% in principal amount
of the Notes at the time outstanding determined in accordance with Section 9.4,
or to any suit instituted by any Noteholder for the enforcement of the payment
of the principal of or premium, if any, or interest on any Note (including, but
not limited to, the redemption price or repurchase price with respect to the
Notes being redeemed or repurchased as provided in this Indenture) on or after
the due date expressed in such Note or to any suit for the enforcement of the
right to convert any Note in accordance with the provisions of Article XV.
-43-
<PAGE>
Section 7.10 Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any holder of any Note 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 Notes
may be exercised from time to time, and as often as may be deemed expedient, by
the Trustee or by the holders of Notes, 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
(2) in the absence of bad faith and willful
misconduct 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;
-44-
<PAGE>
(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 Noteholder 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 Notes 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;
(d) the Trustee shall not be deemed to know of any default or
Event of Default or other fact or circumstances upon the occurrence of
which it may be required to take actions hereunder unless one of its
Responsible Officers has actual knowledge thereof; and
(e) 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, note, 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;
(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
-45-
<PAGE>
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 Noteholders pursuant to the provisions
of this Indenture, unless such Noteholders 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 indemnity reasonably
satisfactory to the Trustee from the Noteholders 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 Notes (except in the Trustee's certificate of authentication)
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
-46-
<PAGE>
Section 8.4 Trustee, Paying Agents, Conversion Agents or Registrar May
Own Notes. The Trustee, any paying agent, any conversion agent or Note
registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Note registrar.
Section 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 agents and
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 Notes 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 Notes 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(h) or (i) occurs, the expenses and the compensation for the services are
intended to constitute expenses of administration under any bankruptcy,
insolvency or similar laws; provided, however, that if such amounts are not so
paid, the Trustee shall be entitled to collect them pursuant to Section 7.3.
Section 8.7 Officers' Certificate as Evidence. Except as otherwise
provided in Section 8.1, whenever in the administration of the provisions of
this Indenture the Trustee shall
-47-
<PAGE>
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. If the Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.
Section 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 Notes at their addresses as they shall appear on the
Note register. Upon receiving such notice of resignation, the Company
shall promptly appoint a successor trustee by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of
which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. 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 Noteholders, the resigning
Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee, or any Noteholder who has been a
bona fide holder of a Note or Notes for at least six months may,
subject to the provisions of Section 7.9, on behalf of himself and all
others similarly situated, petition any such court for the appointment
of a successor trustee. Such court may thereupon, after such notice, if
any, as it may deem proper and prescribe, appoint a successor trustee.
-48-
<PAGE>
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8
within a reasonable time after written request therefor by the
Company or by any Noteholder who has been a bona fide holder
of a Note or Notes for at least six months, or
(2) the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.9 and shall fail
to resign after written request therefor by the Company or by
any such Noteholder, or
(3) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver of
the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
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 Noteholder
who has been a bona fide holder of a Note or Notes for at least six
months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of
the Notes at the time outstanding may at any time remove the Trustee
and nominate a successor trustee which shall be deemed appointed as
successor trustee unless within ten (10) days after notice to the
Company of such nomination the Company objects thereto, in which case
the Trustee so removed or any Noteholder, upon the terms and conditions
and otherwise as 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 trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
-49-
<PAGE>
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 Notes, 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 Notes at their addresses as they shall appear on the Note 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 corporate trust business of
the Trustee, 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 Notes 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 Notes so authenticated; and in
case at that time any of the Notes shall not have been authenticated, any
successor to the Trustee or an authenticating agent appointed by such successor
trustee may authenticate such Notes 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 Notes or
in this Indenture provided that the certificate of the Trustee shall have;
provided, however, that the right to adopt the certificate of authentication of
any predecessor
-50-
<PAGE>
Trustee or to authenticate Notes 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 Notes), the Trustee shall be subject to the provisions of the
Trust Indenture Act regarding the collection of the claims against the Company
(or any such other obligor).
ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.1 Action by Noteholders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article X, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may f9 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 Noteholders. Subject to the
provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Noteholder or his agent or proxy shall be sufficient if made in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
holding of Notes shall be proved by the Note register or by a certificate of the
Note registrar. The record of any Noteholders' meeting shall be proved in the
manner provided in Section 10.6.
Section 9.3 Who Are Deemed Absolute Owners. The Company, the Trustee,
any authenticating agent, any paying agent, any conversion agent and any Note
registrar may deem the person in whose name such Note shall be registered upon
the Note register to be, and may treat him as, the absolute owner of such Note
(whether or not such Note shall be overdue and notwithstanding any notation of
ownership or other writing thereon) for the purpose of receiving payment of or
on account of the principal of, premium, if any, and interest on such Note, for
conversion of such Note and for all other purposes; and neither the Company nor
the Trustee nor any paying agent nor any conversion agent nor any Note registrar
shall be affected by any notice to the contrary. All such payments so made to
any holder for the time being, or upon his order,
-51-
<PAGE>
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 Note.
Section 9.4 Company-Owned Notes Disregarded. In determining whether the
holders of the requisite aggregate principal amount of Notes have concurred in
any direction, consent, waiver or other action under this Indenture, Notes which
are owned by the Company or any other obligor on the Notes or by any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any other obligor on the Notes shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, consent, waiver or other
action only Notes which a Responsible Officer knows are so owned shall be so
disregarded. Notes 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 Notes and that the pledgee is not the Company, any other obligor on the
Notes or a person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor. In
the case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee. Upon request of
the Trustee, the Company shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Notes, if any, known by the Company to
be owned or held by or for the account of any of the above described persons;
and, subject to Section 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 Notes 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 Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have consented to such action may, by filing
written notice with the Trustee at its Corporate Trust Office and upon proof of
holding as provided in Section 9.2, revoke such action so far as concerns such
Note. Except as aforesaid, any such action taken by the holder of any Note shall
be conclusive and binding upon such holder and upon all future holders and
owners of such Note and of any Notes issued in exchange or substitution
therefor, irrespective of whether any notation in regard thereto is made upon
such Note or any Note issued in exchange or substitution therefor.
-52-
<PAGE>
ARTICLE X
NOTEHOLDERS' MEETINGS
Section 10.1 Purpose of Meetings. A meeting of Noteholders 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:
(1) 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 Noteholders pursuant to any of the provisions of Article VII;
(2) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article VIII;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2;
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of
the Notes under any other provision of this Indenture or under
applicable law; or
(5) 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 Noteholders 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
Noteholders, 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 Notes at
their addresses as they shall appear on the Note 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 Noteholders shall be valid without notice if the holders
of all Notes then outstanding are present in person or by proxy or if notice is
waived before or after the meeting by the holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
-53-
<PAGE>
Section 10.3 Call of Meetings by Company or Noteholders. In case at any
time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least 10% in aggregate principal amount of the Notes then
outstanding, shall have requested the Trustee to call a meeting of Noteholders,
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 Noteholders 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 Noteholders a person shall (a) be a holder of one or more Notes 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 Notes. The only
persons who shall be entitled to be present or to speak at any meeting of
Noteholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
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 Noteholders, in regard to proof of the holding of
Notes 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 Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders 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 Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 9.4, at any meeting each
Noteholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Notes held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any Note 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 Notes held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Noteholders. Any meeting
of Noteholders 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 Notes represented at the meeting, whether or not
constituting a quorum, and the meeting may be held as so adjourned without
further notice.
-54-
<PAGE>
Section 10.6 Voting. The vote upon any resolution submitted to any
meeting of Noteholders shall be by written ballot on which shall be subscribed
the signatures of the holders of Notes or of their representatives by proxy and
the principal amount of the Notes 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 Noteholders shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was mailed as provided in
Section 10.2. The record shall show the principal amount of the Notes 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 Noteholders 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 Noteholders under
any of the provisions of this Indenture or of the Notes.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1 Supplemental Indentures Without Consent of Noteholders.
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 Notes pursuant to the requirements of Section 15.6;
(b) subject to Article IV, to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the Notes, any
property or assets;
-55-
<PAGE>
(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 for the benefit of the holders of
Notes, and to make the occurrence, or the occurrence and continuance,
of a default in any such additional covenants, restrictions or
conditions a default or an Event of Default permitting the enforcement
of all or any of the several remedies provided in this Indenture as
herein set forth; provided, 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 Notes
in coupon form (including Notes registrable as to principal only) and
to provide for exchangeability of such Notes with the Notes issued
hereunder in fully registered form and to make all appropriate changes
for such purpose;
(f) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture 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
Notes;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; 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.
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 Notes at the time outstanding, notwithstanding any of the
provisions of Section 11.2.
-56-
<PAGE>
Section 11.2 Supplemental Indentures With Consent of Noteholders. With
the consent (evidenced as provided in Article 9) of the holders of not less than
a majority in aggregate principal amount of the Notes 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 Notes; provided,
however, that no such supplemental indenture shall (i) extend the fixed maturity
of any Note, or reduce the rate or extend the time of payment of interest
thereon, or reduce the principal amount thereof or premium, if any, thereon, or
reduce any amount payable on redemption or repurchase thereof, impair, or change
in any respect adverse to the holder of Notes, the obligation of the Company to
repurchase any Note at the option of the holder upon the happening of a
Repurchase Event, or impair or adversely affect the right of any Noteholder to
institute suit for the payment thereof, or change the currency in which the
Notes are payable, or impair or change in any respect adverse to the Noteholders
the right to convert the Notes 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 Notes in a manner adverse to the
Noteholders, without the consent of the holder of each Note so affected, or (ii)
reduce the aforesaid percentage of Notes, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of all Notes then outstanding.
Upon the request of the Company, accompanied by a copy of 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 Noteholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, 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 Noteholders 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 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 Notes shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
-57-
<PAGE>
Section 11.4 Notation on Notes. Notes 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 Notes so modified as to conform, in the opinion of the Trustee
and the Board of Directors, to any modification of this Indenture contained in
any such supplemental indenture may, at the Company's expense, be prepared and
executed by the Company, authenticated by the Trustee (or an authenticating
agent duly appointed by the Trustee pursuant to Section 17.11) and delivered in
exchange for the Notes then outstanding, upon surrender of such Notes 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
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1 Company May Consolidate, Etc. on Certain Terms. The
Company shall not, directly or indirectly, consolidate with or merge with or
into any other Person or sell, lease, convey or transfer all its properties and
assets substantially as an entirety, whether in a single transaction or a series
of related transactions, to any Person or group of affiliated Persons unless:
(a) either (i) in the case of a merger or consolidation that
does not involve a transfer of all or substantially all of the Company's
properties and assets, the Company is the surviving entity or (ii) in case the
Company shall consolidate with or merge into another Person or sell, lease,
convey or transfer all its properties and assets substantially as an entirety,
whether in a single transaction or a series of related transactions, to any
Person, the Person formed by such consolidation or into which the Company is
merged, or the Person which acquires by sale, conveyance or transfer, or which
leases the properties and assets of the Company substantially as an entirety,
shall be a corporation, limited liability company, partnership or trust, shall
be organized and validly existing under the laws of the United States of
America, any state thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual payment of
the principal of, premium, if any, and interest (including Liquidated Damages,
if any) on all of the Notes as applicable, and the performance or observance of
every covenant of this Indenture on the part of the Company to be performed or
observed and shall have provided for the applicable conversion rights set forth
in Section 15.6 and the repurchase rights set forth in Article XVI;
-58-
<PAGE>
(b) immediately after giving effect to such transaction, no
Event of Default, and no event that after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with, together with any documents
required under Article 9.
Section 12.2 Successor Corporation to Be Substituted. In case of any
such consolidation, merger, sale, conveyance or lease in accordance with Section
12.1, and, where required in accordance with Section 12.1(a) 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
Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
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 CareMatrix Corporation any or all of the Notes
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 Notes which previously shall
have been signed and delivered by the officers of the Company to the Trustee for
authentication, and any Notes which such successor corporation thereafter shall
cause to be signed and delivered to the Trustee for that purpose. All the Notes
so issued shall in all respects have the same legal rank and benefit under this
Indenture as the Notes theretofore or thereafter issued in accordance with the
terms of this Indenture as though all of such Notes had been issued at the date
of the execution hereof. In the event of any such consolidation, merger, sale,
conveyance or 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 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 Notesligations 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
Notes thereafter to be issued as may be appropriate.
Section 12.3 Opinion of Counsel to Be Given Trustee. The Trustee,
subject to Sections 8.1 and 8.2, shall receive an Officers' Certificate and an
Opinion of Counsel as conclusive
-59-
<PAGE>
evidence that any such consolidation, merger, sale, conveyance or lease and any
such assumption complies with the provisions of this Article XII.
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 Notes theretofore authenticated (other than
any Notes which have been destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated and delivered)
and not theretofore canceled, or (b) all the Notes 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, funds sufficient to pay at maturity or upon redemption of all
of the Notes (other than any Notes which shall have been mutilated, destroyed,
lost or stolen and in lieu of or in substitution for which other Notes 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 Notes, (ii) rights
hereunder of Noteholders to receive payments of principal of and premium, if
any, and interest on, the Notes and the other rights, duties and obligations of
Noteholders, 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 17.5
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 Notes.
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
Notes 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.
-60-
<PAGE>
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
Notes (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 Notes and not applied but
remaining unclaimed by the holders of Notes for two years after the date upon
which the principal of, premium, if any, or interest on such Notes, 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 Notes shall thereafter look
only to the Company for any payment which such holder may be entitled to collect
unless an applicable abandoned property law designates another person.
Section 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 Notes so request by written
notice to the Trustee, the Company's obligations under this Indenture and the
Notes 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 Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the holders of such Notes to receive such payment from the
money held by the Trustee or paying agent.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1 Indenture and Notes Solely Corporate Obligations. No
recourse for the payment of the principal of or premium, if any, or interest on
any Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, 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
-61-
<PAGE>
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Notes.
ARTICLE XV
CONVERSION OF NOTES
Section 15.1 Right to Convert. Subject to and upon compliance with the
provisions of this Indenture, the holder of any Note shall have the right, at
his option, at any time following the date of original issuance of the Notes and
prior to the close of business on August 15, 2004 (except that, with respect to
any Note or portion of a Note which shall be called for redemption, such right
shall terminate, except as provided in the fifth paragraph of Section 15.2, at
the close of business on the Business Day next preceding the date fixed for
redemption of such Note or portion of a Note unless the Company shall default in
payment due upon redemption thereof) to convert the principal amount of any such
Note, or any portion of such principal amount 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 Note or portion thereof surrendered for conversion by
the Conversion Price in effect at such time, by surrender of the Note so to be
converted in whole or in part in the manner provided in Section 15.2. A holder
of Notes is not entitled to any rights of a holder of Common Stock until such
holder has converted his Notes to Common Stock, and only to the extent such
Notes are deemed to have been converted to Common Stock under this Article XV. A
Note with respect to which a holder has delivered a notice in accordance with
Section 16.2 regarding such holder's election to require the Company to
repurchase such holder's Notes following the occurrence of a Repurchase Event
may be converted in accordance with this Article XV only if such holder
withdraws such notice by delivering a written notice of withdrawal to the
Company prior to the close of business on last Business Day prior to the day
fixed for repurchase.
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 Note in definitive form, the holder of
any such Note to be converted in whole or in part shall surrender such Note,
duly endorsed, at an office or agency maintained by the Company pursuant to
Section 5.2, accompanied by the funds, if any, required by the penultimate
paragraph of this Section 15.2, and shall give written notice of conversion in
the form provided on the Notes (or such other notice which is acceptable to the
Company) to the office or agency that the holder elects to convert such Note 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 Note surrendered for conversion shall, unless the shares issuable on
conversion are to be issued in the same name as the registration of such Note,
be duly endorsed by, or be accompanied
-62-
<PAGE>
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 Note in global form, 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 Note in global form, 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, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or portion thereof) so converted), the Company shall issue and shall deliver to
such holder at the office or agency maintained by the Company for such purpose
pursuant to Section 5.2, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such Note 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 and, if applicable, any cash
payment required pursuant to the proviso to the first sentence of Section 15.1
(which payment, if any, shall be paid no later than five Business Days after
satisfaction of the requirements for conversion set forth above). In case any
Note of a denomination greater than $1,000 shall be surrendered for partial
conversion, and subject to Section 2.3, the Company shall execute and the
Trustee shall authenticate and deliver to the holder of the Note so surrendered,
without charge to him, a new Note or Notes in authorized denominations in an
aggregate principal amount equal to the unconverted portion of the surrendered
Note.
Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 15.2 have been satisfied as to such Note (or portion thereof),
and the person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
provided, however, that any such surrender on any date when the stock transfer
books of the Company shall be closed shall constitute the person in whose name
the certificates are to be issued as the record holder thereof for all purposes
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Note shall be surrendered.
Any Note or portion thereof surrendered for conversion during the
period from the close of business on the record date for any interest payment
date through the close of business on the Business Day next preceding such
interest payment date shall (unless such Note or portion thereof being converted
shall have been called for redemption pursuant to a redemption notice
-63-
<PAGE>
mailed to the Noteholders in accordance with 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 Notes. Except as provided above in
this Section 15.2, no adjustment shall be made for interest accrued on any Note
converted or for dividends on any shares issued upon the conversion of such Note
as provided in this Article.
Upon the conversion of an interest in a Note in global form, the
Trustee, or the Custodian at the direction of the Trustee, shall make a notation
on such Note in global form as to the reduction in the principal amount
represented thereby.
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 Notes. If more than one Note 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 Notes (or specified portions thereof to the extent
permitted hereby) so surrendered for conversion. If any fractional share of
stock otherwise would be issuable upon the conversion of any Note or Notes, the
Company shall make an adjustment therefor in cash at the current market value
thereof to the holder of Notes. The current market value of a share of Common
Stock shall be the Closing Price on the first Trading Day immediately preceding
the day on which the Notes (or specified portions thereof) are deemed to have
been converted and such Closing Price shall be determined as provided in Section
15.5(h).
Section 15.4 Conversion Price. The conversion price shall be as
specified in the form of Note (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
stockholders entitled to receive such dividend or other distribution
shall be reduced by multiplying such Conversion Price by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the Record Date (as defined in
Section 15.5(h)) 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
-64-
<PAGE>
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 stockholders entitled to receive such rights or
warrants) to subscribe for or purchase shares of Common Stock at a
price per share less than the Current Market Price (as defined in
Section 15.5(h)) on the Record Date fixed for the determination of
stockholders entitled to receive such rights or warrants, the
Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect at the
opening of business on the date after 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 for subscription or purchase 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 stockholders
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 stockholders
entitled to receive such rights or warrants had not been fixed. In
determining whether any rights or warrants entitle the holders to
subscribe for or purchase shares of Common Stock at less than such
Current Market Price, and in determining the aggregate offering price
of such shares of Common Stock, there shall be taken into account any
consideration received for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of
Directors.
(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
-65-
<PAGE>
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) and, (2) dividends
and distributions (A) in connection with the liquidation, dissolution
or winding up of the Company or paid (B) exclusively in cash and (3)
excluding any capital stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation to which Section 15.6
applies) (the foregoing hereinafter in this Section 15.5(d) called the
"Securities")), (unless the Company elects to reserve such Securities
for distribution to the Noteholders upon conversion of the Notes so
that any such holder converting Notes will receive upon such
conversion, in addition to the shares of Common Stock to which such
holder is entitled, the amount and kind of such Securities which such
holder would have received if such holder had converted its Notes into
Common Stock immediately prior to the Record Date (as defined in
Section 15.5(h) for such distribution of 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(h)) 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(h)) on such date less the fair
market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution)
on such date of the portion of the Securities so distributed applicable
to one share of Common Stock and the denominator shall be such Current
Market Price, such reduction to become effective immediately prior to
the opening of business on the day following the Record Date; provided,
however, that in the event the then fair market value (as so
determined) of the portion of the Securities so distributed applicable
to one share of Common Stock is equal to or greater than the Current
Market Price on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Noteholder shall have the
right to receive upon conversion of a Note (or any portion thereof) the
amount of Securities such holder would have received had such holder
converted such Note (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(h) to the extent possible, unless the
Board of Directors in a board resolution determines in good faith that
determining the fair
-66-
<PAGE>
market value during the Reference Period would not be in the best
interest of the Noteholder.
In the event that the Company implements a stockholder rights
plan, such rights plan shall provide that upon conversion of the Notes
the holders will receive, in addition to the Common Stock issuable upon
such conversion, the rights issued under such rights plan
(notwithstanding the occurrence of an event causing such rights to
separate from the Common Stock at or prior to the time of conversion).
Any distribution of rights or warrants pursuant to a stockholder 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 the 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
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
-67-
<PAGE>
Common Stock, 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 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 stockholders 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 stockholders entitled to receive such
rights or warrants", "the Record Date fixed for the determination of
the stockholders 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(h)) 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 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
-68-
<PAGE>
Common Stock is equal to or greater than the Current Market Price of
the Common Stock on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Noteholder
shall have the right to receive upon conversion of a Note (or any
portion thereof) the amount of cash such holder would have received
had such holder converted such Note (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 stockholders (based on the acceptance (up to any
maximum specified in the terms of the tender offer) of Purchased Shares
(as defined below)) of an aggregate consideration having a fair market
value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution) that combined
together with (1) the aggregate of the cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), as of the expiration
of such tender offer, of consideration payable in 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(h)) as of the last time (the "Expiration
Time") tenders could have been made pursuant to such tender offer (as
it may be amended) times the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time,
then, and in each such case, immediately prior to the opening of
business on the day after the date of the Expiration Time, the
Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to close of business on the date of the Expiration
Time by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding (including any tendered shares) on the
Expiration Time multiplied by the Current Market Price of the Common
Stock on the Trading Day next succeeding the Expiration Time and the
denominator shall be the sum of (x) the fair market value (determined
as aforesaid) of the aggregate consideration payable to stockholders
based on the acceptance (up to any maximum specified in the terms of
the tender offer) of all shares validly tendered and not withdrawn as
of the Expiration Time (the shares deemed
-69-
<PAGE>
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 "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 Expiration Time, and in which, as
of the 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 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
Expiration Time multiplied by the current Market Price of the Common
Stock on the Trading Day next succeeding the Expiration Time and the
denominator shall be the sum of (x) the fair market value (determined
as aforesaid) of the aggregate consideration payable to stockholders
based on the acceptance (up to any maximum specified in the terms of
the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the
"Purchased Shares") and (y) the product of the number of shares of
Common Stock outstanding (less any Purchased Shares) on the Expiration
Time and the Current Market Price of the Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction to become
effective immediately prior to the opening oflowing the 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
-70-
<PAGE>
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 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) 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 American Stock Exchange or New York
Stock Exchange or the Nasdaq National Market, as applicable,
or, if such security is not listed or admitted to trading on
the American Stock Exchange or New York Stock Exchange or
Nasdaq National Market, 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 requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section
15.5(a), (b), (c), (d), (e), (f) or (g) 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
requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 15.5(a), (b), (c), (d),
(e), (f) or (g) occurs on or after the "ex" date for the
issuance or distribution requiring such computation and prior
to the day in question, the Closing Price for each Trading Day
on and after the "ex" date for such other event shall be
adjusted by
-71-
<PAGE>
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 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 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) and (g) occurs on
or after the Expiration Time for the tender or exchange offer
requiring such computation and prior to the day in question,
the Closing Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction by which
the Conversion Price is so required to be adjusted as a result
of such other event. For purposes of this paragraph, the term
"ex" date, (1) when used with respect to any issuance or
distribution, means the first date on which the Common Stock
trades regular way on the relevant exchange or in the relevant
market from which the Closing Price was obtained without the
right to receive such issuance or distribution, (2) when used
with respect to any subdivision or combination of shares of
Common Stock, means the first date on which the Common Stock
trades regular way on such exchange or in such market after
the time at which such subdivision or combination becomes
effective, and (3) when used with respect to any tender or
exchange offer means the first date on which the Common Stock
trades regular way on such exchange or in such market after
the Expiration Time 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.
-72-
<PAGE>
(4) "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which
the holders of Common Stock have the right to receive any
cash, securities or other property or in which the Common
Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other
property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable
security is listed or admitted for trading on the American
Stock Exchange or New York Stock Exchange or another national
security exchange, a day on which the American Stock Exchange
or 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.
(i) 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 Note at his last address appearing on the Note
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.
(j) 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(j) 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
-73-
<PAGE>
adjustment need be made for a change in the par value or no par value
of the Common Stock.
(k) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly file with the Trustee and any
conversion agent other than the Trustee an Officers' Certificate
setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
Promptly after delivery of such certificate, the Company shall prepare
a notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the
Conversion Price to the holder of each Note at his last address
appearing on the Note register provided for in Section 2.5, within
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.
(l) 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 Note converted after such Record Date and
before the occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment and (ii) paying
to such holder any amount in cash in lieu of any fraction pursuant to
Section 15.3.
(m) 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.
(n) 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 Notes upon the
conversion of the Notes so that any such holder converting Notes 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 Notes into Common Stock, together with any interest
accrued with respect to such amount, in accordance with this Section
15.5(n). 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 Notes would have received if such holders had,
immediately prior to the Record Date for such distribution, converted
all of the Notes into
-74-
<PAGE>
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 Notes 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 Note 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(n), the Company shall give or
shall cause to be given notice to all Noteholders of such election,
which notice shall state the amount of cash per $1,000 principal
amount of Notes such holders shall be entitled to receive (excluding
interest) upon conversion of the Notes as a consequence of the Company
having made such election.
Section 15.6 Effect of Reclassification, Consolidation, Merger or Sale.
If any of the following events occur, namely (i) any reclassification or change
of the outstanding shares of Common Stock (other than a 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), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture if such supplemental indenture is then required
to so comply) providing that such Note shall be convertible into the kind and
amount of shares of stock and other securities or property or assets (including
cash) receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a holder of a number of shares of Common
Stock issuable upon conversion of such Notes (assuming, for such purposes, a
sufficient number of authorized shares of Common Stock available to convert all
such Notes) immediately prior to such reclassification, change, consolidation,
merger, combination, sale or conveyance assuming such holder of Common Stock did
not exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance (provided that, if the securities, cash
or other property receivable upon such consolidation, merger, statutory
exchange, sale or conveyance is not the same for each share of Common Stock in
respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purposes of this Section 15.6 the kind and
amount of securities, cash or other property receivable upon such consolidation,
merger, statutory exchange, sale or conveyance for each non-electing share shall
be deemed to be the kind
-75-
<PAGE>
and amount so receivable per share by a plurality of the non-electing shares).
Such supplemental indenture shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Article. If, in the case of any such reclassification, change, consolidation,
merger, combination, sale or conveyance, the stock or other securities and
assets receivable thereupon by a holder of shares of Common Stock includes
shares of stock or other securities and assets of a corporation other than the
successor or purchasing corporation, as the case may be, in such
reclassification, change, consolidation, merger, combination, sale or
conveyance, 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 of the Notes as the Board of Directors shall reasonably
consider necessary by reason of the foregoing, including to the extent
practicable the provisions providing for the repurchase rights set forth in
Article XVI herein.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at his address appearing on the
Note register provided for in Section 2.5 of this Indenture, within twenty (20)
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 15.6 applies to any event or occurrence, Section 15.5
shall not apply.
Section 15.7 Taxes on Shares Issued. The issue of stock certificates on
conversions of Notes shall be made without charge to the converting Noteholder
for any 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 Note converted, and the Company shall not be required to issue or deliver
any such stock certificate unless and until the person or persons requesting the
issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
Section 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 Notes from time to time as such Notes are
presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, 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.
-76-
<PAGE>
The Company covenants that all shares of Common Stock issued upon
conversion of Notes 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 further covenants that if at any time the Common Stock
shall be listed on the American Stock Exchange 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 Notes.
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 Notes 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 Note; 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 note 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 Noteholders upon the conversion of their Notes 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
-77-
<PAGE>
(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
(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 Notes at his address appearing on the Note 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.
ARTICLE XVI
REPURCHASE UPON A REPURCHASE EVENT
Section 16.1 Repurchase Right.
(a) If, at any time prior to August 15, 2004 there shall occur
a Repurchase Event, then each Noteholder shall have the right, at such
holder's option, to require the Company to repurchase all of such
holder's Notes, or any portion thereof (in principal amounts of $1,000
or integral multiples thereof), on the date (the "repurchase date")
that is forty (40) calendar days after the date of the Company Notice
(as defined in Section 16.2 below) of such Repurchase Event (or, if
such 40th day is not a Business Day, the next succeeding Business Day).
Such repurchase shall be made in cash at a price equal to 100% of the
principal amount of Notes such holder elects to repurchase, together
with accrued interest, if any, to the repurchase date (the "Repurchase
Price") (or, at the option of the Company, by delivery of Common Stock
in accordance with the provisions of Section 16.3); provided, however,
that if such repurchase date is February
-78-
<PAGE>
15 or August 15, then the interest payable on such date shall be paid
to the holder of record of the Note on the next preceding February 1
or August 1, respectively. No Notes may be redeemed at the option of
holders upon a Repurchase Event if there has occurred and is
continuing an Event of Default, other than a default in the payment of
the Repurchase Price with respect to such Notes on the repurchase
date.
Section 16.2 Notices; Method of Exercising Repurchase Right, Etc.
(a) Unless the Company shall have theretofore called for
redemption all of the outstanding Notes, on or before the fifteenth
(15th) calendar day after the occurrence of a Repurchase Event, the
Company or, at the written request of the Company, the Trustee, shall
mail to all holders of record of the Notes a notice (the "Company
Notice") in the form as prepared by the Company of the occurrence of
the Repurchase Event and of the repurchase right set forth herein
arising as a result thereof. The Company shall also deliver a copy of
such notice of a repurchase right to the Trustee and cause a copy of
such notice of a repurchase right, or a summary of the information
contained therein, to be published once in a newspaper of general
circulation in The City of New York. The Company Notice shall contain
the following information:
(1) the repurchase date,
(2) the date by which the repurchase right must be
exercised,
(3) the last date by which the election to require
repurchase, if submitted, must be revoked;
(4) the Repurchase Price, and whether the Repurchase
Price shall be payable in cash or Common Stock and, if payable
in Common Stock, the method of calculating the amount of the
Common Stock to be delivered upon the repurchase as provided
in Section 16.3(a) of this Indenture;
(5) a description of the procedure which a holder
must follow to exercise a repurchase right, and
(6) the Conversion Price then in effect, the date on
which the right to convert the principal amount of the Notes
to be repurchased will terminate and the place or places where
Notes may be surrendered for conversion.
No failure of the Company to give the foregoing notices or
defect therein shall limit any holder's right to exercise a repurchase
right or affect the validity of the proceedings for the repurchase of
Notes.
-79-
<PAGE>
If any of the foregoing provisions are inconsistent with
applicable law, such law shall govern.
(b) To exercise a repurchase right, a holder shall deliver to
the Trustee on or before the thirty-fifth (35th) day after the Company
Notice (i) written notice to the Company (or agent designated by the
Company for such purpose) of the holder's exercise of such right, which
notice shall set forth the name of the holder, the principal amount of
the Notes to be repurchased, a statement that an election to exercise
the repurchase right is being made thereby, and, in the event that the
Repurchase Price shall be paid in shares of Common Stock, the name or
names (with addresses) in which the Certificate of certificates for
shares of Common Stock shall be issued, and (ii) Notes with respect to
which the repurchase right is being exercised, duly endorsed for
transfer to the Company. Election of repurchase by a holder shall be
revocable at any time prior to, but excluding, the repurchase date, by
delivering written notice to that effect to the Trustee prior to the
close of business on the Business Day prior to the repurchase date.
(c) If the Company fails to repurchase on the repurchase date
any Notes (or portions thereof) as to which the repurchase right has
been properly exercised, then the principal of such Notes shall, until
paid, bear interest to the extent permitted by applicable law from the
repurchase date at the rate borne by the Note and each such Note shall
be convertible into Common Stock in accordance with this Indenture
(without giving effect to Section 16.2(b)) until the principal of such
Note shall have been paid or duly provided for.
(d) Any Note which is to be repurchased only in part shall be
surrendered to the Trustee duly endorsed for transfer to the Company
and accompanied by appropriate evidence of genuineness and authority
satisfactory to the Company and the Trustee, and the Company shall
execute, and the Trustee shall authenticate and deliver to the holder
of such Note without service charge, a new Note or Notes, containing
identical terms and conditions, of any authorized denomination as
requested by such holder in aggregate principal amount equal to and in
exchange for the unrepurchased portion of the principal of the Note so
surrendered.
(e) On or prior to the repurchase date, the Company shall
deposit with the Trustee or with a paying agent (or, if the Company is
acting as its own paying agent, segregate and hold in trust as provided
in Section 5.4) the Repurchase Price in cash for payment to the holder
on the repurchase date; provided that if payment is to be made in cash,
such cash payment is made on the repurchase 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; provided further that if the Repurchase
Price is to be paid in shares of Common Stock, such shares of Common
Stock are to be paid as promptly after the repurchase date as
practicable.
-80-
<PAGE>
(f) Any issuance of shares of Common Stock in respect of the
Repurchase Price shall be deemed to have been effected immediately
prior to the close of business on the repurchase date and the person or
persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such repurchase shall be
deemed to have become on the repurchase date the holder or holders of
record of the shares represented thereby; provided, however, that any
surrender for repurchase on a date when the stock transfer books of the
Company shall be closed shall constitute the person or persons in whose
name or names the certificate or certificates for such shares are to be
issued as the record holder or holders thereof for all purposes at the
opening of business on the next succeeding day on which such stock
transfer books are open. No payment or adjustment shall be made for
dividends or distributions on any Common Stock issued upon repurchase
of any Security declared prior to the repurchase date.
(g) No fractions of shares shall be issued upon repurchase of
Notes. If more than one Note shall be repurchased from the same holder
and the Repurchase Price shall be payable in shares of Common Stock,
the number of full shares which shall be issuable upon such repurchase
shall be computed on the basis of the aggregate principal amount of the
Notes so repurchased. Instead of any fractional share of Common Stock
which would otherwise be issuable on the repurchase of any Note or
Notes, the Company will deliver to the applicable holder its check for
the current market value of such fractional share. The current market
value of a fraction of a share is determined by multiplying the current
market price of a full share by the fraction, and rounding the result
to the nearest cent. For purposes of this Section, the current market
price of a share of Common Stock is the Closing Price of the Common
Stock on the Trading Day immediately preceding the repurchase date.
(h) Any issuance and delivery of certificates for shares of
Common Stock on repurchase of Notes shall be made without charge to the
holder of Notes being repurchased for such certificates or for any tax
or duty in respect of the issuance or delivery of such certificates or
the securities represented thereby; provided, however, that the Company
shall not be required to pay any tax or duty which may be payable in
respect of (i) income of the holder or (ii) any transfer involved in
the issuance or delivery of certificates for shares of Common Stock in
a name other than that of the holder of the Notes being repurchased,
and no such issuance or delivery shall be made unless and until the
person requesting such issuance or delivery has paid to the Company the
amount of any such tax or duty or has established, to the satisfaction
of the Company, that such tax or duty has been paid.
(i) All Notes delivered for repurchase shall be delivered to
the Trustee to be canceled at the direction of the Trustee.
Section 16.3 Conditions to the Company's Election to Pay the Repurchase
Price in Common Stock.
-81-
<PAGE>
The Company may elect to pay the Repurchase Price by delivery of shares
of Common Stock pursuant to Section 16.1 if and only if the following conditions
shall have been satisfied:
(a) The shares of Common Stock deliverable in payment of the Repurchase
Price shall have a fair market value as of the repurchase date of not less than
the Repurchase Price. For purposes of Section 16.1 and this Section 16.3, the
fair market value of shares of Common Stock on the repurchase date shall be
determined by the Company and set forth in an Officers' Certificate filed with
the Trustee and shall be equal to 95% of the average of the Closing Prices of
the Common Stock for the five consecutive Trading Days immediately preceding and
including the third Trading Day prior to the repurchase date;
(b) The Repurchase Price shall be paid only in cash in the event any
shares of Common Stock to be issued upon repurchase of Notes hereunder (i)
require registration under any federal securities law before such shares may be
freely transferrable without being subject to any transfer restrictions under
the Securities Act upon repurchase and if such registration is not completed or
does not become effective prior to the repurchase date, and/or (ii) require
registration with or approval of any governmental authority under any state law
or any other federal law before such shares may be validly issued or delivered
upon repurchase and if such registration is not completed or does not become
effective or such approval is not obtained prior to the repurchase date;
(c) Payment of the Repurchase Price may not be made in Common Stock
unless such stock is, or shall have been, approved for quotation on the American
Stock Exchange or Nasdaq National Market or listed on a national securities
exchange, in either case, prior to the repurchase date; and
(d) All shares of Common Stock which may be issued upon repurchase of
the Notes will be issued out of the Company's authorized but unissued Common
Stock and, will upon issue, be duly and validly issued and fully paid and
non-assessable and free of any preemptive rights.
If all of the conditions set forth in this Section 16.3 are not
satisfied in accordance with the terms thereof, the Repurchase Price shall be
paid by the Company only in cash.
Section 16.4 Certain Definitions. For purposes of this Article XVI:
(a) the term "beneficial owner" shall be determined in
accordance with Rule 13d-3 and 13d-5, as in effect on the date of the
original execution of this Indenture, promulgated by the Securities and
Exchange Commission pursuant to the Exchange Act;
(b) the term "person" or "group" shall include any syndicate
or group which would be deemed to be a "person" under Section 13(d) and
14(d) of the Exchange Act as in effect on the date of the original
execution of this Indenture; and
-82-
<PAGE>
(c) the term "Continuing Director" means at any date a member
of the Company's Board of Directors (i) who was a member of such board
on August 18, 1997 or (ii) who was nominated or elected by at least a
majority of the directors who were Continuing Directors at the time of
such nomination or election or whose election to the Company's Board of
Directors was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination
or election or such lesser number comprising a majority of a nominating
committee if authority for such nominations or elections has been
delegated to a nominating committee whose authority and composition
have been approved by at least a majority of the directors who were
continuing directors at the time such committee was formed. (Under this
definition, if the current Board of Directors of the Company were to
approve a new director or directors and then resign, no Change in
Control would occur even though the current Board of Directors would
thereafter cease to be in office).
(d) the term "Repurchase Event" means a Change in Control or a
Termination of Trading.
(e) a "Change in Control" shall be deemed to have occurred
when (i) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rules 13-d3 and 13-d5 under the Exchange Act) of
shares representing more than 50% of the combined voting power of the
then outstanding securities entitled to vote generally in elections of
directors of the Company (the "Voting Stock"); (ii) approval by
stockholders of the Company of any plan or proposal for the
liquidation, dissolution or winding up of the Company; (iii) the
Company (A) consolidates with or merges into any other corporation or
any other corporation merges into the Company, and in the case of any
such transaction, the outstanding Common Stock of the Company is
changed or exchanged into other assets or securities as a result,
unless the stockholders of the Company immediately before such
transaction own, directly or indirectly immediately following such
transaction, at least 51% of the combined voting power of the
outstanding voting securities of the corporation resulting from such
transaction in substantially the same proportion as their ownership of
the Voting Stock immediately before such transaction, or (B) conveys,
transfers or leases all or substantially all of its assets to any
person; or (iv) any time Continuing Directors do not constitute a
majority of the Board of Directors of the Company (or, if applicable, a
successor corporation to the Company); provided that a Change in
Control shall not be deemed to have occurred if either (x) the Closing
Price (as defined in Section 15.5(h)(1) hereof) of the Common Stock for
any five (5) Trading Days during the ten (10) Trading Days immediately
preceding the Change in Control is at least equal to 105% of the
Conversion Price in effect on the date on which the Change in Control
occurs or (y) in the case of a merger or consolidation otherwise
constituting a Change in Control, all of the consideration (excluding
cash payments for fractional shares) in such merger or consolidation
constituting the Change in Control consists of common stock traded on a
United States national securities exchange or quoted on the Nasdaq
National Market (or
-83-
<PAGE>
which will be so traded when issued or exchanged in connection with
such Change in Control) and as a result of such transaction or
transactions such Notes become convertible solely into such common
stock. A Change in Control also shall not be deemed to have occurred if
Abraham D. Gosman or a group (within the meaning of Section 13(d) of
the Exchange Act) that includes Abraham D. Gosman (a "Permitted
Investor") becomes the beneficial owner of more than 50% of the Voting
Stock, provided that, if as a consequence of any transaction involving
a Permitted Investor, or in which a Permitted Investor has an interest,
less than 30% of the number of shares of Common Stock outstanding upon
the issuance of the Notes are neither listed for trading upon a
national securities exchange nor approved for trading or quoted for
trading on the Nasdaq National Market, then a Change in Control shall
be deemed to have occurred upon the consummation of such transaction.
(f) a "Termination of Trading" shall have occurred if the
Common Stock (or other common stock into which the Notes are then
convertible) is neither listed for trading on a United States national
securities exchange nor approved for trading on an established
automated over-the-counter trading market in the United States.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
Section 17.1 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 17.2 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 17.3 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 Notes 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 CareMatrix Corporation, 197 First Avenue, Needham, Massachusetts
02194, Attention: Chief Financial Officer, with a copy to Nutter, McClennen &
Fish, LLP, One International Place, Boston, Massachusetts 02110-2699, Attention:
Michael J. Bohnen. 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
-84-
<PAGE>
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 Two International Place, 4th Floor, Boston, Massachusetts
02110, Attention: Corporate Trust Division (CareMatrix Corporation 6-1/4%
Convertible Subordinated Notes due 2004).
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Noteholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Note register and shall be sufficiently given to him if so mailed within the
time prescribed.
Failure to mail a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 17.4 Governing Law. This Indenture and each Note 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).
Section 17.5 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, 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 17.6 Legal Holidays. In any case where the date of maturity of
interest on or principal of the Notes or the date fixed for redemption of any
Note will not be a Business Day, then payment of such interest on or principal
of the Notes need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on
-85-
<PAGE>
the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period from and after such date.
Section 17.7 No Security Interest Created. Nothing in this Indenture or
in the Notes, expressed or implied, shall be construed to constitute a security
interest under the Uniform Commercial Code or similar legislation, as now or
hereafter enacted and in effect, in any jurisdiction.
Section 17.8 Trust Indenture Act. This Indenture is hereby made subject
to, and shall be governed by, the provisions of the Trust Indenture Act required
to be part of and to govern indentures qualified under the Trust Indenture Act;
provided, however, that, unless otherwise required by law, notwithstanding the
foregoing, this Indenture and the Notes issued hereunder shall not be subject to
the provisions of subsections (a)(1), (a)(2), and (a)(3) of Section 314 of the
Trust Indenture Act as now in effect as hereafter amended or modified; provided
further that this Section 17.8 shall not require that this Indenture or the
Trustee be qualified under the Trust Indenture Act prior to the time such
qualification is in fact required under the terms of the Trust Indenture Act,
nor shall it constitute any admission or acknowledgment by any party hereto that
any such qualification is required prior to the time such qualification is in
fact required under the terms of the Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof which is
required to be included in an indenture qualified under the Trust Indenture Act,
such required provision shall control.
Section 17.9 Benefits of Indenture. Nothing in this Indenture or in the
Notes, expressed or implied, shall give to any person, other than the parties
hereto, any paying agent, any authenticating agent, any Note registrar and their
successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
Section 17.10 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 17.11 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 Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all intents and
purposes as though the authenticating agent had been expressly authorized by
this Indenture and those Sections to authenticate and deliver Notes. For all
purposes of this Indenture, the authentication and delivery of Notes by the
authenticating agent shall be deemed to be authentication and delivery of such
Notes "by the Trustee" and a certificate of authentication executed on behalf of
the Trustee by an authenticating agent shall be deemed to satisfy any
requirement hereunder or in the Notes for the Trustee's certificate of
authentication. Such
-86-
<PAGE>
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 Notes as the names and
addresses of such holders appear on the Note register.
The Trustee agrees to pay to the authenticating agent from time to time
reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 17.11
shall be applicable to any authenticating agent.
Section 17.12 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.
-87-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed all as of the date first written above.
CAREMATRIX CORPORATION
By:/s/ Robert M. Kaufman
-----------------------------
Name: Robert M. Kaufman
Title: CEO
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:/s/ Henry W. Seemore
-----------------------------
Name: Henry W. Seemore
Title: Assistant Vice President
Exhibit 4.2
-----------
6-1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
REGISTRATION RIGHTS AGREEMENT
Dated as of August 15, 1997
by and among
CAREMATRIX CORPORATION,
as the Company,
and
ROBERTSON, STEPHENS & COMPANY LLC,
MORGAN STANLEY & CO. INCORPORATED,
PAINEWEBBER INCORPORATED,
SALOMON BROTHERS INC
and
SMITH BARNEY INC.,
as Purchasers
<PAGE>
This Registration Rights Agreement is made and entered into as of
August 15, 1997, by and among CareMatrix Corporation, a Delaware corporation
(the "Company"), and Robertson, Stephens & Company LLC, Morgan Stanley & Co.
Incorporated, PaineWebber Incorporated, Salomon Brothers Inc and Smith Barney
Inc. (the "Purchasers") who have purchased or have the right to purchase up to
$115,000,000 in aggregate principal amount of 6-1/4% Convertible Subordinated
Notes due 2004 (the "Notes") of the Company pursuant to the Purchase Agreement
(as such term is defined below).
This Agreement is made pursuant to the Purchase Agreement, dated August
13, 1997, among the Company and the Purchasers (the "Purchase Agreement"). In
order to induce the Purchasers to enter into the Purchase Agreement, the Company
has agreed to provide the registration rights provided for in this Agreement to
the Purchasers and their respective direct and indirect transferees (i) for the
benefit of the Purchasers, (ii) for the benefit of the holders from time to time
of the Notes (including the Purchasers) and the holders from time to time of the
Common Stock issuable or issued upon conversion of the Notes and (iii) for the
benefit of the securities constituting the Transfer Restricted Securities. The
execution of this Agreement is a condition to the closing of the transactions
contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
Accredited Investor Notes: Notes initially resold by the
Purchasers pursuant to the Purchase Agreement to institutional "accredited
investors" (within the meaning of Rule 501(a)(1), (2), (3) or (7) promulgated by
the SEC under the Securities Act) (it being understood and agreed that such
Notes shall not include any Regulation S Notes) and all Notes issued upon
registration of transfer of or in exchange for such Notes.
Act: As defined in this Section 1.
Advice: As defined in the last paragraph of Section 2(d)
hereof.
Affiliate: An 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 person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise and
the terms "affiliated," "controlling" and "controlled" have meanings correlative
to the foregoing.
Agreement: This Registration Rights Agreement, as the same may
be amended, supplemented or modified from time to time in accordance with the
terms hereof.
<PAGE>
Business Day: Each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
Closing Date: August 18, 1997.
Common Stock: Common Stock, $.05 par value per share, of the
Company and any other shares of common stock as may constitute "Common Stock"
for purposes of the Indenture, in each case, as issuable or issued upon
conversion of the Notes.
Company: CareMatrix Corporation, a Delaware corporation, and
any successor corporation thereto.
controlling person: As defined in Section 6(a) hereof.
Damages Payment Date: Each of the semi-annual interest payment
dates provided in the Indenture.
Effectiveness Period: As defined in Section 2(a) hereof.
Effectiveness Target Date: The 120th day following the Closing
Date.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
Filing Date: The 60th day after the Closing Date.
Holder: Each beneficial owner of any Transfer Restricted
Securities.
Indemnified Person: As defined in Section 6(a) hereof.
Indenture: The Indenture, dated as of the date hereof, between
the Company and the Trustee, pursuant to which the Notes are being issued, as
the same may be amended, modified or supplemented from time to time in
accordance with the terms thereof.
Liquidated Damages: As defined in Section 3(a) hereof.
Purchasers: As defined in the first paragraph hereof.
Notes: The $100,000,000 aggregate principal amount of 6-1/4%
Convertible Subordinated Notes due 2004 of the Company being issued pursuant to
the Indenture (together with up to $15,000,000 aggregate principal amount of
such Notes, if, and to the extent, the Purchasers' over-allotment option is
exercised).
-2-
<PAGE>
Proceeding: An action, claim, suit or proceeding (including,
without limitation, an investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed in reliance upon Rule
430A), as amended or supplemented by any prospectus supplement, with respect to
the resale of any of the Transfer Restricted Securities covered by such
Registration Statement, and all other amendments and supplements to any such
prospectus, including post-effective amendments, and all materials incorporated
by reference or deemed to be incorporated by reference, if any, in such
prospectus.
Purchase Agreement: As defined in the second paragraph hereof.
Record Holder: (i) with respect to any Damages Payment Date
relating to any Note as to which any such Liquidated Damages have accrued, the
registered Holder of such Note on the record date with respect to the interest
payment date under the Indenture on which such Damages Payment Date shall occur
and (ii) with respect to any Damages Payment Date relating to any shares of
Common Stock as to which any such Liquidated Damages have accrued, the
registered Holder of such shares 15 days prior to the next succeeding Damages
Payment Date.
Registration Default: As defined in Section 3(a) hereof.
Registration Statement: Any registration statement of the
Company filed with the SEC pursuant to the Securities Act that covers the resale
of any of the Transfer Restricted Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference, if any, in such registration statement.
Regulation S Notes: Notes initially resold by the Purchasers
pursuant to the Purchase Agreement outside the United States to certain persons
in offshore transactions in reliance on Registration S under the Securities Act
and all Notes issued upon registration of transfer of or in exchange for such
Notes.
Requisite Information: As defined in Section 2(c) hereof.
Rule 144: Rule 144 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any successor
rule or regulation.
Rule 144A: Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any successor
rule or regulation.
-3-
<PAGE>
Rule 144A Notes: Notes initially resold by the Purchasers
pursuant to the Purchase Agreement to "qualified institutional buyers" (as such
term is defined in Rule 144A) (it being understood and agreed that such Notes
shall not include any Regulation S Notes) and all Notes issued upon registration
of transfer of or in exchange for such Notes.
Rule 158: Rule 158 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any successor
rule or regulation.
Rule 415: Rule 415 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any successor
rule or regulation.
Rule 424: Rule 424 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any successor
rule or regulation.
Rule 430A: Rule 430A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any successor
rule or regulation.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations promulgated by the SEC thereunder.
Shelf Registration Statement: As defined in Section 2 (a)
hereof.
Special Counsel: The special counsel to the Holders.
TIA: The Trust Indenture Act of 1939, as amended, and the
rules and regulations promulgated by the SEC thereunder.
Transfer Restricted Securities: Each Note, including each
Accredited Investor Note, Rule 144A Note and Regulation S Note, and each share
of Common Stock into which such Notes are converted or convertible (including
each share of Common Stock issued or issuable thereon upon any stock split,
stock combination, stock dividend or the like), upon original issuance thereof,
and at all times subsequent thereto, and associated related rights, if any,
until, in the case of any such Note or share (and associated rights) (i) the
date on which such Note or share of Common Stock has been effectively registered
under the Securities Act and disposed of in accordance with the Registration
Statement relating thereto, (ii) the date on which such Note or share of Common
Stock is distributed to the public pursuant to Rule 144 or is saleable pursuant
to paragraph (k) of Rule 144 (or similar provisions then in force) or (iii) the
date on which it ceases to be outstanding, whichever date is earliest; provided
that for purposes of the provisions hereof requiring the Company to register the
resale of Transfer Restricted Securities and related obligations, Common Stock
issuable upon conversion of outstanding Notes constituting Transfer Restricted
Securities shall be treated as
-4-
<PAGE>
outstanding (other than for purposes of Liquidated Damages and approval,
amendment and waiver provisions).
Trustee: The trustee under the Indenture.
underwritten registration or underwritten offering: A
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective Registration
Statement.
References herein to the term "Holders of a majority in
aggregate principal amount of Transfer Restricted Securities" or words to a
similar effect shall mean, with respect to any request, notice, demand,
objection or other action by the Holders hereunder or pursuant hereto (each, an
"Act"), registered Holders of a number of shares of then-outstanding Common
Stock constituting Transfer Restricted Securities and an aggregate principal
amount of then outstanding Notes constituting Transfer Restricted Securities,
such that the sum of such shares of Common Stock and the shares of Common Stock
issuable upon conversion of such Notes constitutes in excess of 50% of the sum
of all of the then-outstanding shares of Common Stock constituting Transfer
Restricted Securities and the number of shares of Common Stock issuable upon
conversion of then- outstanding Notes constituting Transfer Restricted
Securities. For purposes of the immediately preceding sentence, (i) any Holder
may elect to take any Act with respect to all or any portion of Transfer
Restricted Securities held by it and only the portion as to which such Act is
taken shall be included in the numerator of the fraction described in the
preceding sentence and (ii) Transfer Restricted Securities owned, directly or
indirectly, by the Company or its Affiliates shall be deemed not to be
outstanding.
2. Shelf Registration Statement
(a) The Company agrees to file with the SEC as promptly as
practicable after the Closing Date, but in no event later than the Filing Date,
a Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Transfer Restricted Securities or
separate Registration Statements for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Notes constituting Transfer
Restricted Securities and all of the Common Stock constituting Transfer
Restricted Securities, respectively (such Registration Statement or Registration
Statements, collectively, the "Shelf Registration Statement"). Each Shelf
Registration Statement shall be on Form S-3 under the Securities Act or another
appropriate form selected by the Company permitting registration of such
Transfer Restricted Securities for resale by the Holders in the manner or
manners reasonably designated by Holders of a majority in aggregate principal
amount of Transfer Restricted Securities being sold (including, without
limitation, up to two underwritten offerings). The Company shall use all
commercially reasonable efforts to not permit any securities other than the
Transfer Restricted Securities to be included in any Shelf Registration
Statement. The Company shall use all commercially reasonable efforts to cause
each Shelf Registration Statement to be declared effective pursuant to the
Securities Act as promptly as practicable but in no event later than the
Effectiveness Target Date and to keep each Shelf Registration Statement
continuously
-5-
<PAGE>
effective under the Securities Act until the earlier of such date that is two
years after the latest date of initial issuance of any of the Notes (the
"Effectiveness Period") or the date that all Transfer Restricted Securities
shall have been effectively registered under the Securities Act and disposed of
in accordance with the Registration Statement relating thereto or distributed to
the public pursuant to Rule 144 or are saleable pursuant to paragraph (k) of
Rule 144 (or similar provisions then in force).
(b) Supplements and Amendments. The Company shall use its best
efforts to keep each Shelf Registration Statement continuously effective by
supplementing and amending the Shelf Registration Statement if required by the
rules, regulations or instructions applicable to the registration form used for
such Shelf Registration Statement, if required by the Securities Act or if
reasonably requested by the Holders of a majority in aggregate principal amount
of the Transfer Restricted Securities or by any underwriter of such Transfer
Restricted Securities; provided, however, that the Effectiveness Period shall be
extended as provided in Section 2(d) hereof.
(c) Selling Securityholder Information. Each Holder shall
furnish to the Company such information regarding the distribution of its
Transfer Restricted Securities as is required by law to be disclosed in the
applicable Registration Statement (the "Requisite Information") prior to
effecting any sale pursuant to such Registration Statement.
The Company shall file, within five Business Days after the
receipt of notice from any Holder which includes the Requisite Information with
respect to such Holder, a Prospectus supplement pursuant to Rule 424 or
otherwise amend or supplement such Registration Statement to include in the
Prospectus the Requisite Information as to such Holder (and the Transfer
Restricted Securities held by such Holder), and the Company shall provide such
Holder and the Special Counsel within two Business Days after receipt of such
notice with a copy of such Prospectus as so amended or supplemented containing
the Requisite Information in order to permit such Holder to comply with the
Prospectus delivery requirements of the Securities Act in a timely manner with
respect to any proposed disposition of such Holder's Transfer Restricted
Securities.
If any such Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require, in the event that such reference to such
Holder by name or otherwise is not required by the Securities Act or any similar
federal statute then in force, the deletion of the reference to such Holder in
such Registration Statement at any time subsequent to the time that such
reference ceases to be required.
(d) Certain Notices; Suspension of Sales. Each Holder agrees
by acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 4(c)(ii), 4(c)(iii), 4(c)(v) or 4(c)(vi) hereof, such Holder will
forthwith discontinue disposition of such Transfer Restricted Securities covered
by such Registration Statement and Prospectus (other than in transactions exempt
from the registration requirements under the Securities Act) until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Sections 4(c) and 4(k) hereof, or until it is
-6-
<PAGE>
advised in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus. If the Company shall give any such
notice, the Effectiveness Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each Holder shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Sections 4(i) and 4(k) hereof
or (y) the Advice, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
3. Liquidated Damages
(a) The Company and the Purchasers agree that the Holders will
suffer damages if the Company fails to fulfill its obligations pursuant to
Section 2 hereof and that it would not be possible to ascertain the extent of
such damages. Accordingly, the Company hereby agrees to pay liquidated damages
("Liquidated Damages") to each Holder under the circumstances and to the extent
set forth below:
(i) if the Shelf Registration Statement has not been
filed with the SEC on or prior to the Filing Date; or
(ii) if each Shelf Registration Statement is not
declared effective by the SEC on or prior to the applicable
Effectiveness Target Date; or
(iii) any Shelf Registration Statement is filed and
declared effective but shall thereafter cease to be effective
or usable at any time during the Effectiveness Period (without
being succeeded immediately on the same day by an additional
Shelf Registration Statement filed and declared effective
which is then available for effecting resales of Transfer
Restricted Securities) for a period of time which shall exceed
90 days in the aggregate in any period of 365 consecutive
days;
(any of the foregoing, a "Registration Default"). In the event of any such
Registration Default, the Company shall accrue Liquidated Damages to each Holder
during the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $.05 per week per $1,000 principal
amount of Notes and, if applicable, on an equivalent basis per share (subject to
appropriate adjustment in the event of any stock split, stock combination, stock
dividends and the like) of Common Stock constituting Transfer Restricted
Securities held by such Holder for each week or portion thereof that the
Registration Default continues. The weekly rate at which such Liquidated Damages
accrue shall increase by an additional $.05 per $1,000 principal amount of Notes
and, if applicable, by an equivalent amount per week per share (subject to
adjustment as set forth above) of Common Stock constituting Transfer Restricted
Securities for each subsequent continuing 90-day period following the occurrence
of such Registration Default until all Registration Defaults have been cured;
provided, however, that Liquidated Damages shall not at any time exceed
-7-
<PAGE>
$.25 per week per $1,000 principal amount of Notes or, as applicable, an
equivalent amount per week per share (subject to adjustment as set forth above)
of Common Stock constituting Transfer Restricted Securities. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages shall cease
(without in any way limiting the effect of any subsequent Registration Default).
A Registration Default under clause (i) above shall be cured on the date that
the applicable Shelf Registration Statement is filed with the SEC; a
Registration Default under clause (ii) above shall be cured on the date that the
applicable Shelf Registration Statement is declared effective by the SEC and
becomes available for effecting sales of securities; and a Registration Default
under clause (iii) above shall be cured on the date the applicable Shelf
Registration Statement is declared effective or otherwise usable and becomes
available for effecting sales of securities.
(b) The Company shall notify the Trustee within one Business
Day after each and every date on which a Registration Default occurs. Liquidated
Damages shall be paid by the Company to the Record Holders on each Damages
Payment Date by wire transfer of immediately available funds to the accounts
specified by them or by mailing checks to their registered addresses as they
appear in the Note register (as defined in the Indenture), in the case of the
Notes, and in the register of the Company for the Common Stock, in the case of
shares of Common Stock, if no such accounts have been specified on or before the
Damages Payment Date; provided, however, that any Liquidated Damages accrued
with respect to any Note or portion thereof called for redemption on a
redemption date, repurchased in connection with a Repurchase Event (as defined
in the Indenture) on a repurchase date, or converted into shares of Common Stock
on a conversion date prior to the Damages Payment Date, shall, in any such
event, be paid instead to the Holder who submitted such Note or portion thereof
for redemption, repurchase or conversion on the applicable redemption date,
repurchase date or conversion date, as the case may be, on such date (promptly
following the conversion date, in the case of conversion of a Note). In no event
shall the Company be required to pay Liquidated Damages in excess of the
applicable maximum weekly amount set forth above, regardless of whether one or
multiple Registration Defaults shall exist.
(c) All of the Company's obligations set forth in this Section
3 which are unsatisfied to any extent with respect to any Transfer Restricted
Securities at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security have been satisfied in full (notwithstanding the earlier termination of
this Agreement).
(d) Any payments due and payable pursuant to this Section 3
with respect to any Notes shall be subject to the provisions of Article IV of
the Indenture as if such payments were additional interest on the Notes.
4. REgistration Procedures . In connection with the Company's
registration obligations hereunder, the Company shall effect such registrations
on the appropriate form selected by the Company to permit the resale of Transfer
Restricted Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall:
-8-
<PAGE>
(a) No fewer than five Business Days prior to the initial
filing of a Registration Statement or Prospectus and no fewer than two Business
Days prior to the filing of any amendment or supplement thereto (excluding,
unless requested, any document that would be incorporated or deemed to be
incorporated therein by reference), furnish to the registered (as of the most
recent reasonably practicable date which shall not be more than two Business
Days prior to the date such document is personally delivered, delivered to a
next-day courier, deposited in the mail or telecopied, as the case may be)
Holders, Special Counsel and the managing underwriters, if any, copies of all
such documents proposed to be filed (excluding, unless requested, those
incorporated or deemed to be incorporated by reference) and cause the officers
and directors of the Company, counsel to the Company and independent certified
public accountants to the Company to respond to such inquiries as shall be
necessary in connection with such Registration Statement, in the opinion of
Special Counsel and counsel to such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act; provided, that the
Company shall be under no obligation to furnish copies of any supplement to the
Registration Statement or Prospectus containing the information specified in
Item 507 of Regulation S-K relating solely to the sale by a single Holder other
than the Holder named therein. The Company shall not file any such Registration
Statement or related Prospectus or any amendments or supplements thereto to
which the Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities, Special Counsel, or the managing underwriters, if any,
shall reasonably object no more than two Business Days following the delivery
thereof; provided, that the Company may assume, for the purposes of this
subparagraph (a), that objections to the inclusion of information (i)
specifically requested to be included in the Registration Statement by the staff
of the SEC, (ii) specifically referenced in a written opinion by counsel to the
Company that inclusion of such information is required or (iii) specifically
required by the Securities Act or other applicable law, shall not be deemed to
be reasonable.
(b) As expeditiously as reasonably possible, prepare and file
with the SEC such amendments, including post-effective amendments, to each
Registration Statement as may be necessary to keep such Registration Statement
continuously effective for the applicable time period set forth in Section 2(a)
hereof; cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act and the Exchange Act with respect to the disposition of
all securities covered by such Registration Statement during such period in
accordance with the intended method or methods of disposition by the Holder set
forth in such Registration Statement as so amended or in such Prospectus as so
supplemented (including, without limitation, the filing of any Prospectus
supplement pursuant to Rule 424 in order to add or change any selling security
holder information (including any such supplements or amendments pursuant to
Section 2(c) hereof, provided such Holder to which such change applies complies
with the Requisite Information requirements of Section 2(c) hereof));
(c) Notify the registered (as of the most recent reasonably
practicable date which shall not be more than two Business Days prior to the
date such notice is personally delivered, delivered to a next-day courier,
deposited in the mail or telecopied, as the case may be) Holders, Special
Counsel and the managing underwriters, if any, promptly (and in the case of an
event
-9-
<PAGE>
specified by clause (i)(A) of this paragraph in no event fewer than two Business
Days prior to such filing), and (if requested by any such person), confirm such
notice in writing, (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be filed
(other than any Prospectus or Prospectus Supplement containing the information
specified in Item 507 of Regulation S-K relating solely to the sale by a single
Holder other than the Holder named therein), and, (B) with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request of the SEC or any other federal or state
governmental authority for amendments or supplements to such Registration
Statement or related Prospectus or for additional information related thereto,
(iii) of the issuance by the SEC, any state securities commission, any other
governmental agency or any court of any stop order, order or injunction
suspending or enjoining the use or the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose, (iv) if at any
time any of the representations and warranties of the Company contained in any
agreement (including any underwriting agreement) contemplated by Section 4(m)
hereof are not true and correct in all material respects, (v) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Transfer Restricted
Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, and (vi) of the existence of any fact and the
happening of any event that makes any statement made in such Registration
Statement or related Prospectus untrue in any material respect, or that requires
the making of any changes in such Registration Statement or Prospectus so that
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
that, in the case of the Prospectus, such Prospectus will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(d) Use all commercially reasonable efforts to avoid the
issuance of, or, if issued, obtain the withdrawal of any stop order or order
enjoining or suspending the use or effectiveness of a Registration Statement or
the lifting of any suspension of the qualification (or exemption from
qualification) of any of the Transfer Restricted Securities for sale in any
jurisdiction, at the earliest practicable moment;
(e) If requested by the Special Counsel, the managing
underwriters, if any, or the Holders of a majority in aggregate principal amount
of the Transfer Restricted Securities being sold in connection with such
offering, (i) promptly include in a Prospectus supplement or post-effective
amendment such information as the Special Counsel, the managing underwriters, if
any, and such Holders reasonably request to be included therein, and (ii) make
all required filings of such Prospectus supplement or such post-effective
amendment as soon as reasonably practicable after the Company has received
notification of the matters to be included in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall not be
required to take any action pursuant to this Section 4(e) that would, in the
opinion of counsel for the Company, violate applicable law;
-10-
<PAGE>
(f) As expeditiously as reasonably possible, furnish to each
Holder who so requests, Special Counsel and each managing underwriter, if any,
without charge, at least one conformed copy of each Registration Statement and
each amendment thereto, including financial statements (but excluding schedules,
all documents incorporated or deemed to be incorporated therein by reference and
all exhibits, unless requested in writing by such Holder, Special Counsel or
managing underwriter);
(g) As expeditiously as reasonably possible, deliver to each
Holder, the Special Counsel, and the underwriters, if any, without charge, as
many copies of the Prospectus or Prospectuses (including each form of
Prospectus) and each amendment or supplement thereto as such persons may
reasonably request; and, unless the Company shall have given notice to such
Holder pursuant to Section 2(d), the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders of Transfer Restricted Securities and the underwriters, if any, in
connection with the offering and sale of the Transfer Restricted Securities
covered by such Prospectus and any amendment or supplement thereto, provided,
however, that no Holder shall be entitled to use the Prospectus unless and until
such Holder shall have furnished to the Company any and all Requisite
Information pursuant to Section 2(c) hereof;
(h) Use all commercially reasonable efforts to register or
qualify, or cooperate with the Holders of Transfer Restricted Securities to be
sold, the underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of, such Transfer Restricted Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the United States
as any Holder or underwriter reasonably requests in writing, keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things necessary legally to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the applicable
Registration Statement; provided, however, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified, take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or subject the
Company to any tax in any such jurisdiction where it is not then so subject;
(i) In connection with any sale or transfer of Transfer
Restricted Securities that will result in such securities no longer being
Transfer Restricted Securities, cooperate with the Holders and the managing
underwriters, if any, to (A) facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold, which
certificates shall not bear any restrictive legends, shall bear a CUSIP number
different from the CUSIP number for the Transfer Restricted Securities and shall
be in a form eligible for deposit with The Depository Trust Company and (B)
enable such Transfer Restricted Securities to be in such denominations and
registered in such names as the managing underwriters, if any, or Holders may
reasonably request at least two Business Days prior to any sale of Transfer
Restricted Securities;
-11-
<PAGE>
(j) Use all commercially reasonable efforts to cause the
offering of the Transfer Restricted Securities covered by the Registration
Statement to be registered with or approved by such other governmental agencies
or authorities within the United States, except as may be required as a
consequence of the nature of a Holder's business, in which case the Company will
cooperate in all reasonable respects with the filing of such Registration
Statement and the granting of such approvals as may be reasonably necessary to
enable the seller or sellers thereof or the underwriters, if any, to consummate
the disposition of such Transfer Restricted Securities; provided, however, that
the Company shall not be required to register the Transfer Restricted Securities
in any jurisdiction that would require the Company to qualify to do business in
any jurisdiction where it is not then so qualified, subject it to general
service of process in any such jurisdiction where it is not then so subject or
subject the Company to any tax in any such jurisdiction where it is not then so
subject or to;
(k) Upon the occurrence of any event contemplated by Section
4(c)(vi) hereof, as promptly as reasonably practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, such Prospectus will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
provided that, the Company may delay the filing and delivery of such supplement
or amendment if, and only for so long as, (i) such supplement or amendment would
require the Company to disclose material non-public information, (ii) the Board
of Directors of the Company determines in good faith that such disclosure is
adverse to the reasonable interests of the Company and its shareholders, and
(iii) the Company complies with its obligations, if any, to pay Liquidated
Damages;
(l) Prior to the effective date of the first Registration
Statement relating to the Transfer Restricted Securities, to provide a CUSIP
number for the Transfer Restricted Securities to be sold pursuant to the
Registration Statement;
(m) Enter into such agreements (including any underwriting
agreements in form, scope and substance as are customary in underwritten
offerings) reasonably satisfactory to the Company and take all such other
reasonable actions in connection therewith (including those reasonably requested
by the managing underwriters, if any, or the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities being sold) in order to
expedite or facilitate the sale of such Transfer Restricted Securities;
provided, however, that the Company is not required to facilitate an
underwritten public offering unless a request therefor shall have been made by
the holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold and, in any event, the Company is not required
to effect more than two underwritten offerings. In such connection, whether or
not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration, the Company shall (i) make such
representations and warranties to the Holders of such Transfer Restricted
Securities and the underwriters, if any, with
-12-
<PAGE>
respect to the business of the Company and its subsidiaries (including with
respect to businesses or assets acquired or to be acquired by any of them), and
the Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, in form, substance
and scope as are customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if and when requested; (ii) seek to obtain
opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and Special Counsel to the Holders of the
Transfer Restricted Securities being sold), addressed to each selling Holder of
Transfer Restricted Securities and each of the underwriters, if any, covering
the matters customarily covered in opinions requested in underwritten offerings
(including any such matters as may be reasonably requested by such Special
Counsel and underwriters); (iii) use all reasonable efforts to obtain customary
"cold comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data is, or is
required to be, included in the Registration Statement), addressed (where
reasonably possible) to each selling Holder of Transfer Restricted Securities
and each of the underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings; (iv) if an underwriting agreement is
entered into, provide that the underwriting agreement shall contain
indemnification provisions and procedures no less favorable to the selling
Holders of Transfer Restricted Securities and the underwriters, if any, than
those set forth in Section 6 hereof (or such other provisions and procedures
acceptable to Holders of a majority in aggregate principal amount of the
Transfer Restricted Securities covered by such Registration Statement and the
managing underwriters); and (v) deliver such documents and certificates as may
be reasonably requested by the Holders of majority in aggregate principal amount
of the Transfer Restricted Securities being sold, their Special Counsel or the
managing underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (i) of this Section 4(m)
and to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company;
(n) Make available for inspection by a representative of the
Holders of Transfer Restricted Securities being sold, any underwriter
participating in any such disposition of Transfer Restricted Securities, if any,
and any attorney, consultant or accountant retained by such selling Holders or
underwriter, at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries as they may reasonably request,
and cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by any
such representative, underwriter, attorney, consultant or accountant in
connection with such Registration Statement, provided, however, that such
persons shall first agree in writing with the Company that any information that
is reasonably and in good faith designated by the Company in writing as
confidential at the time of delivery or inspection (as the case may be) of such
information shall be kept confidential by such persons, unless (i) disclosure of
such information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities,
-13-
<PAGE>
(ii) disclosure of such information is required by law (including any disclosure
requirements pursuant to federal securities laws in connection with the filing
of any Registration Statement or the use of any Prospectus), (iii) such
information becomes generally available to the public other than as a result of
a disclosure or failure to safeguard by any such person or (iv) such information
becomes available to any such person from a source other than the Company and
such source is not bound by a confidentiality agreement.
(o) Cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement relating to
the Transfer Restricted Securities; and in connection therewith, cooperate with
the Trustee and the Holders of Notes constituting Transfer Restricted Securities
to effect such changes to the Indenture, if any, as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute, and use its best efforts to cause the Trustee to execute, all customary
documents as may be required to effect such changes, and all other forms and
documents (including Form T-1) required to be filed with the SEC to enable the
Indenture to be so qualified under the TIA in a timely manner.
(p) Comply with applicable rules and regulations of the SEC
and make generally available to its security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act or Rule 158 (or
any similar rule promulgated under the Securities Act), no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Transfer Restricted Securities are sold to underwriters in a
firm commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter after the effective date of a Registration Statement, which
statement shall cover said period, consistent with the requirements of Rule 158;
and
(q) (i) List all shares of Common Stock covered by such
Registration Statement on any securities exchange on which the Common Stock is
then listed or (ii) authorize for quotation on the National Association of
Securities Dealers Automated Quotation System ("Nasdaq") or the Nasdaq National
Market or the American Stock Exchange all Common Stock covered by such
Registration Statement if the Common Stock is then so authorized for quotation.
5. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by it whether or
not any Registration Statement is filed or becomes effective and whether or not
any securities are offered or sold pursuant to any Registration Statement. The
fees and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filings fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and (B) in compliance
with securities or Blue Sky laws (including, without limitation and in addition
to that provided for in (b) below, fees and disbursements of counsel for the
underwriters or the Special Counsel in connection with Blue Sky qualifications
of the Transfer
-14-
<PAGE>
Restricted Securities and determination of the eligibility of the Transfer
Restricted Securities for investment under the laws of such jurisdictions as the
managing underwriters, if any, or Holders of a majority in aggregate principal
amount of Transfer Restricted Securities, may designate)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Transfer Restricted Securities in a form eligible for deposit with The
Depository Trust Company and of printing Prospectuses if the printing of
Prospectuses is required by the managing underwriters, if any, or by the Holders
of a majority in aggregate principal amount of the Transfer Restricted
Securities included), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and the Special Counsel (plus
any local counsel deemed appropriate by the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities) in accordance with the
provisions of Section 5(b) hereof, (v) fees and disbursements of all independent
certified public accountants referred to in Section 4(m)(iii) (including,
without limitation, the expenses of any special audit and "comfort" letters
required by or incident to such performance), (vi) Securities Act liability
insurance, if the Company so desires such insurance, and (vii) fees and expenses
of all other persons retained by the Company. In addition, the Company shall pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of an annual audit and the fees and expenses incurred in connection with
the listing of the securities to be registered on any securities exchange or the
authorizing for quotation on the Nasdaq or the Nasdaq National Market or the
American Stock Exchange. Notwithstanding anything in this Agreement to the
contrary, each Holder shall pay all underwriting discounts and brokerage
commissions with respect to any Transfer Restricted Securities sold by it.
(b) In connection with any registration hereunder, the Company
shall reimburse the Holders of the Transfer Restricted Securities being
registered or tendered for in such registration for the reasonable fees and
disbursements of not more than one firm of attorneys representing the selling
Holders (in addition to any local counsel), which firm shall be chosen by the
Holders of a majority in aggregate principal amount of the Transfer Restricted
Securities. Shearman & Sterling shall be Special Counsel for all purposes hereof
unless and until another Special Counsel shall have been selected by a majority
in aggregate principal amount of the Transfer Restricted Securities and notice
hereof shall have been given to the Company.
6. Indemnification
(a) The Company agrees to indemnify and hold harmless (i) each
of the Purchasers, (ii) each Holder, (iii) each person, if any, who controls
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) any of the foregoing (any of the persons referred to in this
clause (iii) being hereinafter referred to as a "controlling person"), and (iv)
the respective officers, directors, partners, employees, representatives and
agents of the Purchasers, the Holders (including predecessor Holders), or any
controlling person (any person referred to in clause (i), (ii), (iii) or (iv)
may hereinafter be referred to as an "Indemnified Person"), from and against any
and all losses, claims, damages, liabilities, expenses and judgments caused by
any untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or Prospectus or in any amendment or supplement
thereto or in any preliminary Prospectus, or caused
-15-
<PAGE>
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the case of
any Prospectus or supplement thereto or any preliminary Prospectus, in light of
the circumstances under which they were made) not misleading, except insofar as
such losses, claims, damages, liabilities, expenses or judgments are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon information relating to any Indemnified Person furnished to the
Company by or on behalf of such Indemnified Person expressly for use therein;
provided, however, that the foregoing indemnity with respect to any preliminary
Prospectus shall not inure to the benefit of any Indemnified Person from whom
the person asserting such losses, claims, damages, liabilities, expenses and
judgments purchased securities if such untrue statement or omission or alleged
untrue statement or omission made in such preliminary Prospectus is eliminated
or remedied in the Prospectus and a copy of the Prospectus shall not have been
furnished to such person in a timely manner due to the wrongful action or
wrongful inaction of such Indemnified Person, whether as a result of negligence
or otherwise.
(b) In case any action shall be brought against any
Indemnified Person, based upon any Registration Statement or any such Prospectus
or any amendment or supplement thereto and with respect to which indemnity may
be sought against the Company, such Indemnified Person shall promptly notify the
Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Person and
payment of all reasonable fees and expenses. Any Indemnified Person shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person, unless (i) the employment of such counsel
shall have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel or (iii) such
Indemnified Person or Persons shall have been advised by counsel that there may
be a conflict between the positions of the indemnifying party or parties and of
the indemnified party or parties in conducting the defense of such action or
proceeding or that there may be legal defenses available to such Indemnified
Person or Persons different from or in addition to those available to the
indemnifying party or parties (in which case the Company shall not have the
right to assume the defense of such action on behalf of such Indemnified Person,
it being understood, however, that the Company shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all such Indemnified Persons, which firm
shall be designated in writing by such Indemnified Persons, and that all such
fees and expenses shall be reimbursed as they are incurred). The Company shall
not be liable for any settlement of any such action effected without its written
consent but if settled with the written consent of the Company, the Company
agrees to indemnify and hold harmless any Indemnified Person from and against
any loss or liability by reason of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
-16-
<PAGE>
(c) In connection with any Registration Statement pursuant to
which any Holder (or predecessor Holder) sold or offered for resale Transfer
Restricted Securities, such Holder (or predecessor Holder) agrees, severally and
not jointly, to indemnify and hold harmless the Company, its directors, its
officers and any person controlling the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, to the same extent as
the foregoing indemnity from the Company to each Indemnified Person but only
with reference to information relating to such Indemnified Person furnished by
or on behalf of such Indemnified Person expressly for use in such Registration
Statement. In case any action shall be brought against the Company, any of its
directors, any such officer or any person controlling the Company based on such
Registration Statement and in respect of which indemnity may be sought against
any Indemnified Person, the Indemnified Person shall have the rights and duties
given to the Company (except that if the Company shall have assumed the defense
thereof, such Indemnified Person shall not be required to do so, but may employ
separate counsel therein and participate in defense thereof but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person),
and the Company, its directors, any such officers and any person controlling the
Company shall have the rights and duties given to the Indemnified Person by
Section 6(b) hereof.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities, expenses or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities, expenses and judgments (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and each Indemnified Person on the other hand pursuant to the Purchase
Agreement or from the offering for resale of the Transfer Restricted Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and each such Indemnified Person in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities,
expenses or judgments, as well as any other relevant equitable considerations.
The relative fault of the Company and each such Indemnified Person shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or such Indemnified Person and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, the Holders and the Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 6(d)
were determined by pro rata allocation (even if the Indemnified Person were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities, expenses or
judgments referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or
-17-
<PAGE>
defending any such action or claim. Notwithstanding the provisions of this
Section 6, no Indemnified Person shall be required to contribute any amount in
excess of the amount by which the total net profit received by it in connection
with the sale of the Transfer Restricted Securities pursuant to this Agreement
exceeds the amount of any damages which such Indemnified Person has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Indemnified Persons' obligations to contribute pursuant
to this Section 6(d) are several in proportion to the respective amount of
Transfer Restricted Securities included in and sold pursuant to any such
Registration Statement by each Indemnified Person and not joint.
7. Rules 144 and 144A
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner and, if at any
time it is not required to file such reports but in the past had been required
to or did file such reports, it will, upon the request of any Holder, make
available other information as required by, and so long as necessary to permit
sales of its Transfer Restricted Securities pursuant to, Rule 144 and Rule 144A.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
8. Underwritten Registrations
If any of the Transfer Restricted Securities covered by any
Shelf Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be investment bankers of recognized national
standing selected by the Holders of a majority in aggregate principal amount of
such Transfer Restricted Securities included in such offering, subject to the
consent of the Company (which may not be unreasonably withheld or delayed).
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities underwriting agreements, lock-up agreements and other
documents reasonably required under the terms of such underwriting arrangements.
9. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder of any of their respective obligations under this Agreement, each Holder
or the Company, in addition to being entitled to exercise all rights granted by
law, including, without limitation, recovery of damages, will
-18-
<PAGE>
be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agree that, in the event of any
action for specific performance in respect of such breach, they shall waive the
defense that a remedy at law would be adequate. This Section 9(a) shall not
apply to any breach for which Liquidated Damages have been specifically provided
hereunder.
(b) No Inconsistent Agreements.
(i) The Company shall not enter into any agreement
with respect to its securities that is inconsistent with the rights specifically
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Without limiting the generality of the foregoing, without the
written consent of the Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities, the Company shall not hereafter grant to any
person the right to include any securities held by such person in any
Registration Statement filed pursuant to this Agreement.
(ii) The Company is not currently a party to any
agreement granting any registration rights with respect to any of its securities
to any person which conflicts with the Company's obligations hereunder, except
for such rights and conflicts (A) as have been irrevocably waived, (B) that
subject the Transfer Restricted Securities to be sold in an underwritten
offering to be cutback prior to the securities included in such offering by
security holders exercising piggyback registration rights with respect to such
offering as specifically described in the Offering Circular dated August 13,
1997 with respect to the Notes (the "Offering Circular") and (C) that could
delay the time period with respect to amendments or supplements as contemplated
in this Agreement as specifically described in the Offering Circular.
(iii) Notwithstanding any term of this Agreement to
the contrary, the Company shall use its best efforts to obtain waivers from
holders of registration rights with respect to the Company's securities
("Existing Registration Rights Holders") of any rights to include any of their
shares of Common Stock ("Piggyback Shares") in any Registration Statement filed
pursuant to this Agreement and any other rights they otherwise would have with
respect to actions required to be taken by the Company under this Agreement.
Without limiting the foregoing, the Company shall, to the extent reqoraneously
with the Shelf Registration Statement required pursuant to Section 2(a) of this
Agreement, a shelf registration statement with respect to the Existing
Registration Rights Holders' Piggyback Shares with substantially the same terms
that such Existing Registration Rights Holders would otherwise have with respect
to any Shelf Registration Statement. In addition, the Company shall use its best
efforts to eliminate or minimize any adverse effects on the rights of the
Holders under this Agreement as a result of the Company's registration rights
agreements with the Existing Registration Rights Holders.
-19-
<PAGE>
(iv) The Purchasers agree that the second paragraph
of Section 2(c) of this Agreement shall not require the Company to breach the
third-party obligation referenced in Section 9(b)(ii)(C) above if such
third-party obligation is not waived. The Company acknowledges that neither the
agreement set forth in the preceding sentence, the disclosure set forth in
Section 9(b)(ii) above nor the covenants of the Company set forth in Section
9(b)(iii) above shall relieve the Company of its obligation to pay Liquidated
Damages pursuant to and in accordance with Section 3 of this Agreement. Without
limiting the foregoing, with respect to amendments or supplements to a Shelf
Registration Statement, such Shelf Registration Statement shall "cease to be
usable" within the meaning of Section 3(a)(iii) of this Agreement for such
period which exceeds the applicable time period for filing and delivering
amendments or supplements, as the case may be, as required under this Agreement.
(c) No Adverse Action Affecting the Transfer Restricted
Securities. The Company will not take any action with respect to the Transfer
Restricted Securities which would adversely affect the ability of any of the
Holders to include such Transfer Restricted Securities in a registration
undertaken pursuant to this Agreement.
(d) No Piggyback on Registrations. After the date hereof, the
Company shall not grant to any of its security holders (other than the Holders
in such capacity) the right to include any of its securities in any Shelf
Registration Statement.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof,
may not be given, without the written consent of the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities; provided,
however, that, for the purposes of this Agreement, Transfer Restricted
Securities that are owned, directly or indirectly, by either the Company or an
Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders whose Transfer
Restricted Securities are being sold pursuant to an underwritten offering and
that does not directly or indirectly affect the rights of other Holders may be
given by Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold by such Holders pursuant to such an
underwritten offering; provided, however, that the provisions of this sentence
may not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(f) Notices. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next day air courier,
certified first-class mail, return receipt requested or telecopy:
(i) if to a Holder, to the address of such Holder as
it appears in the Note or Common Stock register
of the Company, as applicable;
-20-
<PAGE>
(ii) if to the Company, to:
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Attn.: Robert M. Kaufman
Telecopy No.: (617) 433-1073
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110-2699
Attn.: Michael J. Bohnen, Esq.
Telecopy No.: (617) 973-9748
(iii) if to the Special Counsel, to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attn.: Linda Quinn, Esq.
Telecopy No.: (212) 848-7179
or such other Special Counsel at such other
address and telecopy number as a majority in
aggregate principal amount of the Transfer
Restricted Securities shall have given
notice to the Company as contemplated by
Section 5(b) hereof.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given, when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier, five Business Days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is acknowledged by the recipient's
telecopier machine, if telecopied.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each existing and future Holder.
The Company may not assign its rights or obligations hereunder without the prior
written consent of the Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities, other than by operation of law pursuant to a
merger or consolidation to which the Company is a party. In the event the Notes
constituting Transfer Restricted Securities become convertible into common stock
of another person pursuant to Section 15.6 of the Indenture, the Company shall
cause such person to assume the Company's obligations hereunder.
-21-
<PAGE>
(h) Counterparts. This Agreement may be executed in any number
of counterparts by the parties hereto, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(j) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(k) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. All references made in this Agreement to "Section" and
"paragraph" refer to such Section or paragraph of this Agreement, unless
expressly stated otherwise.
(l) Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the prevailing party, as determined by the court,
shall be entitled to recover its reasonable attorneys' fees in addition to any
other available remedy.
-22-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
CAREMATRIX CORPORATION
By:______________________________
Name:
Title:
The foregoing Registration Rights
Agreement is hereby confirmed and
agreed to as of the date first
written above:
ROBERTSON, STEPHENS & COMPANY LLC
MORGAN STANLEY & CO. INCORPORATED
PAINEWEBBER INCORPORATED
SALOMON BROTHERS INC
SMITH BARNEY INC.
By: ROBERTSON, STEPHENS & COMPANY LLC
By: ROBERTSON, STEPHENS & COMPANY GROUP, L.L.C.
By:___________________________
Authorized Signatory
Acting on behalf of itself and the other
Purchasers
Exhibit 5.1
NUTTER, McCLENNEN & FISH, LLP
ATTORNEYS AT LAW
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2699
TELEPHONE: (617) 439-2000 FACSIMILE: (617) 973-9748
DIRECT DIAL NUMBER E-MAIL ADDRESS
October 10, 1997
22237-19
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Gentlemen:
Reference is made to that certain Registration Statement on Form S-3
(the "Registration Statement"), which CareMatrix Corporation, a Delaware
corporation (the "Company"), is filing on the date hereof with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the resale of up to $115,000,000 aggregate
principal amount of the Company's 6-1/4% Convertible Subordinated Debentures due
2004 (the "Debentures") by the holders thereof, and the resale of up to
3,982,683 shares of the Company's Common Stock, $.05 par value per share (the
"Shares"), issuable upon the conversion of the Debentures by holders of
Debentures who did not purchase such Debentures pursuant to the Registration
Statement.
We have acted as counsel for the Company in connection with the
Registration Statement. We have examined original or certified copies of the
Restated Certificate of Incorporation of the Company, the Company's By-laws, the
Indenture under which the Debentures were issued, the corporate records of the
Company to the date hereof, certificates of public officials and such other
documents, records and materials as we have deemed necessary in connection with
this opinion letter. Based upon the foregoing, and in reliance upon information
from time to time furnished to us by the Company's officers, directors and
agents, we are of the opinion that: (i) the Debentures constitute binding
obligations of the Company to the holders thereof; and (ii) the shares of Common
Stock to be issued by the Company from time to time upon the conversion of
Debentures, when issued under the terms of said Indenture, will be duly and
validly issued, fully paid and non-assessable.
We understand that this opinion letter is to be used in connection with
the Registration Statement, as finally amended, and hereby consent to the filing
of this opinion letter with and as a part of the Registration Statement as so
amended, and to the reference to our firm in the Prospectus under the heading
"Legal Matters." It is understood that this opinion letter is to be
<PAGE>
NUTTER, MCCLENNEN & FISH, LLP
CareMatrix Corporation
October 10, 1997
Page 2
used in connection with the resale of the aforesaid Debentures and shares of
Common Stock only while the Registration Statement is effective and as it may be
amended from time to time as contemplated by Section 10(a)(3) of the Securities
Act.
Very truly yours,
/s/ Nutter, McClennen & Fish, LLP
NUTTER, McCLENNEN & FISH, LLP
JED/ADA
Exhibit 12.1
Ratios of earnings to fixed charges
<TABLE>
<CAPTION>
June 24, 1994
Six months (inception) to
ended Year ended December, 31 December 31,
June 30, 1997 1996 1995 1994
------------- ---- ---- --------------
<S> <C> <C> <C> <C>
Pre-tax earnings (loss) from continuing operations $3,436,161 ($6,579,392) ($7,206,243) ($2,555,352)
Add back fixed charges deducted from earnings (loss) 1,600,223 1,816,163 917,431 155,993
Less pre-tax equivalent of preferred stock dividends (20,152) (66,222) ---- ----
---------- ------------ ------------ ------------
$5,016,232 ($4,829,451) ($6,288,813) ($2,399,359)
========== ============ ============ ============
Fixed Charges:
Interest expense $ 521,243 $1,137,974 $ 543,571 $ 55,856
Portion of operating lease rentals deemed to
represent interest 1,058,828 611,967 373,860 100,137
Pre-tax equivalent of preferred stock dividends 20,152 66,222 ---- ----
---------- ------------ ------------ ------------
$1,600,223 $1,816,163 $ 917,431 $ 155,993
========== ========== ========== ==========
Ratios of earnings to fixed charges 3.13
====
Deficiency of earnings available to cover fixed charges ($6,645,614) ($7,206,243) ($2,555,352)
============ ============ ============
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
CareMatrix Corporation on Form S-3 of our report dated February 7, 1997, on our
audits of the consolidated financial statements of CareMatrix Corporation as of
December 31, 1996 and for the year then ended, and the combined financial
statements of CareMatrix Corporation as of December 31, 1995 and for the year
ended December 31, 1995 and the period from June 24, 1994 (inception) to
December 31, 1994. We also consent to the reference to our firm under the
caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 17, 1997
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Senior Vice President and Corporate Secretary
225 Franklin Street, Boston, Massachusetts 02110
(617)654-3253
(Name, address and telephone number of agent for service)
---------------------
CareMatrix Corporation
(Exact name of obligor as specified in its charter)
Massachusetts 04-3069586
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
197 First Avenue
Needham, MA 02194
(781) 433-1000
(Address of principal executive offices) (Zip Code)
--------------------
6-1/4% Convertible Subordinated Notes due 2004
(Title of indenture securities)
<PAGE>
GENERAL
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.
The 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 Boston Corporation.
(See note on page 2.)
Item 3. through Item 15. Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the 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.
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.
1
<PAGE>
5. A copy of each indenture referred to in Item 4. if the obligor is in
default.
Not applicable.
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.
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.
NOTES
In answering any item of this Statement of Eligibility and
Qualification which relates to matters peculiarly within the knowledge of the
obligor or any underwriter for the obligor, the trustee has relied upon
information furnished to it by the obligor and the underwriters, and the trustee
disclaims responsibility for the accuracy or completeness of such information.
The answer furnished to Item 2. of this statement 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, as
amended, 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 8th day of October, 1997.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Eric J. Donaghey
--------------------------------------
Eric J. Donaghey
Assistant Vice President
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by CareMatrix
Corporation, of its 6 1/4% Convertible Subordinated Notes due 2004 we hereby
consent that reports of examination 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
By: /s/ Eric J. Donaghey
--------------------------------------
Eric J. Donaghey
Assistant Vice President
Dated: October 8, 1997
3
<PAGE>
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 June 30, 1997, published
in accordance with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act 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> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ..................................... 1,842,337
Interest-bearing balances .............................................................. 8,771,397
Securities ...................................................................................... 10,596,119
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary .................................................... 5,953,036
Loans and lease financing receivables:
Loans and leases, net of unearned income ................... 5,769,090
Allowance for loan and lease losses ........................ 74,031
Allocated transfer risk reserve............................. 0
Loans and leases, net of unearned income and allowances ................................ 5,695,059
Assets held in trading accounts ................................................................. 916,608
Premises and fixed assets ....................................................................... 374,999
Other real estate owned ......................................................................... 755
Investments in unconsolidated subsidiaries ...................................................... 28,992
Customers' liability to this bank on acceptances outstanding .................................... 99,209
Intangible assets ............................................................................... 229,412
Other assets .................................................................................... 1,589,526
----------
Total assets .................................................................................... 36,097,449
==========
LIABILITIES
Deposits:
In domestic offices .................................................................... 11,082,135
Noninterest-bearing .............................. 8,932,019
Interest-bearing ................................. 2,150,116
In foreign offices and Edge subsidiary ................................................. 13,811,677
Noninterest-bearing .............................. 112,281
Interest-bearing ................................. 13,699,396
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary .................................................... 6,785,263
Demand notes issued to the U.S. Treasury and Trading Liabilities ................................ 755,676
Other borrowed money ............................................................................ 716,013
Subordinated notes and debentures ............................................................... 0
Bank's liability on acceptances executed and outstanding ........................................ 99,605
Other liabilities ............................................................................... 841,566
Total liabilities ............................................................................... 34,091,935
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus.................................................... 0
Common stock .................................................................................... 29,931
Surplus ......................................................................................... 437,183
Undivided profits and capital reserves/Net unrealized holding gains (losses) .................... 1,542,695
Cumulative foreign currency translation adjustments ............................................ (4,295)
Total equity capital ............................................................................ 2,005,514
----------
Total liabilities and equity capital ............................................................ 36,097,449
</TABLE>
4
<PAGE>
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
5
