<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-21699
VIROPHARMA INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Delaware 94-2347624
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
405 Eagleview Boulevard
Exton, Pennsylvania 19341
(Address of Principal Executive Offices and Zip Code)
610-458-7300
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days: Yes X No ______
----
Number of shares outstanding of the issuer's Common Stock, par value $.002 per
share, as of May 11, 2000: 15,183,552 shares.
1
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VIROPHARMA INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
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<S> <C>
Item 1. Financial Statements:
Balance Sheets at December 31, 1999 and March 31, 2000 3
Statements of Operations for the three months ended March 31, 1999 and 2000 and
the period from December 5, 1994 (inception) to March 31, 2000 4
Statements of Cash Flows for the three months ended March 31, 1999 and 2000 and
the period from December 5, 1994 (inception) to March 31, 2000 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 13
</TABLE>
2
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PART I. FINANCIAL INFORMATION
- ---------------------------------
ITEM 1. FINANCIAL STATEMENTS
ViroPharma Incorporated
(A Development Stage Company)
Balance Sheets
December 31, 1999 and March 31, 2000
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
----------------- ----------------
Assets Audited Unaudited
----------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,984,707 24,996,793
Short-term investments 59,868,213 206,586,538
Notes receivable from officers - current 39,205 39,205
Other current assets 1,068,764 3,931,390
----------------- ----------------
Total current assets 67,960,889 235,553,926
Equipment and leasehold improvements, net 3,469,927 3,930,034
Restricted investment 550,000 550,000
Notes receivable from officers - noncurrent 23,151 13,350
Debt Issue costs - 5,539,043
Other assets 81,899 81,899
----------------- ----------------
Total assets $ 72,085,866 245,668,252
================= ================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 1,187,234 1,478,916
Loans payable - current 1,200,000 1,200,000
Deferred revenue - current 1,000,000 1,000,000
Obligation under capital lease - current 2,807 -
Accrued expenses and other current liabilities 5,879,589 5,899,156
----------------- ----------------
Total current liabilities 9,269,630 9,578,072
Loans payable - noncurrent 525,000 475,000
Deferred revenue - noncurrent 4,000,000 3,750,000
Convertible subordinated notes - 180,000,000
----------------- ----------------
13,794,630 193,803,072
----------------- ----------------
Stockholders' equity:
Preferred stock, par value $.001 per share. 5,000,000 shares authorized;
Series A convertible participating preferred stock; 2,300,000 issued
and outstanding at December 31, 1999 and March 31, 2000 2,300 2,300
Series A junior participating preferred stock; 200,000 shares designated;
no shares issued and outstanding - -
Common stock, par value $.002 per share. Authorized 27,000,000 shares at
December 31, 1999 and March 31, 2000; issued and outstanding 15,066,612
shares at December 31, 1999 and 15,156,635 shares at March 31, 2000 30,133 30,313
Additional paid-in capital 136,259,509 136,850,074
Deferred compensation (44,580) (6,391)
Unrealized losses on available for sale securities (35,126) (320,188)
Deficit accumulated during the development stage (77,921,000) (84,690,928)
----------------- ----------------
Total stockholders' equity 58,291,236 51,865,180
----------------- ----------------
Commitments
Total liabilities and stockholders' equity $ 72,085,866 245,668,252
================= ================
</TABLE>
See accompanying notes to financial statements.
3
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ViroPharma Incorporated
(A Development Stage Company)
Statements of Operations
(unaudited)
Three months ended March 31, 1999 and 2000 and the
period from December 5, 1994 (inception) to March 31, 2000
<TABLE>
<CAPTION>
Period from
December 5, 1994
Three months ended (inception) to
March 31, March 31,
1999 2000 2000
-------------------- ------------------ -------------------
<S> <C> <C> <C>
Revenues:
License fee and milestone revenue - 1,250,000 5,250,000
Grant revenue - - 526,894
-------------------- ------------------ -------------------
Total revenues - 1,250,000 5,776,894
-------------------- ------------------ -------------------
Operating expenses incurred in the
development stage:
Research and development 4,860,883 6,571,733 78,387,413
General and administrative 1,154,216 2,109,133 17,568,607
-------------------- ------------------ -------------------
Total operating expenses 6,015,099 8,680,866 95,956,020
-------------------- ------------------ -------------------
Loss from operations (6,015,099) (7,430,866) (90,179,126)
Interest income 392,826 1,596,649 6,974,295
Interest expense 42,354 935,711 1,486,097
-------------------- ------------------ -------------------
Net loss (5,664,627) (6,769,928) (84,690,928)
==================== ================== ===================
Preferred stock dividends 181,838
-------------------- ------------------
Net loss allocable to common stockholders (5,664,627) (6,951,766)
==================== ==================
Basic and diluted net loss per share allocable
to common stockholders: (0.49) (0.46)
==================== ==================
Shares used in computing basic and diluted
net loss per share allocable to common
stockholders: 11,554,993 15,112,610
==================== ==================
</TABLE>
See accompanying notes to financial statements.
4
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ViroPharma Incorporated
(A Development Stage Company)
Statements of Cash Flows
(unaudited)
Three months ended March 31, 1999 and 2000 and the
period from December 5, 1994 (inception) to March 31, 2000
<TABLE>
<CAPTION>
Period from
December 5, 1994
Three months ended (inception) to
March 31, March 31,
1999 2000 2000
------------ ------------ ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (5,664,627) (6,769,928) (84,690,928)
Adjustments to reconcile net loss to net cash
used in operating activities:
Non-cash compensation expense 88,454 38,189 826,695
Non-cash warrant value 3,984 - 153,751
Non-cash consulting expense 4,860 - 46,975
Depreciation and amortization expense 125,729 242,013 1,573,117
Changes in assets and liabilities:
Other current assets 129,698 (2,862,626) (3,931,390)
Notes receivable from officers 9,801 9,801 (52,555)
Other assets - - (81,899)
Accounts payable 1,057,074 291,682 1,478,916
Deferred revenue - (250,000) (4,750,000)
Accrued expenses and other current liabilities (818,317) 19,567 5,899,156
------------ ------------ ----------------
Net cash used in operating activities (5,063,344) (9,281,302) (74,028,162)
Cash flows from investing activities:
Purchase of equipment (126,395) (635,385) (5,436,416)
Purchase of short-term investments - (155,832,690) (342,018,174)
Sales of short-term investments - - 9,680,414
Maturities of short-term investments 8,993,576 8,829,303 124,881,034
------------ ------------ ----------------
Net cash (used in) provided by investing activities 8,867,181 (147,638,772) (212,893,142)
Cash flows from financing activities:
Net proceeds from issuance of preferred stock - - 27,242,143
Net proceeds from issuance of common stock 82,471 772,583 108,326,145
Preferred stock cash dividends - (181,838) (363,538)
Proceeds from loans payable and milestone advance - - 2,100,000
Payment of loans payable (33,333) (50,000) (425,000)
Proceeds received on notes receivable - - 1,625
Proceeds from notes payable - 174,394,222 175,086,722
Payment of notes payable - - (50,000)
Obligation under capital lease (16,547) (2,807) -
------------ ------------ ----------------
Net cash provided by financing activities 32,591 174,932,160 311,918,097
Net increase in cash and cash equivalents 3,836,428 18,012,086 24,996,793
Cash and cash equivalents at beginning of period 1,076,682 6,984,707 -
------------ ------------ ----------------
Cash and cash equivalents at end of period $ 4,913,110 24,996,793 24,996,793
============ ============ ================
Supplemental disclosure of noncash transactions:
Conversion of milestone advance to loan payable - - 1,000,000
Unrealized gains (losses) on available for sale securities 36,786 (285,062) (320,188)
</TABLE>
See accompanying notes to financial statements.
5
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ViroPharma Incorporated
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999 and 2000
(unaudited)
(1) Organization and Business Activities
ViroPharma Incorporated (a development stage company) (the "Company") commenced
operations on December 5, 1994. The Company is a development stage
pharmaceutical company engaged in the discovery and development of new antiviral
medicines.
The Company is devoting substantially all of its efforts towards conducting drug
discovery and development, raising capital, conducting clinical trials, pursuing
regulatory approval for products under development, recruiting personnel and
building infrastructure. In the course of such activities, the Company has
sustained operating losses and expects such losses to continue for the
foreseeable future. The Company has not generated any significant revenues or
product sales and has not achieved profitable operations or positive cash flow
from operations. The Company's deficit accumulated during the development stage
aggregated $84,690,928 through March 31, 2000. There is no assurance that
profitable operations, if ever achieved, could be sustained on a continuing
basis.
The Company plans to continue to finance its operations with a combination of
stock issuances, license payments, payments from strategic research and
development arrangements and, in the longer term, revenues from product sales.
There are no assurances, however, that the Company will be successful in
obtaining an adequate level of financing needed for the long-term development
and commercialization of its planned products.
Basis of Presentation
The information at March 31, 2000 and for the three months ended March 31, 1999
and 2000, is unaudited but includes all adjustments (consisting only of normal
recurring adjustments) which, in the opinion of management, are necessary to
state fairly the financial information set forth therein in accordance with
generally accepted accounting principles. The interim results are not
necessarily indicative of results to be expected for the full fiscal year.
These financial statements should be read in conjunction with the audited
financial statements for the year ended December 31, 1999 included in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
(2) Comprehensive Loss
In the Company's annual financial statements, comprehensive loss is presented as
a separate financial statement. For interim financial statements, the Company
is permitted to disclose the information in the footnotes to the financial
statements. The disclosures are required for comparative purposes. The only
comprehensive income item the Company has is unrealized gains and losses on
available for sale securities.
The following reconciles net loss to comprehensive loss for the three-months
ended March 31, 1999 and 2000:
1999 2000
---- ----
Net loss $(5,664,627) (6,769,928)
Other comprehensive income:
Unrealized gains (losses) on
available for sale securities 36,786 (285,062)
----------- ----------
Comprehensive loss $(5,627,841) (7,054,990)
=========== ==========
6
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ViroPharma Incorporated
(A Development Stage Company)
Notes to Financial Statements
(3) Convertible Subordinated Notes
The Company made a private offering of $180 million of convertible subordinated
notes due 2007, which closed on March 8, 2000. Net proceeds from the issuance of
convertible subordinated notes were approximately $174,400,000. The notes are
convertible into shares of the Company's common stock at a price of $109.15 per
share, subject to certain adjustments. The notes bear interest at a rate of 6%
per annum, payable semi-annually in arrears, and can be redeemed by the Company,
at certain premiums over the principal amount, at any time on or after March 6,
2003. The notes are subordinated in right of payment to all senior indebtedness
of the Company. The notes may be required to be repaid on the occurrence of
certain fundamental changes, as defined.
7
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our disclosure and analysis in this report contains some forward-looking
statements. Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by the fact that
they do not relate strictly to historical or current facts. They use words such
as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe,"
and other words and terms of similar meaning in connection with any discussion
of future operating or financial performance. In particular, these include
statements relating to present or anticipated scientific progress, development
of potential pharmaceutical products, future revenues, capital expenditures,
research and development expenditures, future financings and collaborations,
personnel, manufacturing requirements and capabilities, and other statements
regarding matters that are not historical facts or statements of current
condition.
Any or all of our forward-looking statements in this report may turn out to be
wrong. They can be affected by inaccurate assumptions we might make or by known
or unknown risks and uncertainties. Many factors, including those mentioned in
the discussion below and those described in the "Risk Factors" discussion of our
annual report on Form 10-K for the year ended December 31, 1999 filed with the
Securities and Exchange Commission, will be important in determining future
results. Consequently, no forward-looking statement can be guaranteed. Actual
future results may vary materially. We do not intend to update our forward-
looking statements to reflect future events or developments.
Since inception, the Company has devoted substantially all of its resources to
its research and product development programs. ViroPharma has generated no
revenues from product sales and has been dependent upon funding primarily from
equity and debt financing. The Company does not expect any revenues from
product sales for at least the next two years. The Company has not been
profitable since inception and has incurred a cumulative net loss of $84,690,928
through March 31, 2000. Losses have resulted principally from costs incurred in
research and development activities and general and administrative expenses.
The Company expects to incur additional operating losses over at least the next
several years. The Company expects such losses to increase over historical
levels, primarily due to expected increases in the Company's research and
development expenses, further clinical trials of the Company's most advanced
drug candidate, pleconaril (including any significant additional studies for
approval in the European Union, if any are required), and milestone payments
that may be payable under the terms of the Company's Agreement with
Sanofi-Synthelabo, S.A. in respect of pleconaril. Also, the Company expects to
incur expenses related to its marketing and market research activities for
pleconaril, its development of a marketing and sales staff and further research
and development related to its hepatitis C and RSV disease product candidates.
The Company's ability to achieve profitability is dependent on developing and
obtaining regulatory approvals for its product candidates, successfully
commercializing such product candidates (which may include entering into
collaborative agreements for product development and commercialization), and
securing contract manufacturing services and distribution and logistics
services.
Liquidity and Capital Resources
The Company commenced operations in December 1994. The Company is a
development stage company and to date has not generated revenues from product
sales. The cash flows used in operations are primarily for research and
development activities and the supporting general and administrative expenses.
Through March 31, 2000, the Company has used approximately $74.0 million in
operating activities. The Company invests its cash in short-term investments.
Through March 31, 2000, the Company has used approximately $212.9 million in
investing activities, including $207.5 million in short-term investments and
$5.4 million in equipment purchases and new construction. Through March 31,
2000, the Company has financed its operations primarily through public offerings
of common stock, a convertible subordinated notes offering, private placements
of redeemable preferred stock, two bank loans, equipment lease lines and a
milestone advance totaling approximately $312.0 million. At March 31, 2000, the
Company had cash and cash equivalents and short-term investments aggregating
approximately $231.6 million.
8
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We lease our corporate and research and development facilities under an
operating lease expiring in 2008. We also have the right to expand the facility
and, under certain circumstances, to purchase the facility. We have financed
substantially all of our equipment under two bank loans and two master lease
agreements. The first bank loan, which we entered into in February 1997, is for
$600,000, is payable in equal monthly installments over 72 months and has a
9.06% interest rate. The second bank loan, which we entered into in December
1998, is for $500,000, is payable in equal monthly installments over 60 months
and has a 7.25% interest rate. We have paid off one of the lease agreements and
expect to pay off the second lease agreement in 2000. As of April 1, 2000,
aggregate outstanding borrowings under these bank loans and lease agreements
were approximately $675,000.
Under our agreement with Sanofi-Synthelabo, we are required to make milestone
payments upon the achievement of certain development milestones and, until the
expiration of the last patent on pleconaril or any related drug, royalty
payments on any sales in the United States and Canada of products developed
under the agreement. The development milestones include regulatory submissions
of New Drug Applications and regulatory approvals in various jurisdictions,
however, we may not be able to achieve these milestones. Unless the agreement
is earlier terminated, in September 2001 or within 60 days after we file a New
Drug Application for pleconaril (whichever occurs sooner), we will be required
to pay Sanofi-Synthelabo $900,000.
We entered into an addendum to our development agreement with SELOC France in
1998. Under this addendum, SELOC France has manufactured three validation
batches of pleconaril drug substance. We will pay approximately $1,000,000
during the second half of 2000 under this addendum. SELOC France is also
assisting us in preparing the pleconaril drug master file and is preparing
certain documentation that will be required with our New Drug Applications for
pleconaril.
On October 9, 1997, the Company received $1,000,000 from Boehringer Ingelheim
Pharmaceuticals, Inc. ("BI") as an advance on a future milestone in connection
with a Collaborative Research Agreement (the "Agreement"). The Agreement
expired in August 1998. Such amount is due and payable in August 2000. The
loan bears interest at 8.5% and is evidenced by a convertible promissory note.
If amounts due under the note are not paid as described in the note, BI may
convert the then outstanding principal balance and accrued interest thereon into
shares of the Company's common stock based on the last sale price of such common
stock on the date immediately prior to the date on which the Company is notified
of BI's intention to convert the promissory note.
We recently completed our expansion of our research and development
capabilities at our facility. We invested approximately $1,000,000 for this
expansion. In addition, we have exercised our right to expand our current
facility by 22,500 square feet. We will incur no additional material capital
expenditures in connection with this expansion. We expect that rent expense in
future years will increase approximately $268,000 per year, commencing in mid-
2000.
We have incurred losses from operations since inception. We expect to incur
additional operating losses over at least the next several years. We expect to
incur such losses at an increasing rate over at least the next several years,
primarily due to expected increases in our research and development expenses,
further clinical trials and clinical development of our most advanced product
candidate, pleconaril (including any significant additional studies for approval
in the European Union, if any are required), and milestone payments that may be
payable under the terms of our agreement with Sanofi-Synthelabo for pleconaril.
Also, we expect to incur expenses for pleconaril marketing and market research
activities, our development of a marketing and sales staff and building the
requisite infrastructure, and further research and development related to our
hepatitis C and RSV disease product candidates.
We expect that we will need to raise additional funds to continue our business
activities and to further expand our facilities. We may need additional
financing to complete all clinical studies, to develop our marketing and sales
staffs for pleconaril and to build the requisite infrastructure. We expect that
we will need additional financing for the development and required testing of
our hepatitis C and RSV disease compounds, and for any other product candidates.
To obtain this financing, we intend to access the public or private equity or
debt markets or enter into additional arrangements with corporate collaborators
to whom we may issue shares of our stock. For example, in connection with our
collaboration and license agreement, American Home Products Corporation will
purchase our common stock at a market value premium at the time of completion of
certain product development stages. If we raise additional capital by issuing
equity securities, the terms and prices for these financings may be much more
favorable to the new investors than the terms obtained by our existing
stockholders. These financings also may dilute the ownership of existing
stockholders. Collaborative arrangements may require us to grant product
development programs or licenses to third parties for products that we might
otherwise seek to develop or commercialize ourselves. Additional financing,
however, may not be available on acceptable terms from any
9
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source. If sufficient additional financing is not available, we may need to
delay, reduce or eliminate current research and development programs or other
aspects of our business.
Results of Operations
Quarters ended March 31, 2000 and 1999
We earned license fee and milestone revenue of $1,250,000 for the quarter
ended March 31, 2000. We had no revenues for the quarter ended March 31, 1999.
Research and development expenses increased to $6,571,733 for the quarter ended
March 31, 2000 from $4,860,883 for the quarter ended March 31, 1999. The
increase was principally due to the completion of three phase 3 clinical trials
of pleconaril, initiation of phase 1 clinical trials of VP50406 for the
treatment of hepatitis C and the advancement of our drug candidate for the
treatment of RSV disease. General and administrative expenses increased to
$2,109,133 for the quarter ended March 31, 2000 from $1,154,216 for the quarter
ended March 31, 1999. The increase was principally due to an increase in
employee related expenses, pre-marketing expenses related to pleconaril and
business development related activities. The net loss increased to $6,769,928
for the quarter ended March 31, 2000 from $5,664,627 for the quarter ended March
31, 1999.
Recently Issued Accounting Standards
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulleting ("SAB") No. 101, Revenue Recognition in Financial
Statements ("SAB 101"). SAB 101 summarizes certain of the staff's views in
applying generally accepted accounting principles to revenue recognition in
financial statements, including the recognition of non-refundable fees received
upon entering into arrangements. We are in the process of evaluating this SAB
and the effect it will have on our financial statements and current revenue
recognition policy.
10
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Our holdings of financial instruments are comprised of a mix of U.S.
corporate debt, government securities and commercial paper. All such
instruments are classified as securities available for sale. Our debt security
portfolio represents funds held temporarily pending use in our business and
operations. We manage these funds accordingly. We seek reasonable assuredness
of the safety of principal and market liquidity by investing in rated fixed
income securities while at the same time seeking to achieve a favorable rate of
return. Our market risk exposure consists principally of exposure to changes in
interest rates. Our holdings are also exposed to the risks of changes in the
credit quality of issuers. We typically invest in the shorter-end of the
maturity spectrum. The principal amount and weighted average interest rate of
our investment portfolio at March 31,2000 was $206,586,538 and approximately
6.3%, respectively.
PART II - OTHER INFORMATION
---------------------------
ITEM 2. Changes in Securities and Use of Proceeds
On March 8, 2000, we closed a private offering of $180 million convertible
subordinated notes due 2007. Net proceeds from the issuance were approximately
$174.4 million. The offering was made through Morgan Stanley Dean Witter and
U.S. Bancorp Piper Jaffray as initial purchasers to qualified institutional
investors under Rule 144A of the Securities Act of 1933, as amended (the
"Securities Act"), and to a limited number of institutional accredited
investors.
The notes are convertible into shares of our common stock at a price of $109.15
per share, subject to certain conditions. The notes bear interest at a rate of
6% per annum, have a 7-year term, and can be redeemed by us, at certain premiums
over the principal amount, at any time after March 6, 2003. If a fundamental
change occurs on or before March 1, 2007, the holders may require us to purchase
all or part of the notes at a redemption price equal to 100% of the outstanding
principal amount of the notes being redeemed, plus accrued and unpaid interest.
We have committed to file a shelf registration statement with the Securities and
Exchange Commission covering the resale of the notes and the underlying common
stock on or before May 30, 2000 and to maintain the effectiveness of the
registration statement until either (i) all securities covered by the
registration statement have been sold; or (ii) the expiration of the holding
period applicable to the notes and the underlying common stock under Rule 144(k)
under the Securities Act.
ITEM 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits:
4.3 Indenture dated as of March 1, 2000 of ViroPharma
Incorporated to Summit Bank as Trustee (including the form of
note).
10.27+ Purchase Agreement dated February 24, 2000 by and among
ViroPharma Incorporated, Morgan Stanley & Co. Incorporated
and US Bancorp Piper Jaffray Inc.
10.28 Registration Rights Agreement dated as of March 1, 2000 by
and among ViroPharma Incorporated, Morgan Stanley & Co.
Incorporated and US Bancorp Piper Jaffray Inc.
27 Financial Data Schedule
+ Portions of this exhibit were omitted and filed separately
with the Securities and Exchange Commission pursuant to an
application for confidential treatment.
(b) Reports on Form 8-K:
11
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We filed the following Current Reports on Form 8-K during the quarter
ended March 31, 2000:
(i) We filed a Current Report on Form 8-K dated February 16,
2000 to report, pursuant to item 5, that we intended,
subject to market and other conditions, to make a private
offering of $100 million of convertible subordinated notes
due 2007, with an option to issue an additional $20 million
in notes.
(ii) We filed a Current Report on Form 8-K dated February 25,
2000 to report, pursuant to item 5, that we increased the
private offering of convertible subordinated notes to $150
million, with an option to issue an additional $30 million
in notes, and the conversion price and certain other terms
relating to the notes.
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIROPHARMA INCORPORATED
Date: May 11, 2000 By: /s/ Claude H. Nash
---------------------------
Claude H. Nash
President, Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)
By: /s/ Vincent J. Milano
---------------------------
Vincent J. Milano
Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting
Officer)
13
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Exhibit Index
---------------------------------------
Exhibit Description
4.3 Indenture dated as of March 1, 2000 of ViroPharma Incorporated to
Summit Bank as Trustee (including the form of note).
10.27+ Purchase Agreement dated February 24, 2000 by and among ViroPharma
Incorporated, Morgan Stanley & Co. Incorporated and US Bancorp Piper
Jaffray Inc.
10.28 Registration Rights Agreement dated as of March 1, 2000 by and among
ViroPharma Incorporated, Morgan Stanley & Co. Incorporated and US
Bancorp Piper Jaffray Inc.
27 Financial Data Schedule
+ Portions of this exhibit were omitted and filed separately with the
Securities and Exchange Commission pursuant to an application for
confidential treatment.
14
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Exhibit 4.3
- --------------------------------------------------------------------------------
ViroPharma Incorporated
To
Summit Bank
as Trustee
___________________________
INDENTURE
Dated as of
March 1, 2000
___________________________
6% Convertible Subordinated Notes due 2007
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE ONE DEFINITIONS........................................................................................... 1
Section 1.1. Definitions............................................................................ 1
ARTICLE TWO ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES..................................... 7
Section 2.1. Designation Amount and Issue of Notes.................................................. 7
Section 2.2. Form of Notes.......................................................................... 7
Section 2.3. Date and Denomination of Notes; Payments of Interest................................... 8
Section 2.4. Execution of Notes..................................................................... 9
Section 2.5. Exchange and Registration of Transfer of Notes; Restrictions on Transfer;
Depositary............................................................................. 10
Section 2.6. Mutilated, Destroyed, Lost or Stolen Notes............................................. 16
Section 2.7. Temporary Notes........................................................................ 17
Section 2.8. Cancellation of Notes Paid, Etc........................................................ 17
Section 2.9. CUSIP Numbers.......................................................................... 17
ARTICLE THREE REDEMPTION OF NOTES................................................................................. 18
Section 3.1. Initial Prohibition on Redemption...................................................... 18
Section 3.2. Notice of Redemptions; Selection of Notes.............................................. 18
Section 3.3. Payment of Notes Called for Redemption................................................. 19
Section 3.4. Conversion Arrangement on Call for Redemption.......................................... 20
Section 3.5. Redemption at Option of Holders........................................................ 20
ARTICLE FOUR SUBORDINATION OF NOTES............................................................................... 22
Section 4.1. Agreement of Subordination............................................................. 22
Section 4.2. Payments to Noteholders................................................................ 23
Section 4.3. Subrogation of Notes................................................................... 25
Section 4.4. Authorization to Effect Subordination.................................................. 26
Section 4.5. Notice to Trustee...................................................................... 26
Section 4.6. Trustee's Relation to Senior Indebtedness.............................................. 27
Section 4.7. No Impairment of Subordination......................................................... 27
Section 4.8. Certain Conversions Not Deemed Payment................................................. 27
Section 4.9. Article Applicable to Paying Agents.................................................... 28
Section 4.10. Senior Indebtedness Entitled to Rely................................................... 28
Section 4.11. Reliance on Judicial Order or Certificate of Liquidating Agent......................... 28
ARTICLE FIVE PARTICULAR COVENANTS OF THE COMPANY.................................................................. 28
Section 5.1. Payment of Principal, Premium and Interest............................................. 28
Section 5.2. Maintenance of Office or Agency........................................................ 28
Section 5.3. Appointments to Fill Vacancies in Trustee's Office..................................... 29
Section 5.4. Provisions as to Paying Agent.......................................................... 29
Section 5.5. Existence.............................................................................. 30
Section 5.6. Maintenance of Properties.............................................................. 30
Section 5.7. Payment of Taxes and Other Claims...................................................... 30
Section 5.8. Rule 144A Information Requirement...................................................... 31
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
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Section 5.9. Stay, Extension and Usury Laws............................................................ 31
Section 5.10. Compliance Certificate.................................................................... 31
Section 5.11. Liquidated Damages Notice................................................................. 32
ARTICLE SIX NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE............................................ 32
Section 6.1. Noteholders' Lists........................................................................ 32
Section 6.2. Preservation and Disclosure of Lists...................................................... 32
Section 6.3. Reports by Trustee........................................................................ 33
Section 6.4. Reports by Company........................................................................ 33
ARTICLE SEVEN REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT......................................... 33
Section 7.1. Events of Default......................................................................... 33
Section 7.2. Payments of Notes on Default; Suit Therefor............................................... 35
Section 7.3. Application of Monies Collected by Trustee................................................ 36
Section 7.4. Proceedings by Noteholder................................................................. 37
Section 7.5. Proceedings by Trustee.................................................................... 37
Section 7.6. Remedies Cumulative and Continuing........................................................ 38
Section 7.7. Direction of Proceedings and Waiver of Defaults by Majority of Noteholders................ 38
Section 7.8. Notice of Defaults........................................................................ 38
Section 7.9. Undertaking to Pay Costs.................................................................. 38
ARTICLE EIGHT THE TRUSTEE............................................................................................ 39
Section 8.1. Duties and Responsibilities of Trustee.................................................... 39
Section 8.2. Reliance on Documents, Opinions, Etc...................................................... 40
Section 8.3. No Responsibility for Recitals, Etc....................................................... 41
Section 8.4. Trustee, Paying Agents, Conversion Agents or Registrar May Own Notes...................... 41
Section 8.5. Monies to be Held in Trust................................................................ 41
Section 8.6. Compensation and Expenses of Trustee...................................................... 41
Section 8.7. Officers' Certificate as Evidence......................................................... 41
Section 8.8. Conflicting Interests of Trustee.......................................................... 42
Section 8.9. Eligibility of Trustee.................................................................... 42
Section 8.10. Resignation or Removal of Trustee......................................................... 42
Section 8.11. Acceptance by Successor Trustee........................................................... 43
Section 8.12. Succession by Merger, Etc................................................................. 44
Section 8.13. Preferential Collection of Claims......................................................... 44
Section 8.14. Trustee's Application for Instructions from the Company................................... 44
ARTICLE NINE THE NOTEHOLDERS......................................................................................... 44
Section 9.1. Action by Noteholders..................................................................... 44
Section 9.2. Proof of Execution by Noteholders......................................................... 45
Section 9.3. Who Are Deemed Absolute Owners............................................................ 45
Section 9.4. Company-Owned Notes Disregarded........................................................... 45
</TABLE>
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(continued)
<TABLE>
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Section 9.5. Revocation of Consents; Future Holders Bound.............................................. 46
ARTICLE TEN MEETINGS OF NOTEHOLDERS.................................................................................. 46
Section 10.1. Purpose of Meetings....................................................................... 46
Section 10.2. Call of Meetings by Trustee............................................................... 46
Section 10.3. Call of Meetings by Company or Noteholders................................................ 46
Section 10.4. Qualifications for Voting................................................................. 47
Section 10.5. Regulations............................................................................... 47
Section 10.6. Voting.................................................................................... 47
Section 10.7. No Delay of Rights by Meeting............................................................. 48
ARTICLE ELEVEN SUPPLEMENTAL INDENTURES............................................................................... 48
Section 11.1. Supplemental Indentures Without Consent of Noteholders.................................... 48
Section 11.2. Supplemental Indenture with Consent of Noteholders........................................ 49
Section 11.3. Effect of Supplemental Indenture.......................................................... 50
Section 11.4. Notation on Notes......................................................................... 50
Section 11.5. Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee............... 50
ARTICLE TWELVE CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE..................................................... 50
Section 12.1. Company May Consolidate, Etc.............................................................. 50
Section 12.2. Successor Corporation to be Substituted................................................... 51
Section 12.3. Opinion of Counsel to be Given Trustee.................................................... 51
ARTICLE THIRTEEN SATISFACTION AND DISCHARGE OF INDENTURE............................................................. 51
Section 13.1. Discharge of Indenture.................................................................... 51
Section 13.2. Deposited Monies to be Held in Trust by Trustee........................................... 52
Section 13.3. Paying Agent to Repay Monies Held......................................................... 52
Section 13.4. Return of Unclaimed Monies................................................................ 52
Section 13.5. Reinstatement............................................................................. 52
ARTICLE FOURTEEN IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS..................................... 53
Section 14.1. Indenture and Notes Solely Corporate Obligations.......................................... 53
ARTICLE FIFTEEN CONVERSION OF NOTES.................................................................................. 53
Section 15.1. Right to Convert.......................................................................... 53
Section 15.2. Exercise of Conversion Privilege; Issuance of Common Stock on Conversion; No
Adjustment for Interest or Dividends...................................................... 53
Section 15.3. Cash Payments in Lieu of Fractional Shares................................................ 55
Section 15.4. Conversion Price.......................................................................... 55
Section 15.5. Adjustment of Conversion Price............................................................ 55
Section 15.6. Effect of Reclassification, Consolidation, Merger or Sale................................. 63
Section 15.7. Taxes on Shares Issued.................................................................... 64
</TABLE>
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Section 15.8. Reservation of Shares; Shares to be Fully Paid; Compliance with Governmental
Requirements; Listing of Common Stock..................................................... 64
Section 15.9. Responsibility of Trustee................................................................. 65
Section 15.10. Notice to Holders Prior to Certain Actions................................................ 65
ARTICLE SIXTEEN MISCELLANEOUS PROVISIONS............................................................................. 66
Section 16.1. Provisions Binding on Company's Successors................................................ 66
Section 16.2. Official Acts by Successor Corporation.................................................... 66
Section 16.3. Addresses for Notices, Etc................................................................ 66
Section 16.4. Governing Law............................................................................. 66
Section 16.5. Evidence of Compliance with Conditions Precedent; Certificates to Trustee................. 66
Section 16.6. Legal Holidays............................................................................ 67
Section 16.7. Trust Indenture Act....................................................................... 67
Section 16.8. No Security Interest Created.............................................................. 67
Section 16.9. Benefits of Indenture..................................................................... 67
Section 16.10. Table of Contents, Headings, Etc.......................................................... 67
Section 16.11. Authenticating Agent...................................................................... 67
Section 16.12. Execution in Counterparts................................................................. 68
Section 16.13. Severability.............................................................................. 68
</TABLE>
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<PAGE>
Reconciliation and Tie Between the Trust Indenture Act of 1939 and Indenture,
dated as of March 1, 2000, between ViroPharma Incorporated and Summit Bank as
Trustee.
<TABLE>
<S> <C>
TRUST INDENTURE ACT SECTION INDENTURE SECTION
Section 310(a)(1)................................................................... 8.9
(a)(2)................................................................... 8.9
(a)(3)................................................................... N.A.
(a)(4)................................................................... N.A.
(a)(5)................................................................... 8.9
(b)......................................................... 8.8; 8.9; 8.10; 8.11
Section 311(a)...................................................................... 8.13
(b)...................................................................... 8.13
(b)(2)................................................................... 8.13
Section 312(a).................................................................... 6.1; 6.2(a)
(b)...................................................................... 6.2(b)
(c)...................................................................... 6.2(c)
Section 313(a)...................................................................... 6.3(a)
(b)...................................................................... 6.3(a)
(c)...................................................................... 6.3(a)
(d)...................................................................... 6.3(b)
Section 314(a)...................................................................... 6.4
(b)...................................................................... N.A.
(c)(1).................................................................. 16.5
(c)(2)................................................................... 16.5
(c)(3)................................................................... N.A.
(d)...................................................................... N.A.
(e)...................................................................... 16.5
Section 315(a)...................................................................... 8.1
(b)...................................................................... 7.8
(c)...................................................................... 8.1
(d)...................................................................... 8.1
(d)(1)................................................................... 8.1(a)
(d)(2)................................................................... 8.1(b)
(d)(3)................................................................... 8.1(c)
(e)...................................................................... 7.9
Section 316(a)...................................................................... 7.7
(a)(1)(A)................................................................ 7.7
(a)(1)(B)................................................................ 7.7
(a)(2)................................................................... N.A.
(b)...................................................................... 7.4
Section 317(a)(1)................................................................... 7.5
(a)(2)................................................................... 7.5
(b)...................................................................... 5.4
Section 318(a)...................................................................... 16.7
</TABLE>
______________________
* Note: This reconciliation and tie shall not, for any purpose, be deemed
to be a part of the Indenture.
** Note: N.A. means Not Applicable.
<PAGE>
INDENTURE
INDENTURE, dated as of March 1, 2000, between ViroPharma Incorporated, a
Delaware corporation (hereinafter called the "Company"), having its principal
office at 405 Eagleview Boulevard, Exton, Pennsylvania 19341, and Summit Bank,
as trustee hereunder (hereinafter called the "Trustee"), having its principal
corporate trust office at 210 Main Street, 6/th/ Floor, Hackensack, New Jersey
07601 .
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% Convertible Subordinated Notes due 2007 (hereinafter called
the "Notes"), in an aggregate principal amount not to exceed $150,000,000, and
additional Notes not to exceed $30,000,000 at the option of the Initial
Purchasers pursuant to Section 2 of the Purchase Agreement, 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
Fundamental Change, and a form of conversion notice 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 this Indenture 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 ONE
DEFINITIONS
Section 1.1. Definitions. The terms defined in this Section 1.1 (except as
-----------
herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture that are defined in the Trust Indenture Act 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 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.
<PAGE>
"Affiliate" of any specified Person means any other Person directly or
---------
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person means the power to
direct 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" means the Board of Directors of the Company or a
------------------
committee of such Board duly authorized to act for it hereunder.
"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.
"Closing Price" has the meaning specified in Section 15.5(h)(1).
-------------
"Commission" means the Securities and Exchange Commission, as from time to
----------
time constituted, created under the Exchange Act, or, if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" means any stock of any class of the Company which has no
------------
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the provisions
of Section 15.6, however, shares issuable on conversion of Notes shall include
only shares of the class designated as common stock of the Company at the date
of this Indenture (namely, the Common Stock, par value $.002 per share) 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, however, that if at any time there shall be more than
one such resulting class, the shares of each such class then so issuable shall
be substantially in the proportion which the total number of shares of such
class resulting from all such reclassifications bears to the total number of
shares of all such classes resulting from all such reclassifications.
"Company" means the corporation named as the "Company" in the first
-------
paragraph of this Indenture, and, subject to the provisions of Article Twelve,
shall include its successors and assigns.
"Company Notice" has the meaning specified in Section 3.5(b).
--------------
"Conversion Price" has the meaning specified in Section 15.4.
----------------
"Corporate Trust Office" or other similar term, means the designated office
----------------------
of the Trustee at which at any particular time its corporate trust business
shall be administered, which office is, at the date as of which this Indenture
is dated, located at 210 Main Street, 6/th/ Floor, Hackensack, New Jersey 07601,
Attention: Corporate Trust Administration (ViroPharma Incorporated, 6%
Convertible Subordinated Notes due 2007).
"Custodian" means Summit Bank, as custodian with respect to the Notes in
---------
global form, or any successor entity thereto.
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<PAGE>
"Default" means any event that is, or after notice or passage of time, or
-------
both, would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 2.3.
------------------
"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" means all Indebtedness existing on the
------------------------------
date hereof and the Company's obligations hereafter incurred or existing under
any other particular Senior Indebtedness in which the instrument or agreement
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). If any
payment made to any holder of any Designated Senior Indebtedness or its
Representative with respect to such Designated Senior Indebtedness is rescinded
or must otherwise be returned by such holder or Representative upon the
insolvency, bankruptcy or reorganization of the Company or otherwise, the
reinstated Indebtedness of the Company arising as a result of such rescission or
return shall constitute Designated Senior Indebtedness effective as of the date
of such rescission or return.
"Event of Default" means any event specified in Section 7.1(a), (b), (c),
----------------
(d) or (e).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated thereunder, as in effect from time to
time.
"Fundamental Change" means the occurrence of any transaction or event in
------------------
connection with which all or substantially all of the Common Stock shall be
exchanged for, converted into, acquired for or constitute solely the right to
receive consideration (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which consideration is not all or substantially
all common stock (a) listed on, or will be listed on or immediately after the
transaction or event, on a United States national securities exchange or (b)
approved for quotation on the Nasdaq National Market or any similar United
States system of automated dissemination of quotations of securities prices.
"Global Note" has the meaning set forth in Section 2.5(b).
-----------
"Indebtedness" means, with respect to any Person, and without duplication,
------------
(a) all indebtedness, obligations and other liabilities (contingent or
otherwise) of such Person for borrowed money (including obligations of the
Company in respect of overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements, and any loans or advances from
banks, whether or not evidenced by notes or similar instruments) or evidenced by
bonds, debentures, notes or similar instruments (whether or not the recourse of
the lender is to the whole of the assets of such Person or to only a portion
thereof), other than any account payable or other accrued current liability or
obligation incurred in the ordinary course of business in connection with the
obtaining of materials or services; (b) all reimbursement obligations and other
liabilities (contingent or otherwise) of such Person with respect to letters of
credit, bank guarantees or bankers' acceptances; (c) all obligations and
liabilities (contingent or otherwise) in respect of
-3-
<PAGE>
real or personal property leases of such Person required, in conformity with
generally accepted accounting principles, to be accounted for as capitalized
lease obligations on the balance sheet of such Person and all obligations and
other liabilities (contingent or otherwise) under any lease or related document
(including a purchase agreement) in connection with the lease of real property
which provides that such Person is contractually obligated to purchase or cause
a third party to purchase the leased property and thereby guarantee a minimum
residual value of the leased property to the lessor and the obligations of such
Person under such lease or related document to purchase or to cause a third
party to purchase such leased property; (d) all obligations of such Person
(contingent or otherwise) with respect to an interest rate or other swap, cap or
collar agreement or other similar instrument or agreement or foreign currency
hedge, exchange, purchase or similar instrument or agreement; (e) all direct or
indirect guaranties or similar agreements by such Person in respect of, and
obligations or liabilities (contingent or otherwise) of such Person to purchase
or otherwise acquire or otherwise assure a creditor against loss in respect of,
indebtedness, obligations or liabilities of another Person of the kind described
in clauses (a) through (d); (f) any indebtedness or other obligations described
in clauses (a) through (e) secured by any mortgage, pledge, lien or other
encumbrance existing on property which is owned or held by such Person,
regardless of whether the indebtedness or other obligation secured thereby shall
have been assumed by such Person; and (g) any and all deferrals, renewals,
extensions and refundings of, or amendments, modifications or supplements to,
any indebtedness, obligation or liability of the kind described in clauses (a)
through (f).
"Indenture" means this instrument as originally executed or, if amended or
---------
supplemented as herein provided, as so amended or supplemented.
"Initial Purchasers" means Morgan Stanley & Co. Incorporated and U.S.
------------------
Bancorp Piper Jaffray.
"Institutional Accredited Investor" means an institutional "accredited
---------------------------------
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Liquidated Damages" has the meaning specified for "Liquidated Damages
------------------
Amount" in Section 2(e) of the Registration Rights Agreement.
"Non-Payment Default" has the meaning specified in Section 4.2(ii).
-------------------
"Note" or "Notes" means any Note or Notes, as the case may be,
---- -----
authenticated and delivered under this Indenture, including the Global Note.
"Note register" has the meaning specified in Section 2.5(a).
-------------
"Note registrar" has the meaning specified in Section 2.5(a).
--------------
"Noteholder" or "holder" as applied to any Note, or other similar terms
---------- ------
(but excluding the term "beneficial holder"), means any Person in whose name at
the time a particular Note is registered on the Note registrar's books.
"Notice Date" has the meaning specified in Section 3.1(b).
-----------
"Officers' Certificate", when used with respect to the Company, means a
---------------------
certificate signed by both (a) the Chairman of the Board, the Chief Executive
Officer, the 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
-4-
<PAGE>
(b) the Treasurer or any Assistant Treasurer, the Controller or any Assistant
Controller, or the Secretary or any Assistant Secretary of the Company.
"Opinion of Counsel" means an opinion in writing signed by legal counsel,
------------------
who may be an employee of or counsel to the Company, or other counsel reasonably
acceptable to the Trustee.
"Optional Redemption" has the meaning specified in Section 3.1(b).
-------------------
"Outstanding", when used with reference to Notes and subject to the
-----------
provisions of Section 9.4, means, 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, (i) for the 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 (ii) which
shall have been otherwise defeased in accordance with Article Thirteen;
(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; and
(d) Notes converted into Common Stock pursuant to Article Fifteen and
Notes deemed not outstanding pursuant to Article Three.
"Payment Blockage Notice" has the meaning specified in Section 4.2(ii).
-----------------------
"Person" means a corporation, an association, a partnership, a limited
------
liability company, 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" means The Portal Market operated by the National
-------------
Association of Securities Dealers, Inc. or any successor thereto.
"Predecessor Note" of any particular Note means 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" means a "qualified institutional buyer" as defined in Rule 144A.
---
"Purchase Agreement" means that certain Purchase Agreement, dated as of
------------------
February 24, 2000, among the Company and the Initial Purchasers, as amended from
time to time in accordance with its terms.
"Registration Rights Agreement" means that certain Registration Rights
-----------------------------
Agreement, dated as of March 1, 2000, among the Company and the Initial
Purchasers, as amended from time to time in accordance with its terms.
"Representative" means (a) the indenture trustee or other trustee, agent or
--------------
representative for holders of Senior Indebtedness or (b) with respect to any
Senior Indebtedness that does not have any such trustee, agent or other
representative, (i) in the case of such Senior Indebtedness issued pursuant to
an agreement
-5-
<PAGE>
providing for voting arrangements as among the holders or owners of such Senior
Indebtedness, any holder or owner of such Senior Indebtedness acting with the
consent of the required persons necessary to bind such holders or owners of such
Senior Indebtedness and (ii) in the case of all other such Senior Indebtedness,
the holder or owner of such Senior Indebtedness.
"Responsible Officer", when used with respect to the Trustee, means an
-------------------
officer of the Trustee in the Corporate Trust Office assigned and duly
authorized by the Trustee to administer this Indenture.
"Restricted Securities" has the meaning specified in Section 2.5(d).
---------------------
"Rule 144A" means Rule 144A as promulgated under the Securities Act.
---------
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder, as in effect from time to time.
"Senior Indebtedness" means the principal of, premium, if any, interest
-------------------
(including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness of the Company, whether outstanding
on the date of this Indenture or thereafter created, incurred, assumed,
guaranteed or in effect guaranteed by the Company (including all deferrals,
renewals, extensions or refundings of, or amendments, modifications or
supplements to, the foregoing), unless in the case of any particular
Indebtedness the instrument creating or evidencing the same or the assumption or
guarantee thereof expressly provides that such Indebtedness shall not be senior
in right of payment to the Notes or expressly provides that such Indebtedness is
"pari passu" or "junior" to the Notes. Notwithstanding the foregoing, the term
Senior Indebtedness shall not include any Indebtedness of the Company to any
subsidiary of the Company, a majority of the voting stock of which is owned,
directly or indirectly, by the Company. If any payment made to any holder of any
Senior Indebtedness or its Representative with respect to such Senior
Indebtedness is rescinded or must otherwise be returned by such holder or
Representative upon the insolvency, bankruptcy or reorganization of the Company
or otherwise, the reinstated Indebtedness of the Company arising as a result of
such rescission or return shall constitute Senior Indebtedness effective as of
the date of such rescission or return.
"Significant Subsidiary" means, as of any date of determination, a
----------------------
Subsidiary of the Company, if as of such date of determination either (a) the
assets of such subsidiary equal 10% or more of the Company's total consolidated
assets or (b) the total revenue of which represented 10% or more of the
Company's consolidated total revenue for the most recently completed fiscal
year.
"Subsidiary" means, with respect to any Person, (i) any corporation,
----------
association or other business entity of which more than 50% of the total voting
power of shares of capital stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or managing general partner of which is such Person or a
subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more subsidiaries of such Person (or any combination
thereof).
"Trading Day" has the meaning specified in Section 15.5(h)(5).
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"Trigger Event" has the meaning specified in Section 15.5(d).
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"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as
-------------------
it was in force at the date 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" means Summit Bank and its successors and any corporation
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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.
The definitions of certain other terms are as specified in Sections 2.5 and
3.5 and Article Fifteen.
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION,
REGISTRATION AND EXCHANGE OF NOTES
Section 2.1. Designation Amount and Issue of Notes. The Notes shall be
-------------------------------------
designated as "6% Convertible Subordinated Notes due 2007". Notes not to exceed
the aggregate principal amount of $150,000,000 (or $180,000,000 if the option
set forth in Section 2 of the Purchase Agreement is exercised in full by the
Initial Purchasers) (except pursuant to Sections 2.5, 2.6, 3.3, 3.5 and 15.2
hereof) 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 to or upon
the written order of the Company, signed by (a) its Chairman of the Board, Chief
Executive Officer, 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) its Treasurer or any Assistant Treasurer, its Controller or
any Assistant Controller 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 to conform to usage.
Any Global Note shall represent such of the outstanding Notes as shall be
specified therein and shall provide that it shall represent the aggregate amount
of outstanding Notes from time to time endorsed thereon and that the aggregate
amount of outstanding Notes represented thereby may from time to time be
increased or reduced to reflect transfers or exchanges permitted hereby. Any
endorsement of a Global Note to reflect the amount 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
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<PAGE>
the holder of such Notes in accordance with this Indenture. Payment of principal
of and interest and premium, if any, on any Global Note shall be made to the
holder of such Note.
The terms and provisions contained in the form of Note attached as Exhibit
-------
A hereto shall constitute, and are hereby expressly made, a part of this
- -
Indenture and, to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.3. Date and Denomination of 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 and shall bear interest from the applicable
date in each case as specified on the face of the form of Note attached as
Exhibit A hereto. Interest on the Notes shall be computed on the basis of a
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360-day year comprised of twelve (12) 30-day months.
The Person in whose name any Note (or its Predecessor Note) is registered
on the Note register at the close of business on any record date with respect to
any interest payment date shall be entitled to receive the interest payable on
such interest payment date, except (i) that the interest payable upon redemption
(unless the date of redemption is an interest payment date) will be payable to
the Person to whom principal is payable and (ii) as set forth in the next
succeeding sentence. In the case of any Note (or portion thereof) that is
converted into Common Stock during the period from (but excluding) a record date
to (but excluding) the next succeeding interest payment date either (x) if such
Note (or portion thereof) has been called for redemption pursuant to Section 3.2
on a redemption date which occurs during such period, or is to be redeemed in
connection with a Fundamental Change on a Repurchase Date (as defined in Section
3.5) that occurs during such period, the Company shall not be required to pay
interest on such interest payment date in respect of any such Note (or portion
thereof) except to the extent required to be paid upon redemption of such Note
or portion thereof pursuant to Section 3.3 or 3.5 hereof or (y) if such Note (or
portion thereof) has not been called for redemption on a redemption date that
occurs during such period and is not to be redeemed in connection with a
Fundamental Change on a Repurchase Date that occurs during such period, such
Note (or portion thereof) that is submitted for conversion during such period
shall be accompanied by funds equal to the interest payable on such succeeding
interest payment date on the principal amount so converted, as provided in the
penultimate paragraph of Section 15.2 hereof. Interest shall be payable at the
office of the Company maintained by the Company for such purposes in Hackensack,
New Jersey, which shall initially be an office or agency of the Trustee and may,
as the Company shall specify to the paying agent in writing by each record date,
be paid either (i) by check mailed to the address of the Person entitled thereto
as it appears in the Note register (provided that the holder of Notes with an
aggregate principal amount in excess of $2,000,000 shall, at the written
election of such holder, be paid by wire transfer in immediately available
funds) or (ii) by transfer to an account maintained by such Person located in
the United States; provided, however, that payments to the Depositary will be
made by wire transfer of immediately available funds to the account of the
Depositary or its nominee. The term "record date" with respect to any interest
payment date shall mean the February 15 or August 15 preceding the relevant
March 1 or September 1, respectively.
Any interest on any Note which is payable, but is not punctually paid or
duly provided for, on any March 1 or September 1 (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Noteholder on the relevant
record date by virtue of his having been such Noteholder, and such Defaulted
Interest shall be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business
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<PAGE>
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 Person entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a special record date for
the payment of such Defaulted Interest which shall be not more than fifteen
(15) days and not less than ten (10) days prior to the date of the proposed
payment, and not less than ten (10) days after the receipt by the Trustee
of the notice of the proposed payment, the Trustee shall promptly notify
the Company of such special record date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the special record date therefor to be mailed,
first-class postage prepaid, to each Noteholder 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) of this Section 2.3.
(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 manual or facsimile signature of its Chairman of
the Board, Chief Executive Officer, 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 attested by the manual or facsimile signature of its
Secretary or any of its Assistant Secretaries or its Treasurer or any of its
Assistant Treasurers (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 16.11),
shall be entitled to the benefits of this Indenture or be valid or obligatory
for any purpose. Such certificate by the Trustee (or such an authenticating
agent) upon any Note executed by the Company shall be conclusive evidence that
the Note so authenticated has been duly authenticated and delivered hereunder
and that the holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the Notes
shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company, and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.
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<PAGE>
Section 2.5. Exchange and Registration of Transfer of Notes; Restrictions
------------------------------------------------------------
on Transfer; Depositary.
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(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. The Note register shall be in
written form or in any form capable of being converted into written form within
a reasonably prompt 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 maintained by the Company pursuant to Section 5.2.
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 issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
All Notes presented or surrendered for registration of transfer or for
exchange, redemption or conversion shall be duly endorsed, or be accompanied by
a written instrument or instruments of transfer in form satisfactory to the
Company, and the Notes shall be duly executed by the Noteholder thereof or his
attorney duly authorized in writing.
No service charge shall be made to any holder for any registration of
transfer or exchange of Notes, but the Company may require payment by the holder
of a sum sufficient to cover any tax, assessment or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of Notes.
Neither the Company nor the Trustee nor any Note 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, (b) any
Notes or portions thereof called for redemption pursuant to Section 3.2, (c) any
Notes or portions thereof surrendered for conversion pursuant to Article Fifteen
or (d) any Notes or portions thereof tendered for redemption (and not withdrawn)
pursuant to Section 3.5.
(b) So long as the Notes are eligible for book-entry settlement with
the Depositary, or unless otherwise required by law, all Notes that, upon
initial issuance are beneficially owned by QIBs or as a result of a sale or
transfer after initial issuance are beneficially owned by QIBs, will be
represented by one or more Notes in global form registered in the name of the
Depositary or the nominee of the Depositary (the
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<PAGE>
"Global Note"), except as otherwise specified below. The transfer and exchange
of beneficial interests in any such Global Note shall be effected through the
Depositary in accordance with this Indenture and the procedures of the
Depositary therefor. The Trustee shall make appropriate endorsements to reflect
increases or decreases in the principal amounts of any such Global Note as set
forth on the face of the Note ("Principal Amount") to reflect any such
transfers. Except as provided below, beneficial owners of a Global Note shall
not be entitled to have certificates registered in their names, will not receive
or be entitled to receive physical delivery of certificates in definitive form
and will not be considered holders of such Global Note.
(c) So long as the Notes are eligible for book-entry settlement with
the Depositary, or unless otherwise required by law, upon any transfer of a
definitive Note (other than a Global Note) to a QIB in accordance with Rule
144A, and upon receipt of the definitive Note or Notes being so transferred,
together with a certification, substantially in the form on the reverse of the
Note, from the transferor that the transfer is being made in compliance with
Rule 144A (or other evidence satisfactory to the Trustee), the Trustee shall
make an endorsement on the Global Note to reflect an increase in the aggregate
Principal Amount of the Notes represented by such Global Note, and the Trustee
shall cancel such definitive Note or Notes in accordance with the standing
instructions and procedures of the Depositary; provided, however, 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
Global Note until such definitive Note is freely tradable in accordance with
Rule 144(k) under the Securities Act, provided further that the Trustee shall
issue Notes in definitive form upon any transfer of a beneficial interest in the
Global Note to the Company or any Affiliate of the Company.
Upon any sale or transfer of a Note to an Institutional Accredited Investor
(other than pursuant to a registration statement that has been declared
effective under the Securities Act), such Institutional Accredited Investor
shall, prior to such sale or transfer, furnish to the Company and/or the Trustee
a signed letter containing representations and agreements relating to
restrictions on transfer substantially in the form set forth in Exhibit B to
---------
this Indenture. Upon any transfer of a beneficial interest in the Global Note
to an Institutional Accredited Investor, the Trustee shall make an endorsement
on the Global Note to reflect a decrease in the aggregate Principal Amount of
the Notes represented by such Global Note, and the Company shall execute a
definitive Note or Notes in exchange therefore, and the Trustee, upon receipt of
such definitive Note or Notes and the written order of the Company, shall
authenticate and deliver such, definitive Note or Notes.
Any Global Note may be endorsed with or have incorporated in the text
thereof such legends or recitals or changes not inconsistent with the provisions
of this Indenture as may be required by the Custodian, the Depositary or by the
National Association of Securities Dealers, Inc. in order for the Notes to be
tradeable on The Portal Market or as may be required for the Notes to be
tradeable on any 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 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 those
set forth in the legend set forth below) unless such restrictions on transfer
shall be waived by written consent of the Company, and the holder of each such
Restricted Security, by such Noteholder'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,
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<PAGE>
pledge, loan, transfer or other disposition whatsoever of any Restricted
Security. The Trustee shall refuse to register any transfer of any Note in
violation of the restrictions contained in the legend set forth in this Section
2.5(d).
Until the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), 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 Note has
been sold pursuant to a registration statement that has been declared effective
under the Securities Act (and which continues to be effective at the time of
such transfer), or unless otherwise agreed by the Company in writing, with
written notice thereof to the Trustee:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR"); (2) AGREES THAT
IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES
OF THIS NOTE UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), RESELL OR OTHERWISE TRANSFER THIS NOTE OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE EXCEPT (A) TO VIROPHARMA INCORPORATED
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 SUMMIT BANK AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF NOTES LESS THAN $100,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (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); (3) AGREES THAT PRIOR TO SUCH TRANSFER (OTHER THAN A
TRANSFER PURSUANT TO CLAUSE (2)(F) ABOVE), IT WILL FURNISH TO SUMMIT BANK
AS TRUSTEE (OR A
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<PAGE>
SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS THE TRUSTEE 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 (4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE PRIOR TO THE EXPIRATION OF THE
HOLDING PERIOD APPLICABLE TO SALES OF THIS NOTE UNDER RULE 144(K) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION), 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 SUMMIT BANK AS TRUSTEE (OR A
SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER WHO IS NOT A U.S.
PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO SUMMIT BANK AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS SUCH TRUSTEE MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE
TRANSFER OF THIS NOTE PURSUANT TO CLAUSE (2)(F) ABOVE OR UPON ANY TRANSFER
OF THIS NOTE UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION). AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF ANY NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
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 or as to conditions for removal of the foregoing legend set forth therein
have been satisfied 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 the second paragraph of Section 2.5(c) and in this
Section 2.5(d)), a Global Note 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.
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<PAGE>
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
Custodian for Cede & Co.
If at any time the Depositary for a Global Note 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 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 certificated form, in aggregate
principal amount equal to the principal amount of such Global Note, in exchange
for such Global Note.
If a Note in certificated form is issued in exchange for any portion of a
Global Note on or after the close of business at the office or agency where such
exchange occurs on any record date and before the opening of business at such
office or agency on the next succeeding interest payment date, interest will not
be payable on such interest payment date in respect of such certificated Note,
but will be payable on such interest payment date, subject to the provisions of
Section 2.3, only to the Person to whom interest in respect of such portion of
such Global Note is payable in accordance with the provisions of this Indenture.
Notes in certificated form issued in exchange for all or a part of a Global
Note pursuant to this Section 2.5 shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee. Upon
execution and authentication, the Trustee shall deliver such Notes in
certificated form to the Persons in whose names such Notes in certificated form
are so registered.
At such time as all interests in a Global Note have been redeemed,
converted, canceled, exchanged for Notes in certificated form, or transferred to
a transferee who receives Notes in certificated form thereof, such Global Note
shall, upon receipt thereof, be 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 Notes in certificated form, redeemed, converted,
repurchased or canceled, or transferred to a transferee who receives Notes in
certificated form therefor or any Note in certificated form is exchanged or
transferred for part of a Global Note, the principal amount of such Global Note
shall, in accordance with the standing procedures and instructions existing
between the Depositary and the Custodian, be appropriately reduced or increased,
as the case may be, and an endorsement shall be made on such Global Note, by the
Trustee or the Custodian, at the direction of the Trustee, to reflect such
reduction or increase.
(e) Until the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
any stock certificate representing Common Stock issued upon conversion of any
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 in writing with written notice thereof to the transfer agent:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED
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<PAGE>
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 THE HOLDING PERIOD APPLICABLE TO SALES OF THE COMMON STOCK
EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY
SUCCESSOR PROVISION), (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE
COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO VIROPHARMA INCORPORATED 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 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 STOCKTRANS,
INC., AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), 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 OR A SUCCESSOR
TRANSFER AGENT, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES LAWS (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 SUCH TRANSFER (OTHER THAN A
TRANSFER PURSUANT TO CLAUSE (1)(F) ABOVE), IT WILL FURNISH TO STOCKTRANS,
INC., AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE),
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS SUCH TRANSFER
AGENT 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. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR OR IS A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO STOCKTRANS, INC. (OR A SUCCESSOR
TRANSFER AGENT, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS
LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE COMMON STOCK
EVIDENCED HEREBY PURSUANT TO CLAUSE (1)(F) ABOVE OR UPON ANY TRANSFER OF
THE COMMON STOCK EVIDENCED HEREBY AFTER THE EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE
144(K)
-15-
<PAGE>
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE
TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Any such Common Stock as to which such restrictions on transfer shall have
expired in accordance with their terms or as to which the conditions for removal
of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.5(e).
(f) Any 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).
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 the Company's written request the Trustee or an
authenticating agent appointed by the Trustee shall authenticate and make
available for delivery, a new Note, bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Note, or in lieu of
and in substitution for the Note so destroyed, lost or stolen. 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.
Following receipt by the Trustee or such authenticating agent, as the case
may be, of satisfactory security or indemnity and evidence, as described in the
preceding paragraph, the Trustee or such authenticating agent may authenticate
any such substituted Note and make available for delivery such Note. Upon the
issuance of any substituted Note, the Company may require the payment by the
holder of a sum sufficient to cover any tax, assessment 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 has been tendered for redemption (and not withdrawn) or
is to be converted into Common Stock shall become mutilated or be destroyed,
lost or stolen, the Company may, instead of issuing a substitute Note, pay or
authorize the payment of or convert or authorize the conversion of the same
(without surrender thereof except in the case of a mutilated Note), as the case
may be, if the applicant for such payment or conversion shall furnish to the
Company, to the Trustee and, if applicable, to such authenticating agent such
security or indemnity as may be required by them to save each of them harmless
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, the Trustee and, if applicable, any paying
agent or conversion agent evidence to their satisfaction of the destruction,
loss or theft of such Note and of the ownership thereof.
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<PAGE>
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, solely as between the Company and the Noteholder of the substitute
Note, 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 Notes in
---------------
certificated form, the Company may execute and the Trustee or an authenticating
agent appointed by the Trustee shall, upon the 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 Notes in certificated form, 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 Notes in certificated form. Without unreasonable delay the Company will
execute and deliver to the Trustee or such authenticating agent Notes in
certificated form (other than in the case of Notes in global form) and thereupon
any or all temporary Notes (other than any such Global Note) shall 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 make available for delivery in exchange for such
temporary Notes an equal aggregate principal amount of Notes in certificated
form. 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 Notes in certificated form authenticated and delivered
hereunder.
Section 2.8. Cancellation of Notes Paid, Etc. All Notes surrendered for
-------------------------------
the purpose of payment, redemption, conversion, exchange or registration of
transfer shall, if surrendered to the Company or any paying agent or any Note
registrar or any conversion agent, be surrendered to the Trustee and promptly
canceled by it, or, if surrendered to the Trustee, shall be promptly canceled by
it, and no Notes shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Indenture. The Trustee shall dispose of such
canceled Notes in accordance with its customary procedures. 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.
Section 2.9. CUSIP Numbers. The Company in issuing the Notes may use
-------------
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Noteholders;
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Notes or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Notes, and any such redemption
shall not be affected by any defect in or omission of such numbers. The Company
will promptly notify the Trustee of any change in the "CUSIP" numbers.
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<PAGE>
ARTICLE THREE
REDEMPTION OF NOTES
Section 3.1. (a) Initial Prohibition on Redemption. Except as otherwise
---------------------------------
provided in Section 3.5, the Notes may not be redeemed by the Company, in whole
or in part, at any time prior to March 6, 2003.
(b) Optional Redemption by the Company. At any time on or after March
----------------------------------
6, 2003, and prior to maturity, the Notes may be redeemed at the option of the
Company, in whole or in part, upon notice as set forth in Section 3.2, at the
following redemption prices (expressed as percentages of the principal amount),
together in each case with accrued and unpaid interest, if any (including
Liquidated Damages, if any) to, but excluding, the date fixed for redemption:
<TABLE>
<CAPTION>
Period Redemption Price
- ------ ----------------------------
<S> <C>
Beginning on March 6, 2003 and ending on February 29, 2004............... 103.429%
Beginning on March 1, 2004 and ending on February 28, 2005............... 102.571
Beginning on March 1, 2005 and ending on February 28, 2006............... 101.714
Beginning on March 1, 2006 and ending on February 28, 2007............... 100.857
</TABLE>
and 100% on March 1, 2007; provided, however, that if the date fixed for
redemption is on a March 1 or September 1, then the interest payable on such
date shall be paid to the holder of record on the preceding February 15 or
August 15, respectively.
Section 3.2. Notice of Redemptions; 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 written request received by the Trustee not fewer
than forty-five (45) days prior (or such shorter period of time as may be
acceptable to the Trustee) to the date fixed for redemption, 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 not fewer than thirty (30) nor 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, however, that if the Company shall give such notice, it
shall also give written notice, and written 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. Concurrently with the
mailing of any such notice of redemption, the Company shall issue a press
release announcing such redemption, the form and content of which press release
shall be determined by the Company in its sole discretion. The failure to issue
any such press release or any defect therein shall not affect the validity of
the redemption notice or any of the proceedings for the redemption of any Note
called for redemption.
Each such notice of redemption shall specify the aggregate principal amount
of Notes to be redeemed, the CUSIP number or numbers of the Notes being
redeemed, the date fixed for redemption (which shall be a Business Day), the
redemption price at which Notes are to be redeemed, the place or places of
payment, that payment will be made upon presentation and surrender of such
Notes, that interest accrued to the date fixed for redemption 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
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<PAGE>
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 (including
CUSIP numbers, if any). 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 Business Day next preceding the redemption date
specified in the notice of redemption given as provided in this Section 3.2, the
Company will deposit with the Trustee or with one or more paying agents (or, if
the Company is acting as its own paying agent, set aside, segregate and hold in
trust as provided in Section 5.4) an amount of money in immediately available
funds 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. The Company
shall be entitled to retain any interest, yield or gain on amounts deposited
with the Trustee or any paying agent pursuant to this Section 3.2 in excess of
amounts required hereunder to pay the redemption price together with accrued
interest to, but excluding, the date fixed for redemption. If any Note called
for redemption is converted pursuant hereto prior to such redemption, 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
written request, or, if then held by the Company, shall be discharged from such
trust. Whenever any Notes are to be redeemed, the Company will give the Trustee
written notice in the form of an Officers' Certificate not fewer than forty-five
(45) days (or such shorter period of time as may be acceptable to the Trustee)
prior to the redemption date as to the aggregate principal amount of Notes to be
redeemed.
If less than all of the outstanding Notes are to be redeemed, the Trustee
shall select the Notes or portions thereof of the Global Note or the Notes in
certificated form to be redeemed (in principal amounts of $1,000 or integral
multiples thereof) by lot, on a pro rata basis or by another method the Trustee
deems fair and appropriate. If any Note selected for partial redemption is
submitted for conversion in part after such selection, the portion of such Note
submitted for conversion 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 submitted for conversion in part before the mailing of the
notice of redemption.
Upon any redemption of less than all of the outstanding Notes, the Company
and the Trustee may (but need not), solely for purposes of determining the pro
rata allocation among such Notes as are unconverted and outstanding at the time
of redemption, 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 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 fixed for
redemption 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 said date) interest on the Notes or portion of Notes so
called for redemption shall cease to accrue and, after the close of business on
the Business Day next preceding the date fixed for redemption, such Notes shall
cease to
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<PAGE>
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 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, however, 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 instead of the holders surrendering such Notes
for redemption on such date.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and make available for delivery to
the holder thereof, at the expense of the Company, a new Note or Notes, of
authorized denominations, in principal amount equal to the unredeemed portion of
the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any Notes or
mail any notice of redemption during the continuance of a default in payment of
interest or premium, if any, on the Notes. 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,
and interest shall have been paid or duly provided for.
Section 3.4. Conversion Arrangement on Call for Redemption. In connection
---------------------------------------------
with any redemption of Notes under this Article Three, 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 (but excluding) the date fixed for redemption, of such
Notes. Notwithstanding anything to the contrary contained in this Article Three,
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
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 Fifteen) 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 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.
Section 3.5. Redemption at Option of Holders.
-------------------------------
(a) If there shall occur a Fundamental Change at any time prior
to maturity of the Notes, then each Noteholder shall have the right, at such
holder's option, to require the Company to redeem all of such holder's Notes, or
any portion thereof that is an integral multiple of $1,000 principal amount, on
the date (the "Repurchase Date") that is thirty (30) days after the date of the
Company Notice (as defined in
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<PAGE>
Section 3.5(b) below) of such Fundamental Change (or, if such 30th day is not a
Business Day, the next succeeding Business Day) at a redemption price equal to
100% of the principal amount thereof, together with accrued interest to (but
excluding) the Repurchase Date; provided, however, that, if such Repurchase Date
is a March 1 or September 1, then the interest payable on such date shall be
paid to the holders of record of the Notes on the next preceding February 15 or
August 15, respectively.
Upon presentation of any Note redeemed in part only, the Company shall
execute and, upon the Company's written direction to the Trustee, 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.
(b) On or before the tenth day after the occurrence of a Fundamental
Change, the Company or at its written request (which must be received by the
Trustee at least five (5) Business Days prior to the date the Trustee is
requested to give notice as described below, unless the Trustee shall agree in
writing to a shorter period), the Trustee, in the name of and at the expense of
the Company, shall mail or cause to be mailed to all holders of record on the
date of the Fundamental Change a notice (the "Company Notice") of the occurrence
of such Fundamental Change and of the redemption right at the option of the
holders arising as a result thereof. Such notice shall be mailed in the manner
and with the effect set forth in the first paragraph of Section 3.2 (without
regard for the time limits set forth therein). If the Company shall give such
notice, the Company shall also deliver a copy of the Company Notice to the
Trustee at such time as it is mailed to Noteholders. Concurrently with the
mailing of any Company Notice, the Company shall, if it has not previously done
so, issue a press release announcing such Fundamental Change referred to in the
Company Notice, the form and content of which press release shall be determined
by the Company in its sole discretion. The failure to issue any such press
release or any defect therein shall not affect the validity of the Company
Notice or any proceedings for the redemption of any Note which any Noteholder
may elect to have the Company redeem as provided in this Section 3.5.
Each Company Notice shall specify the circumstances constituting the
Fundamental Change, the Repurchase Date, the price at which the Company shall be
obligated to redeem Notes, that the holder must exercise the redemption right on
or prior to the close of business on the Repurchase Date (the "Fundamental
Change Expiration Time"), that the holder shall have the right to withdraw any
Notes surrendered prior to the Fundamental Change Expiration Time, a description
of the procedure which a Noteholder must follow to exercise such redemption
right and to withdraw any surrendered Notes, the place or places where the
holder is to surrender such holder's Notes, the amount of interest accrued on
each Note to the Repurchase Date and the "CUSIP" number or numbers of the Notes
(if then generally in use).
No failure of the Company to give the foregoing notices and no defect
therein shall limit the Noteholders' redemption rights or affect the validity of
the proceedings for the redemption of the Notes pursuant to this Section 3.5.
(c) For a Note to be so redeemed at the option of the holder, the
Company must receive at the office or agency of the Company maintained for that
purpose or, at the option of such holder, the Corporate Trust Office, such Note
with the form entitled "Option to Elect Repayment Upon A Fundamental Change" on
the reverse thereof duly completed, together with such Notes duly endorsed for
transfer, on or before the Fundamental Change Expiration Time. All questions as
to the validity, eligibility (including time of receipt) and acceptance of any
Note for repayment shall be determined by the Company, whose determination shall
be final and binding absent manifest error.
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<PAGE>
(d) On or prior to the Business Day next preceding the Repurchase
Date, 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 Repurchase Date all the Notes to be redeemed on such
date at the appropriate redemption price, together with accrued interest to (but
excluding) the Repurchase Date. Payment for Notes surrendered for redemption
(and not withdrawn) prior to the Fundamental Change Expiration Time will be made
promptly (but in no event more than five (5) Business Days) following the
Repurchase Date either (i) by mailing checks for the amount payable to the
holders of such Notes entitled thereto as they shall appear on the registry
books of the Company or (ii) by wire transfer to an account maintained by such
holders located in the United States; provided, however, that payments to the
Depositary will be made by wire transfer of immediately available funds to the
account of the Depositary or its nominee.
(e) In the case of a reclassification, change, consolidation, merger,
combination, sale or conveyance to which Section 15.6 applies, in which the
Common Stock of the Company is changed or exchanged as a result into the right
to receive stock, securities or other property or assets (including cash), which
includes shares of Common Stock of the Company or shares of common stock of
another Person that are, or upon issuance will be, tradeable on a United States
national securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and such shares constitute
at the time such change or exchange becomes effective in excess of 50% of the
aggregate fair market value of such stock, securities or other property or
assets (including cash) (as determined by the Company, which determination shall
be conclusive and binding), then the Person formed by such consolidation or
resulting from such merger or which acquires such assets, as the case may be,
shall execute and deliver to the Trustee a supplemental indenture (accompanied
by an Opinion of Counsel that such supplemental indenture complies with the
Trust Indenture Act as in force at the date of execution of such supplemental
indenture) modifying the provisions of this Indenture relating to the right of
holders of the Notes to cause the Company to repurchase the Notes following a
Fundamental Change, including without limitation the applicable provisions of
this Section 3.5 and the definitions of Common Stock and Fundamental Change, as
appropriate, as determined in good faith by the Company (which determination
shall be conclusive and binding), to make such provisions apply to such other
Person if different from the Company and the common stock issued by such Person
(in lieu of the Company and the Common Stock of the Company). Nothing contained
in this Section 3.5(e) shall be deemed to define the parameters used to
determine whether a Fundamental Change has occurred.
(f) The Company will comply with the provisions of Rule 13e-4 and any
other tender offer rules under the Exchange Act to the extent then applicable in
connection with the redemption rights of the holders of Notes in the event of a
Fundamental Change.
ARTICLE FOUR
SUBORDINATION OF NOTES
Section 4.1. Agreement of Subordination. The Company covenants and agrees,
--------------------------
and each holder of Notes issued hereunder by its acceptance thereof likewise
covenants and agrees, that all Notes shall be issued subject to the provisions
of this Article Four, and each Person holding any Note, whether upon original
issue or upon registration of transfer, assignment or exchange thereof, accepts
and agrees to be bound by such provisions.
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<PAGE>
The payment of the principal of, premium, if any, and interest (including
Liquidated Damages, if any) on all Notes (including, but not limited to, the
redemption price with respect to the Notes called for redemption in accordance
with Section 3.2 or submitted for redemption in accordance with Section 3.5, as
the case may be, as provided in this Indenture) issued hereunder shall, to the
extent and in the manner hereinafter set forth, be subordinated and subject in
right of payment to the prior payment in full of all Senior Indebtedness,
whether outstanding at the date of this Indenture or thereafter incurred.
No provision of this Article Four shall prevent the occurrence of any
default or Event of Default hereunder.
Section 4.2. Payments to Noteholders. No payment shall be made with
-----------------------
respect to the principal of, premium, if any, or interest (including Liquidated
Damages, if any) on the Notes (including, but not limited to, the redemption
price with respect to the Notes to be called for redemption in accordance with
Section 3.2 or submitted for redemption in accordance with Section 3.5, as the
case may be, as provided in this Indenture), except payments and distributions
made by the Trustee as permitted by the first or second paragraph of Section
4.5, if:
(i) a default in the payment of principal, premium, if any, interest,
rent or other obligations in respect of Senior Indebtedness occurs and is
continuing (or, in the case of Senior Indebtedness for which there is a
period of grace, in the event of such a default that continues beyond the
period of grace, if any, specified in the instrument or lease evidencing
such Senior Indebtedness) (a "Payment Default"), unless and until such
Payment Default shall have been cured or waived or shall have ceased to
exist; or
(ii) a default, other than a Payment Default, on any Designated Senior
Indebtedness occurs and is continuing that then permits holders of such
Designated Senior Indebtedness to accelerate its maturity (or in the case
of any lease, a default occurs and is continuing that permits the lessor to
either terminate the lease or require the Company to make an irrevocable
offer to terminate the lease following an event of default thereunder) and
the Trustee receives a notice of the default (a "Payment Blockage Notice")
from a holder of Designated Senior Indebtedness, a Representative of
Designated Senior Indebtedness or the Company (a "Non-Payment Default").
If the Trustee receives any Payment Blockage Notice pursuant to clause (ii)
above, no subsequent Payment Blockage Notice shall be effective for purposes of
this Section 4.2 unless and until at least 365 days shall have elapsed since the
initial effectiveness of the immediately prior Payment Blockage Notice. No Non-
Payment Default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in respect
of the Notes upon the earlier of:
(1) the date upon which any such Payment Default is cured or waived or
ceases to exist, or
(2) in the case of a Non-Payment Default, the earlier of (a) the date
upon which such default is cured or waived or ceases to exist or (b) 179
days after the applicable Payment Blockage Notice is received by the
Trustee if the maturity of such Designated Senior Indebtedness has not been
accelerated (or in the case of any lease, 179 days after notice is received
if the Company has not
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received notice that the lessor under such lease has exercised its right to
terminate the lease or require the Company to make an irrevocable offer to
terminate the lease following an event of default thereunder),
unless this Article Four otherwise prohibits the payment or distribution at
the time of such payment or distribution.
Upon any payment by the Company, or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding up or liquidation or reorganization of the
Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full in cash or other payment
satisfactory to the holders of such Senior Indebtedness (and satisfactory to the
holders of Senior Indebtedness in the case such Senior Indebtedness includes
Designated Senior Indebtedness), or payment thereof in accordance with its terms
provided for in cash or other payment satisfactory to the holders of such Senior
Indebtedness (and satisfactory to the holders of Senior Indebtedness in the case
such Senior Indebtedness includes Designated Senior Indebtedness) before any
payment is made on account of the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Notes (except payments made
pursuant to Article Thirteen from monies deposited with the Trustee pursuant
thereto prior to commencement of proceedings for such dissolution, winding up,
liquidation or reorganization), and upon any such dissolution or winding up or
liquidation or reorganization of the Company or bankruptcy, insolvency,
receivership or other similar proceeding, 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 would
be entitled, except for the provisions of this Article Four, 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
Representative or Representatives, as their respective interests may appear, to
the extent necessary to pay all Senior Indebtedness in full, in cash or other
payment satisfactory to the holders of such Senior Indebtedness (and
satisfactory to the holders of Senior Indebtedness in the case such Senior
Indebtedness includes Designated 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.
For purposes of this Article Four, 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 Four 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 any reorganization or readjustment, and
(ii) the rights of the holders of Senior Indebtedness (other than leases which
are not assumed by the Company or 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 Person upon the terms and conditions
provided for in Article Twelve shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 4.2 if such other
Person shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions stated in Article Twelve.
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In the event of the acceleration of the Notes because of an Event of
Default, no payment or distribution shall be made to the Trustee or any holder
of Notes in respect of the principal of, premium, if any, or interest (including
Liquidated Damages, if any) on the Notes (including, but not limited to, the
redemption price with respect to the Notes called for redemption in accordance
with Section 3.2 or submitted for redemption in accordance with Section 3.5, as
the case may be, as provided in this Indenture), except payments and
distributions made by the Trustee as permitted by the first or second paragraph
of Section 4.5, until all Senior Indebtedness has been paid in full in cash or
other payment satisfactory to the holders of Senior Indebtedness (and
satisfactory to the holders of Designated Senior Indebtedness in the case such
Senior Indebtedness includes Designated 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
or the Trustee shall promptly notify holders of Senior Indebtedness of the
acceleration.
In the event that, notwithstanding the foregoing provisions, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (including, without limitation, by way of setoff or
otherwise), prohibited by the foregoing provisions in this Section 4.2, shall be
received by the Trustee or the holders of the Notes before all Senior
Indebtedness is paid in full in cash or other payment satisfactory to the
holders of such Senior Indebtedness (and satisfactory to the holders of Senior
Indebtedness in the case such Senior Indebtedness includes Designated Senior
Indebtedness), or provision is made for such payment thereof in accordance with
its terms in cash or other payment satisfactory to the holders of such Senior
Indebtedness (and satisfactory to the holders of Senior Indebtedness in the case
such Senior Indebtedness includes Designated Senior Indebtedness), such payment
or distribution shall be held in trust for the benefit of and shall be paid over
or delivered to the holders of Senior Indebtedness or their Representative or
Representatives, as their respective interests may appear, as calculated by the
Company, for application to the payment of any Senior Indebtedness remaining
unpaid to the extent necessary to pay all Senior Indebtedness in full in cash or
other payment satisfactory to the holders of such Senior Indebtedness (and
satisfactory to the holders of Senior Indebtedness in the case such Senior
Indebtedness includes Designated Senior Indebtedness), after giving effect to
any concurrent payment or distribution 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 under or pursuant to Section 8.6. This Section 4.2 shall be subject to
the further provisions of Section 4.5.
Section 4.3. Subrogation of Notes. Subject to the payment in full 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 Four (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, premium, if any, and
interest (including Liquidated Damages, if any) 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 Four, and no payment pursuant to the provisions of
this Article Four, to or for the benefit of the holders of Senior Indebtedness
by holders of the Notes or the Trustee, shall, as among 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 Four, which would otherwise have been paid to the
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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 Four are intended solely for the purposes of defining the relative
rights of the holders of the Notes, on the one hand, and the holders of the
Senior Indebtedness, on the other hand.
Nothing contained in this Article Four 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, premium, if any, and interest (including
Liquidated Damages, if any) 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 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 Four of the holders
of Senior Indebtedness in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.
Section 4.4. Authorization to Effect Subordination. Each holder of a Note
-------------------------------------
by the holder's acceptance thereof authorizes and directs the Trustee on the
holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article Four and appoints the
Trustee to act as the holder's attorney-in-fact for any and all such purposes.
If the Trustee does not file a proper proof of claim or proof of debt in the
form required in any proceeding referred to in the third paragraph of Section
7.2 hereof at least thirty (30) days before the expiration of the time to file
such claim, the holders of any Senior Indebtedness or their Representatives are
hereby authorized to file an appropriate claim for and on behalf of the holders
of the Notes.
Section 4.5. Notice to Trustee. The Company shall give prompt written
-----------------
notice in the form of an Officers' Certificate to a Responsible Officer of the
Trustee and to any paying agent of any fact known to the Company that 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 Four.
Notwithstanding the provisions of this Article Four or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment of monies to or by
the Trustee in respect of the Notes pursuant to the provisions of this Article
Four, 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 Representative or a holder or holders of
Senior Indebtedness, 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, however, that if on a
date not less than one Business Day 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
(including Liquidated Damages, if any) on any Note) the Trustee shall not have
received, with respect to such monies, the notice provided for in this Section
4.5, then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to apply monies received to the
purpose for which they were received, and shall not be affected by any notice to
the contrary that may be received by it on or after such prior date.
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 Representative or 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
Representative or a holder of Senior Indebtedness or a trustee on behalf of any
such holder or holders. The Trustee shall not be required
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to make any payment or distribution to or on behalf of a holder of Senior
Indebtedness pursuant to this Article Four unless it has received satisfactory
evidence 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
Four.
Notwithstanding anything in this Article Four to the contrary, nothing
shall prevent any payment by the Trustee to the Noteholders of monies deposited
with it pursuant to Section 13.1, if a Responsible Officer of the Trustee shall
not have received written notice at the Corporate Trust Office on or before one
Business Day prior to the date such payment is due that such payment is not
permitted under Section 4.1 or 4.2.
Section 4.6. Trustee's Relation to Senior Indebtedness. The Trustee, in
-----------------------------------------
its individual capacity, shall be entitled to all the rights set forth in this
Article Four 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 of any of
its rights as such holder.
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 Four, 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 8.1, the Trustee shall not be liable to any holder of
Senior Indebtedness (i) for any failure to make any payments or distributions to
such holder or (ii) if it shall pay over or deliver to holders of Notes, the
Company or any other Person money in compliance with this Article Four.
Section 4.7. No Impairment of Subordination. No right of any present or
------------------------------
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with. Senior
Indebtedness may be created, renewed or extended and holders of Senior
Indebtedness may exercise any rights under any instrument creating or evidencing
such Senior Indebtedness, including, without limitation, any waiver of default
thereunder, without any notice to or consent from the holders of the Notes or
the Trustee. No compromise, alteration, amendment, modification, extension,
renewal or other change of, or waiver, consent or other action in respect of,
any liability or obligation under or in respect of the Senior Indebtedness or
any terms or conditions of any instrument creating or evidencing such Senior
Indebtedness shall in any way alter or affect any of the provisions of this
Article Four or the subordination of the Notes provided thereby.
Section 4.8. Certain Conversions Not Deemed Payment. For the purposes of
--------------------------------------
this Article Four only, (1) the issuance and delivery of junior securities upon
conversion of Notes in accordance with Article Fifteen shall not be deemed to
constitute a payment or distribution on account of the principal of, premium, if
any, or interest (including Liquidated Damages, if any) on Notes or on account
of the purchase or other acquisition of Notes, and (2) the payment, issuance or
delivery of cash (except in satisfaction of fractional shares pursuant to
Section 15.3), property or securities (other than junior securities) upon
conversion of a Note shall be deemed to constitute payment on account of the
principal of, premium, if any, or interest (including Liquidated Damages, if
any) on such Note. For the purposes of this Section 4.8, the term "junior
securities" means (a) shares of any stock of any class of the Company or (b)
securities of the Company that are subordinated in right of payment to all
Senior Indebtedness that may be outstanding at the time of
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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 Four. Nothing contained in this Article Four 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 Noteholders,
the right, which is absolute and unconditional, of the Holder of any Note to
convert such Note in accordance with Article Fifteen.
Section 4.9. Article Applicable to Paying Agents. If at any time any
-----------------------------------
paying agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "Trustee" as used in this Article Four shall
(unless the context otherwise requires) be construed as extending to and
including such paying agent within its meaning as fully for all intents and
purposes as if such paying agent were named in this Article Four in addition to
or in place of the Trustee; provided, however, that the first paragraph of
Section 4.5 shall not apply to the Company or any Affiliate of the Company if it
or such Affiliate acts as paying agent.
The Trustee shall not be responsible for the actions or inactions of any
other paying agents (including the Company if acting as its own paying agent)
and shall have no control of any funds held by such other paying agents.
Section 4.10. Senior Indebtedness Entitled to Rely. The holders of Senior
------------------------------------
Indebtedness (including, without limitation, Designated Senior Indebtedness)
shall have the right to rely upon this Article Four, and no amendment or
modification of the provisions contained herein shall diminish the rights of
such holders unless such holders shall have agreed in writing thereto.
Section 4.11. Reliance on Judicial Order or Certificate of Liquidating
--------------------------------------------------------
Agent. Upon any payment or distribution of assets of the Company referred to in
- -----
this Article Four, the Trustee, subject to the provisions of Section 8.1, and
the Noteholders shall be entitled to rely upon any order or decree entered by
any court of competent jurisdiction in which such insolvency, bankruptcy,
receivership, liquidation, reorganization, dissolution, winding up or similar
case or proceeding is pending, or a certificate of the trustee in bankruptcy,
liquidating trustee, custodian, receiver, assignee for the benefit of creditors,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Noteholders, for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of 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 Four.
ARTICLE FIVE
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 (including the redemption price upon
redemption pursuant to Article Three), and interest (including Liquidated
Damages, if any), 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. Solely for purposes of this
-------------------------------
Indenture, the Company will maintain an office or agency in Hackensack, New
Jersey, where the Notes may be surrendered for registration of transfer or
exchange or for presentation for payment or for conversion or redemption and
where notices and demands to or upon the Company in respect of the Notes and
this Indenture may be served.
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The Company will give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency not designated or appointed
by the Trustee. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office or the office of agency of the Trustee in
Hackensack, New Jersey (which shall initially be located at Summit Bank, 210
Main Street, 6/th/ Floor, Hackensack, New Jersey 07601, Attention: Corporate
Trust Administration (ViroPharma Incorporated , 6% Convertible Subordinated
Notes due 2007).
The Company may also from time to time designate co-registrars and one or
more 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. The
Company will give prompt written notice 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 each of the Corporate Trust Office
and the office of agency of the Trustee in Hackensack, New Jersey (which shall
initially be located at Summit Bank, 210 Main Street, 6/th/ Floor, Hackensack,
New Jersey 07601, Attention: Corporate Trust Administration (ViroPharma
Incorporated, 6% Convertible Subordinated Notes due 2007)), shall be considered
as one such office or agency of the Company for all purposes of this Indenture.
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. If co-registrars have been appointed in accordance
with this Section, the Trustee shall mail such notices only to the Company and
the holders of Notes it can identify from its records.
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, the Company will
cause such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of this
Section 5.4:
(1) that it will hold all sums held by it as such agent for
the payment of the principal of and premium, if any, or interest
(including Liquidated Damages, if any) 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 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.
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The Company shall, on or before the Business Day next preceding each due
date of the principal of, premium, if any, or interest on the Notes, deposit
with the paying agent a sum (in funds which are immediately available on the due
date for such payment) 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.
(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
(including Liquidated Damages, if any) 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 (including Liquidated Damages,
if any) so becoming due and will promptly 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
(including Liquidated Damages, if any) 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.
The Trustee shall not be responsible for the actions of any other paying
agents (including the Company if acting as its own paying agent) and shall have
no control of any funds held by such other paying agents.
Section 5.5. Existence. Subject to Article Twelve, the Company will do or
---------
cause to be done all things necessary to preserve and keep in full force and
effect its existence and rights (charter and statutory); provided, however, that
the Company shall not be required to preserve any such right if the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Noteholders.
Section 5.6. Maintenance of Properties. The Company will cause all
-------------------------
properties used or useful in the conduct of its business or the business of any
Significant Subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation or maintenance of any of
such properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business or the business of any subsidiary and
not disadvantageous in any material respect to the Noteholders.
Section 5.7. Payment of Taxes and Other Claims. The Company will pay or
---------------------------------
discharge, or cause to be paid or discharged, before the same may become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Significant Subsidiary or upon the income,
profits or property of the Company or any Significant Subsidiary, (ii) all
claims for labor, materials and supplies which,
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if unpaid, might by law become a lien or charge upon the property of the Company
or any Significant Subsidiary and (iii) all stamps and other duties, if any,
which may be imposed by the United States or any political subdivision thereof
or therein in connection with the issuance, transfer, exchange or conversion of
any Notes or with respect to this Indenture; provided, however, that, in the
case of clauses (i) and (ii), the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim (A) if the failure to do so will not, in the aggregate, have a material
adverse impact on the Company, or (B) if the amount, applicability or validity
is being contested in good faith by appropriate proceedings.
Section 5.8. 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
which continue to be Restricted Securities in connection with any sale thereof
and any prospective purchaser of Notes or such Common Stock designated by 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 5.9. 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, premium,
if any, or interest (including Liquidated Damages, if any) 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 had been enacted.
Section 5.10. Compliance Certificate. The Company shall deliver to the
----------------------
Trustee, within one hundred twenty (120) days after the end of each fiscal year
of the Company, a certificate signed by either the principal executive officer,
principal financial officer or principal accounting officer of the Company,
stating whether or not to the best knowledge of the signer thereof the Company
is in default in the performance and observance of any of the terms, provisions
and conditions of this Indenture (without regard to any period of grace or
requirement of notice provided hereunder) and, if the Company shall be in
default, specifying all such defaults and the nature and the status thereof of
which the signer may have knowledge.
The Company will deliver to the Trustee, forthwith upon becoming aware of
(i) any default in the performance or observance of any covenant, agreement or
condition contained in this Indenture, or (ii) any Event of Default, an
Officers' Certificate specifying with particularity such default or Event of
Default and further stating what action the Company has taken, is taking or
proposes to take with respect thereto.
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Any notice required to be given under this Section 5.10 or Section 4.5
shall be delivered to a Responsible Officer of the Trustee at its Corporate
Trust Office. In the event that the payment of the Notes is accelerated because
of an Event of Default, the Company shall promptly provide written notice to the
Trustee specifying the names and addresses of the holders of Senior Indebtedness
if the Trustee (and not the Company) is to provide holders of Senior
Indebtedness notice of such acceleration under Section 4.5 of the Indenture.
Section 5.11. Liquidated Damages Notice. In the event that the Company is
-------------------------
required to pay Liquidated Damages to holders of Notes pursuant to the
Registration Rights Agreement, the Company will provide written notice
("Liquidated Damages Notice") to the Trustee of its obligation to pay Liquidated
Damages no later than fifteen days prior to the proposed payment date for the
Liquidated Damages, and the Liquidated Damages Notice shall set forth the amount
of Liquidated Damages to be paid by the Company on such payment date and the
manner in which such Liquidated Damages are to be paid (which shall not be
inconsistent with the provisions of this Indenture). The Trustee shall not at
any time be under any duty or responsibility to any holder of Notes to determine
the Liquidated Damages, or with respect to the nature, extent or calculation of
the amount of Liquidated Damages when made, or with respect to the method
employed in such calculation of the Liquidated Damages.
ARTICLE SIX
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, semiannually, not more
than fifteen (15) days after each February 15 and August 15 in each year
beginning with August 15, 2000, and at such other times as the Trustee may
request in writing, within thirty (30) days after receipt by the Company of any
such request (or such lesser time as the Trustee may reasonably request in order
to enable it to timely provide any notice to be provided by it hereunder), a
list in such form as the Trustee may reasonably require of the names and
addresses of the holders of 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 by the Company to the Trustee so long as the
Trustee is acting as the sole 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 or
co-registrar in respect of the Notes, 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
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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) Within sixty (60) days after August 15 of each year
commencing with the year 2000, the Trustee shall transmit to holders of Notes
such reports dated as of August 15 of the year in which such reports are made
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 promptly notify the Trustee in writing when the
Notes are listed on any stock exchange or automated quotation system or delisted
therefrom.
Section 6.4. Reports by Company. The Company shall file with the Trustee
------------------
(and the Commission if at any time after the Indenture becomes qualified under
the Trust Indenture Act), 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, whether or not the Notes are governed by such Act;
provided, however, that any such information, documents or reports required to
be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
shall be filed with the Trustee within fifteen (15) days after the same is so
required to be filed with the Commission. Delivery of such reports, information
and documents to the Trustee is for informational purposes only and the
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND
NOTEHOLDERS ON AN EVENT OF DEFAULT
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 any installment of interest
(including Liquidated Damages, if any) upon any of the Notes as and when the
same shall become due and payable, and continuance of such default for a period
of thirty (30) days, whether or not such payment is permitted under Article Four
hereof; or
(b) default in the payment of the principal of or 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 pursuant to Article
Three, by acceleration or otherwise, whether or not such payment is permitted
under Article Four hereof; or
(c) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the Company in
the Notes or in this Indenture (other than a covenant
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or agreement a default in whose performance or whose breach is elsewhere in this
Section 7.1 specifically dealt with) continued for a period of sixty (60) days
after the date on which written notice of such failure, requiring the Company to
remedy the same, shall have been given to the Company by the Trustee, or the
Company and a Responsible Officer of the Trustee by the holders of at least
twenty-five percent (25%) in aggregate principal amount of the Notes at the time
outstanding determined in accordance with Section 9.4; or
(d) the Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to the Company
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 the Company or any
substantial part of the property of the Company, 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 the Company, or shall
make a general assignment for the benefit of creditors, or shall fail generally
to pay its debts as they become due; or
(e) an involuntary case or other proceeding shall be commenced
against the Company seeking liquidation, reorganization or other relief with
respect to the Company 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 the Company or any
substantial part of the property of the Company, 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(d) or (e)), unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the holders of not less
than twenty-five percent (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 (including Liquidated Damages, if any) to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in
Section 7.1(d) or (e) occurs, the principal of all the Notes and the interest
accrued thereon shall (including Liquidated Damages, if any) be immediately and
automatically due and payable without necessity of further action. 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 (including Liquidated Damages, if any) 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 (including Liquidated Damages, if any) (to the extent that payment of
such interest is enforceable under applicable law) and on such principal and
premium, if any, at the rate borne by the 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 (including Liquidated Damages, if any)
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 a Responsible Officer of the Trustee, promptly
upon becoming aware thereof, of any Event of Default.
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In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such waiver or rescission and annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the holders of Notes, and the Trustee shall be restored respectively to
their several positions and rights hereunder, and all rights, remedies and
powers of the Company, the holders of Notes, and the Trustee shall continue as
though no such proceeding had been taken.
Section 7.2. Payments of Notes on Default; Suit Therefor. The Company
-------------------------------------------
covenants that (a) in case default shall be made in the payment of any
installment of interest upon (including Liquidated Damages, if any) 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, by or under this Indenture
declaration 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 (including Liquidated Damages, if any), as the case
may be, with interest upon the overdue principal and premium, if any, and (to
the extent that payment of such interest is enforceable under applicable law)
upon the overdue installments of interest (including Liquidated Damages, if any)
at the rate borne by the 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
all other amounts due the Trustee under Section 8.6. Until such demand by the
Trustee, the Company may pay the principal of and premium, if any, and interest
on (including Liquidated Damages, if any) the Notes to the registered holders,
whether or not the Notes are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor on the Notes under Title 11
of the United States Code, or any other applicable law, or in case a receiver,
assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or
similar official shall have been appointed for or taken possession of the
Company or such other obligor, the property of the Company or such other
obligor, or in the case of any other judicial proceedings relative to the
Company or such other obligor upon the Notes, or to the creditors or property of
the Company or such other obligor, the Trustee, irrespective of whether the
principal of the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand pursuant to the provisions of this Section 7.2, shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove a
claim or claims for the whole amount of principal, premium, if any, and interest
(including Liquidated Damages, if any) owing and unpaid in respect of the Notes,
and, in case of any judicial proceedings, to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee and of the Noteholders allowed in such judicial proceedings
relative to the Company or any other obligor on the Notes, its or their
creditors, or its or their property, and to collect and receive any monies or
other property payable or deliverable on any such claims, and to distribute the
same after the deduction of any amounts due the Trustee under Section 8.6, and
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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 reasonable 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 at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent 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 Seven shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
8.6;
SECOND: Subject to the provisions of Article Four, in case the
principal of the outstanding Notes shall not have become due and be unpaid,
to the payment of interest on (including Liquidated Damages, if any) 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
(including Liquidated Damages, if any) 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 Four, 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
(including Liquidated Damages, if any), 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
(including Liquidated Damages, if any) 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 (including Liquidated Damages, if any)
without preference or priority of principal and premium, if any, over
interest (including Liquidated Damages, if any), or of interest (including
Liquidated Damages, if any) over principal and premium, if any, or of any
installment of interest over any other installment of interest, or of any
Note
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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 Four, 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 reference to 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 twenty-five percent (25%)
in aggregate principal amount of the Notes then outstanding shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for 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 reference to 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 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 (including the redemption price upon redemption
pursuant to Article Three), and accrued interest on (including Liquidated
Damages, if any) such Note, on or after the respective due dates expressed in
such Note or in the event of redemption, 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 its own behalf and for its own benefit, may enforce, and
may institute and maintain any proceeding suitable to enforce, its rights of
conversion as provided herein.
Section 7.5. Proceedings by Trustee. In case of an Event of Default known
----------------------
to a Responsible Officer of the Trustee, 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 are necessary 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.
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Section 7.6. Remedies Cumulative and Continuing. Except as provided in
----------------------------------
Section 2.6, all powers and remedies given by this Article Seven 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 Seven 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, (b) the Trustee may
take any other action which is not inconsistent with such direction and (c) the
Trustee may decline to take any action that would benefit some Noteholder to the
detriment of other Noteholders. 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 (including Liquidated Damages, if any) or premium, if
any, on, or the principal of, the Notes, (ii) a failure by the Company to
convert any Notes into Common Stock, (iii) a default in the payment of
redemption price pursuant to Article Three or (iv) a default in respect of a
covenant or provisions hereof which under Article Eleven cannot be modified or
amended without the consent of the holders of each or all Notes then outstanding
or affected thereby. 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 a Responsible Officer of the Trustee has knowledge of 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; provided, however, that except in the case of default
in the payment of the principal of, or premium, if any, or interest (including
Liquidated Damages, if any) 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 determines 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 and expenses, against any party litigant in such
suit, having due regard to the merits
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and good faith of the claims or defenses made by such party litigant;
provided, however, that the provisions of this Section 7.9 (to the extent
permitted by law) 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 ten percent 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 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 Fifteen.
ARTICLE EIGHT
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 person 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 the Trust Indenture Act 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;
(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 the
Trustee was negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the written
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;
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(d) whether or not therein provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or affording
protection to, the Trustee shall be subject to the provisions of this Section;
(e) the Trustee shall not be liable in respect of any payment (as to
the correctness of amount, entitlement to receive or any other matters relating
to payment) or notice effected by the Company or any paying agent or any records
maintained by any co-registrar with respect to the Notes; and
(f) if any party fails to deliver a notice relating to an event the
fact of which, pursuant to this Indenture, requires notice to be sent to the
Trustee, the Trustee may conclusively rely on its failure to receive such notice
as reason to act as if no such event occurred.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 8.2. Reliance on Documents, Opinions, Etc. Except as otherwise
------------------------------------
provided in Section 8.1:
(a) the Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, note, coupon or other paper or
document (whether in its original or facsimile form) 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 of its own selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or omitted by it hereunder in good
faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee 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; 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.
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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.
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 and Section 4.2, 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 in writing 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) as mutually agreed to from
time to time in writing between the Company and the Trustee, and the Company
will pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ), except any such expense, disbursement
or advance as may arise from its negligence, willful misconduct, recklessness or
bad faith. The Company also covenants to indemnify the Trustee (or any officer,
director or employee of the Trustee), in any capacity under this Indenture and
its agents and any authenticating agent for, and to hold them harmless against,
any and all loss, liability, claim or expense incurred without negligence,
willful misconduct, recklessness or bad faith on the part of the Trustee or such
officers, directors, employees and 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
funds held in trust for the benefit of the holders of particular Notes. The
obligation of the Company under this Section shall survive the satisfaction and
discharge of this Indenture.
When the Trustee and its agents and any authenticating agent incur expenses
or render services after an Event of Default specified in Section 7.1(d) or (e)
with respect to the Company occurs, the expenses and the compensation for the
services are intended to constitute expenses of administration under any
bankruptcy, insolvency or similar laws.
Section 8.7. Officers' Certificate as Evidence. Except as otherwise
---------------------------------
provided in Section 8.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or
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desirable that a matter be proved or established prior to taking or omitting any
action hereunder, such matter (unless other evidence in respect thereof be
herein specifically prescribed) may, in the absence of negligence or willful
misconduct on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee.
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 of at least
$50,000,000 (or if such Person is a member of a bank holding company system, its
bank holding company shall have a combined capital and surplus of at least
$50,000,000). If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining
authority, then for the purposes of this Section the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section 8.9, 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 to the holders of Notes. 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, upon ten (10) business days' notice to the Company and the Noteholders,
appoint a successor identified in such notice or may petition, at the expense of
the Company, 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 (6) 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.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8 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
(6) 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
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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 (6) 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; provided,
however, that if no successor Trustee shall have been appointed and have
accepted appointment sixty (60) days after either the Company or the Noteholders
has removed the Trustee, the Trustee so removed may petition any court of
competent jurisdiction for an 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, or if
such Trustee so removed or any Noteholder fails to act, the Company, 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,
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 amount 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, the Company (or the former trustee, at the written direction of
the Company) shall mail or cause to be mailed notice of the succession of such
trustee hereunder to the holders of Notes at their addresses as they shall
appear on the Note
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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 into which the
--------------------------
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding, whether by equity or
asset purchase or exchange, to all or substantially all of the corporate trust
business of the Trustee (including any trust created by this Indenture), 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
corporate 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 any authenticating agent appointed by such successor
trustee may authenticate such Notes in the name of the successor trustee; and in
all such cases such certificates shall have the full force that is provided in
the Notes or in this Indenture; provided, however, that the right to adopt the
certificate of authentication of any predecessor Trustee or 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. Preferential Collection of Claims. 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).
Section 8.14. Trustee's Application for Instructions from the Company.
-------------------------------------------------------
Any application by the Trustee for written instructions from the Company (other
than with regard to any action proposed to be taken or omitted to be taken by
the Trustee that affects the rights of the holders of the Notes or holders of
Senior Indebtedness under this Indenture, including, without limitation, under
Article Four hereof) may, at the option of the Trustee, set forth in writing any
action proposed to be taken or omitted by the Trustee under this Indenture and
the date on and/or after which such action shall be taken or such omission shall
be effective. The Trustee shall not be liable for any action taken by, or
omission of, the Trustee in accordance with a proposal included in such
application on or after the date specified in such application (which date shall
not be less than five (5) Business Days after the date any officer of the
Company actually receives such application, unless any such officer shall have
consented in writing to any earlier date) unless prior to taking any such action
(or the effective date in the case of an omission), the Trustee shall have
received written instructions in response to such application specifying the
action to be taken or omitted.
ARTICLE NINE
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
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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
Ten, or (c) by a combination of such instrument or instruments and any such
record of such a meeting of Noteholders. Whenever the Company or the Trustee
solicits the taking of any action by the holders of the Notes, the Company or
the Trustee may fix in advance of such solicitation, a date as the record date
for determining holders entitled to take such action. The record date shall be
not more than 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 its 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 registry of such Notes 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 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 it 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 made by any Person other than the Company or any Note registrar) for the
purpose of receiving payment of or on account of the principal of, premium, if
any, and interest on such Note, for conversion of such Note and for all other
purposes; and neither the Company nor the Trustee nor any paying agent nor any
conversion agent nor any Note registrar shall be affected by any notice to the
contrary. All such payments so made to any holder for the time being, or upon
his order, shall be valid, and, to the extent of the sum or sums so 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 any Affiliate of
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,
however, 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 any Affiliate of 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.
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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.
ARTICLE TEN
MEETINGS OF NOTEHOLDERS
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 Ten
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 Seven;
(2) to remove the Trustee and nominate a successor trustee pursuant
to the provisions of Article Eight;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2; or
(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.
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 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.
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 ten percent (10%) in aggregate
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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 on the record
date pertaining to such meeting. The only persons who shall be entitled to be
present or to speak at any meeting of Noteholders shall be the persons entitled
to vote at such meeting and their counsel and any representatives of the Trustee
and its counsel and any representatives of the Company and its counsel.
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. Holders entitled to
vote a majority of the aggregate principal amount of Notes outstanding shall
constitute a quorum.
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 outstanding 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
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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 contained in this
-----------------------------
Article Ten shall be deemed or construed to authorize or permit, solely 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 ELEVEN
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) make provision with respect to the conversion rights of the
holders of Notes pursuant to the requirements of Section 15.6 and the redemption
obligations of the Company pursuant to the requirements of Section 3.5(e);
(b) subject to Article Four, to convey, transfer, assign, mortgage or
pledge to the Trustee as security for the Notes, any property or assets;
(c) to evidence the succession of another Person to the Company, or
successive successions, and the assumption by the successor Person of the
covenants, agreements and obligations of the Company pursuant to Article Twelve;
(d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Notes, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, 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 that may be defective or
inconsistent with any other provision contained herein
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or in any supplemental indenture, or to make such other provisions in regard to
matters or questions arising under this Indenture that 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.
Upon the written 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 supplemental indenture, the Trustee
is hereby authorized to join with the Company in the execution of any such
supplemental indenture, to make any further appropriate agreements and
stipulations that may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
that affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.
Any supplemental indenture authorized by the provisions of this Section
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.
Notwithstanding any other provision of the Indenture or the Notes, the
Registration Rights Agreement and the obligation to pay Liquidated Damages
thereunder may be amended, modified or waived in accordance with the provisions
of the Registration Rights Agreement.
Section 11.2. Supplemental Indenture with Consent of Noteholders. With the
--------------------------------------------------
consent (evidenced as provided in Article Nine) of the holders of not less than
a majority in aggregate principal amount of the Notes at the time outstanding,
the Company, when authorized by 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 thereof,
or impair the right of any Noteholder to institute suit for the payment thereof,
or make the principal thereof or interest or premium, if any, thereon payable in
any coin or currency other than that provided in the Notes, or modify the
provisions of this Indenture with respect to the subordination of the Notes in a
manner adverse to the Noteholders in any material respect, or change the
obligation of the Company to redeem any Note upon the happening of a Fundamental
Change in a manner adverse to the holder of Notes, or impair the right to
convert the Notes into Common Stock subject to the terms set forth herein,
including Section 15.6, in each case, 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 written 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
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Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
It shall not be necessary for the consent of the 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 Indenture. Any supplemental indenture
--------------------------------
executed pursuant to the provisions of this Article Eleven shall comply with the
Trust Indenture Act, as then in effect, provided that this Section 11.3 shall
not require such supplemental indenture or the Trustee to 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 or the Indenture has been qualified
under the Trust Indenture Act, nor shall it constitute any admission or
acknowledgment by any party to such supplemental indenture that any such
qualification is required prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act or the Indenture has been
qualified under the Trust Indenture Act. Upon the execution of any supplemental
indenture pursuant to the provisions of this Article Eleven, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights, limitation of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the holders of Notes shall
thereafter be determined, exercised and enforced hereunder, subject in all
respects to such modifications and amendments and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 11.4. Notation on Notes. Notes authenticated and delivered after
-----------------
the execution of any supplemental indenture pursuant to the provisions of this
Article Eleven 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 16.11)
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 to Trustee. Prior to entering into any supplemental indenture, the
- --------------------
Trustee may request 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 Eleven.
ARTICLE TWELVE
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1. Company May Consolidate, Etc on Certain Terms. Subject to
---------------------------------------------
the provisions of Section 12.2, nothing contained in this Indenture or in any of
the Notes shall prevent any consolidation or merger of the Company with or into
any other Person or Persons (whether or not affiliated with the Company), or
successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale, conveyance or
lease (or successive sales, conveyances or leases) of all or substantially all
of the property of the Company, to any other Person (whether or not affiliated
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with the Company), authorized to acquire and operate the same and that shall be
organized under the laws of the United States of America, any state thereof or
the District of Columbia; provided, however, that upon any such consolidation,
merger, sale, conveyance or lease, the due and punctual payment of the principal
of and premium, if any, and interest (including Liquidated Damages, if any) on
all of the Notes, according to their tenor and the due and punctual performance
and observance of all of the covenants and conditions of this Indenture to be
performed by the Company, shall be expressly assumed, by supplemental indenture
satisfactory in form to the Trustee, executed and delivered to the Trustee by
the Person (if other than the Company) formed by such consolidation, or into
which the Company shall have been merged, or by the Person that shall have
acquired or leased such property, and such supplemental indenture shall provide
for the applicable conversion rights set forth in Section 15.6.
Section 12.2. Successor Corporation to be Substituted. In case of any such
---------------------------------------
consolidation, merger, sale, conveyance or lease and upon the assumption by the
successor Person, 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 Person shall succeed to
and be substituted for the Company, with the same effect as if it had been named
herein as the party of this first part. Such successor Person thereupon may
cause to be signed, and may issue either in its own name or in the name of
ViroPharma Incorporated any or all of the Notes, issuable hereunder that
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor Person instead of the Company and
subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver, or cause to be
authenticated and delivered, any Notes that previously shall have been signed
and delivered by the officers of the Company to the Trustee for authentication,
and any Notes that such successor Person 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 that shall thereafter have become such in the manner prescribed in
this Article Twelve may be dissolved, wound up and liquidated at any time
thereafter and such Person shall be released from its liabilities as obligor and
maker of the Notes and from its obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance 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 shall
--------------------------------------
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance or lease and any
such assumption complies with the provisions of this Article Twelve.
ARTICLE THIRTEEN
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 that 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
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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
that 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, accompanied by a verification
report, as to the sufficiency of the deposited amount, from an independent
certified accountant or other financial professional satisfactory to the
Trustee, and if 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 written demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel as required by
Section 16.5 and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture; the
Company, however, hereby agrees 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,
provided such deposit was not in violation of Article Four, shall be held in
trust for the sole benefit of the Noteholders and not to be subject to the
subordination provisions of Article Four, and such monies shall be applied by
the Trustee to the payment, either directly or through any paying agent
(including the Company if acting as its own paying agent), to the holders of the
particular 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.
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 written request 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 that such holder may be entitled to collect
unless an applicable abandoned property law designates another Person.
Section 13.5. Reinstatement. If 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, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to
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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 FOURTEEN
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, director or subsidiary, as
such, past, present or future, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the Notes.
ARTICLE FIFTEEN
CONVERSION OF NOTES
Section 15.1. Right to Convert. Subject to and upon compliance with the
----------------
provisions of this Indenture, including, without limitation, Article Four, the
holder of any Note shall have the right, at its option, at any time after the
original issuance of the Notes hereunder through the close of business on the
final maturity date of the Notes (except that, with respect to any Note or
portion of a Note that shall be called for redemption, such right shall
terminate, except as provided in Section 15.2, Section 3.2 or Section 3.4, 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, together with any required
funds, in Section 15.2. A Note in respect of which a holder is exercising its
option to require redemption upon a Fundamental Change pursuant to Section 3.5
may be converted only if such holder withdraws its election to exercise in
accordance with Section 3.5. 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 Fifteen.
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 certificated form, the holder
of any such Note to be converted in whole or in part shall surrender such Note,
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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
the portion thereof specified in said notice. Such notice shall also state the
name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock which shall be issuable on such
conversion shall be issued, and shall be accompanied by transfer taxes, if
required pursuant to Section 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 by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to any interest
in a Global Note, the beneficial holder must complete, or cause to be completed,
the appropriate instruction form for conversion pursuant to the Depository's
book-entry conversion program, deliver, or cause to be delivered, by book-entry
delivery an interest in such Global Note, 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 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 Noteholder 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 as determined by the Company in accordance with the provisions of this
Article Fifteen and a check or cash in respect of any fractional interest in
respect of a share of Common Stock arising upon such conversion, calculated by
the Company as provided in Section 15.3. In case any Note in certificated form
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.
No adjustment in respect of interest on any Note converted or dividends on
any shares issued upon conversion of such Note will be made upon any conversion
except as set forth in the next sentence. If this Note (or portion hereof) is
surrendered for conversion during the period from the close of business on any
record date for the payment of interest to the close of business on the Business
Day preceding the following interest payment date and either (x) has not been
called for redemption on a redemption date that occurs during such period or (y)
is not to be redeemed in connection with a Fundamental Change on a Repurchase
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Date that occurs during such period, this Note (or portion hereof being
converted) must be accompanied by an amount, in New York Clearing House funds or
other funds acceptable to the Company, equal to the interest payable on such
interest payment date on the principal amount being converted; provided,
however, that no such payment shall be required if there shall exist at the time
of conversion a default in the payment of interest on the Notes.
Upon the conversion of an interest in a Global Note, the Trustee (or other
conversion agent appointed by the Company), or the Custodian at the direction of
the Trustee (or other conversion agent appointed by the Company), shall make a
notation on such Global Note as to the reduction in the principal amount
represented thereby. The Company shall notify the Trustee in writing of any
conversions of Notes effected through any conversion agent other than the
Trustee.
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 that shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Notes (or specified portions thereof to the extent
permitted hereby) so surrendered. If any fractional share of stock would be
issuable upon the conversion of any Note or Notes, the Company shall make an
adjustment and payment therefor in cash based upon the current market price
thereof to the holder of Notes. The current market price of a share of Common
Stock shall be the Closing Price on the last Business Day immediately preceding
the day on which the Notes (or specified portions thereof) are deemed to have
been converted.
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 Fifteen.
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 shall be reduced so that the same shall equal the
price determined by multiplying 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 by a
fraction, the numerator of which shall be the number of shares of the Common
Stock outstanding at the close of business on the date fixed for such
determination, and the denominator of which shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the day following the date fixed for such determination. For the
purpose of this paragraph (a), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company. The
Company will not pay any dividend or make any distribution on shares of Common
Stock held in the treasury of the Company. If any dividend or distribution of
the type described in this Section 15.5(a) is declared but not so paid or made,
the Conversion Price shall again be adjusted to the Conversion Price that 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 determination of
stockholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price (as defined below) on the date
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fixed for determination of stockholders entitled to receive such rights or
warrants, the Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying the Conversion Price in effect immediately
prior to the date fixed for determination of stockholders entitled to receive
such rights or warrants by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding at the close of business on the
date fixed for determination of stockholders entitled to receive such rights or
warrants plus the number of shares that the aggregate offering price of the
total number of shares so offered would purchase at such Current Market Price,
and the denominator of which shall be the number of shares of Common Stock
outstanding on the date fixed for determination of stockholders entitled to
receive such rights or warrants plus the total number of additional shares of
Common Stock offered for subscription or purchase. Such adjustment shall be
successively made whenever any such rights or warrants are issued, and shall
become effective immediately after the opening of business on the day following
the date fixed for determination of stockholders entitled to receive such rights
or warrants. To the extent that shares of Common Stock are not delivered after
the expiration of such rights or warrants, the Conversion Price shall be
readjusted to the Conversion Price that would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on the
basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price that would
then be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account any consideration received by the Company for such
rights or warrants and any amount payable on exercise or conversion thereof, the
value of such consideration, if other than cash, to be determined by the Board
of Directors.
(c) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and conversely,
in case outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of 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 or assets (including securities, but
excluding any rights or warrants referred to in Section 15.5(b), and excluding
any dividend or distribution (x) paid exclusively in cash or (y) referred to in
Section 15.5(a) (any of the foregoing hereinafter in this Section 15.5(d) called
the "Securities")), then, in each such case (unless the Company elects to
reserve such Securities for distribution to the Noteholders 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 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)(4) for such distribution
of the Securities)), the Conversion Price shall be reduced so that the same
shall be equal to the price determined by multiplying the Conversion Price in
effect on the Record Date with respect to such distribution by a fraction, the
numerator of which shall be the Current Market Price per share of the Common
Stock on such Record Date less the fair market value (as determined by the Board
of Directors, whose determination shall be conclusive, and described in a
resolution of the Board of Directors)
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on the Record Date of the portion of the Securities so distributed applicable to
one share of Common Stock and the denominator of which shall be the Current
Market Price per share of the Common Stock, such reduction to become effective
immediately prior to the opening of business on the day following such Record
Date; provided, however, that in the event the then fair market value (as so
determined) of the portion of the Securities so distributed applicable to one
share of Common Stock is equal to or greater than the Current Market Price of
the Common Stock on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Noteholder shall have the right to
receive upon conversion the amount of Securities such holder would have received
had such holder converted each Note on the Record Date. In the event that such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price that would then be in effect if
such dividend or distribution had not been declared. 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, it must in doing so consider the prices in such market over the same
period used in computing the Current Market Price of the Common Stock.
Under the provisions of the Company's Preferred Shares Rights Plan (the
"Rights Plan"), upon conversion of the Notes into Common Stock, to the extent
that the Rights Plan is still in effect upon such conversion, the holders of
Notes will receive, in addition to the Common Stock, the rights described
therein subject to the limitations set forth in the Rights Plan.
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 (and no adjustment to the Conversion Price under
this Section 15.5 will be required) until the occurrence of the earliest Trigger
Event, whereupon such rights and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) to the Conversion
Price shall be made under this Section 15.5(d). If any such right or warrant,
including any such existing rights or warrants distributed prior to the date of
this Indenture, are subject to events, upon the occurrence of which such rights
or warrants become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the date of the occurrence of any and each
such event shall be deemed to be the date of distribution and record date with
respect to new rights or warrants with such rights (and a termination or
expiration of the existing rights or warrants without exercise by any of the
holders thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other event (of the
type described in the preceding sentence) with respect thereto that was counted
for purposes of calculating a distribution amount for which an adjustment to the
Conversion Price under this Section 15.5 was made, (1) in the case of any such
rights or warrants that shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall be readjusted upon
such final redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash distribution, equal
to the per share redemption or repurchase price received by a holder or holders
of Common Stock with respect to such rights or warrants (assuming such holder
had retained such rights or warrants), made to all holders of Common Stock as of
the date of such redemption or repurchase, and (2) in the case of such rights or
warrants that shall have expired or been terminated without exercise by any
holders thereof, the Conversion Price shall be readjusted as if such rights and
warrants had not been issued.
No adjustment of the Conversion Price shall be made pursuant to this
Section 15.5(d) in respect of rights or warrants distributed or deemed
distributed on any Trigger Event to the extent that such rights or
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warrants are actually distributed, or reserved by the Company for distribution
to holders of Notes upon conversion by such holders of Notes to Common Stock.
For purposes of this Section 15.5(d) and Sections 15.5(a) and (b), any
dividend or distribution to which this Section 15.5(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets or shares of
capital stock other than such shares of Common Stock or rights or warrants (and
any Conversion Price reduction required by this Section 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", "the date fixed for the
determination of stockholders entitled to receive such rights or warrants" and
"the date fixed for such determination" within the meaning of Sections 15.5(a)
and (b), and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of Section 15.5(a).
(e) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock exclusively in cash (excluding (x) any quarterly
cash dividend on the Common Stock to the extent the aggregate cash dividend per
share of Common Stock in any fiscal quarter does not exceed the greater of (A)
the amount per share of Common Stock of the next preceding quarterly cash
dividend on the Common Stock to the extent that such preceding quarterly
dividend did not require any adjustment of the Conversion Price pursuant to this
Section 15.5(e) (as adjusted to reflect subdivisions, or combinations of the
Common Stock), and (B) 3.75% of the arithmetic average of the Closing Price
(determined as set forth in Section 15.5(h)) during the ten Trading Days (as
defined in Section 15.5(h)) immediately prior to the date of declaration of such
dividend, and (y) any dividend or distribution in connection with the
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary), then, in such case, 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, the numerator of which shall be the Current Market Price of the Common
Stock on the record date less the amount of cash so distributed (and not
excluded as provided above) applicable to one share of Common Stock, and the
denominator of which shall be such Current Market Price of the Common Stock,
such reduction to be effective immediately prior to the opening of business on
the day following the record date; provided, however, that in the event the
portion of the cash so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price of the Common Stock on the
record date, in lieu of the foregoing adjustment, adequate provision shall be
made so that each Noteholder shall have the right to receive upon conversion the
amount of cash such holder would have received had such holder converted each
Note on the record date. In the event that such dividend or distribution is not
so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price that would then be in effect if such dividend or distribution
had not been declared. If any adjustment is required to be made as set forth in
this Section 15.5(e) as a result of a distribution that is a quarterly dividend,
such adjustment shall be based upon the amount by which such distribution
exceeds the amount of the quarterly cash dividend permitted to be excluded
pursuant hereto. If an adjustment is required to be made as set forth in this
Section 15.5(e) above as a result of a distribution that is not a quarterly
dividend, such adjustment shall be based upon the full amount of the
distribution.
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(f) In case a tender or exchange offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall expire and such
tender or exchange offer (as amended upon the expiration thereof) shall require
the payment to stockholders of consideration per share of Common Stock having a
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of Directors)
that as of the last time (the "Expiration Time") tenders or exchanges may be
made pursuant to such tender or exchange offer (as it may be amended) exceeds
the Current Market Price of the Common Stock on the Trading Day next succeeding
the Expiration Time, the Conversion Price shall be reduced so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the Expiration Time by a fraction the numerator of which
shall be the number of shares of Common Stock outstanding (including any
tendered or exchanged shares) at 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 of which 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) at the Expiration Time and the Current Market Price of the Common Stock
on the Trading Day next succeeding the Expiration Time, such reduction to become
effective immediately prior to the opening of business on the Trading Day
following the Expiration Time. In the event that the Company is obligated to
purchase shares pursuant to any such tender or exchange offer, but the Company
is permanently prevented by applicable law from effecting any such purchases or
all such purchases are rescinded, the Conversion Price shall again be adjusted
to be the Conversion Price that would then be in effect if such tender or
exchange offer had not been made.
(g) In case of a tender or exchange offer made by a Person other than
the Company or any Subsidiary for an amount that increases the offeror's
ownership of Common Stock to more than twenty-five percent (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) that as of the last time (the "Offer
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 Offer
Expiration Time, and in which, as of the Offer 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 Offer Expiration Time by a
fraction the numerator of which shall be the number of shares of Common Stock
outstanding (including any tendered or exchanged shares) at the Offer Expiration
Time multiplied by the Current Market Price of the Common Stock on the Trading
Day next succeeding the Offer Expiration Time and the denominator of which 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 Offer
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Accepted Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Accepted Purchased
Shares) at the Offer Expiration Time and the Current Market Price of the Common
Stock on the Trading Day next succeeding the Offer Expiration Time, such
reduction to become effective immediately prior to the opening of business on
the Trading Day following the Offer Expiration Time. In the event that such
Person is obligated to purchase shares pursuant to any such tender or exchange
offer, but such Person is permanently prevented by applicable law from effecting
any such purchases or all such purchases are rescinded, the Conversion Price
shall again be adjusted to be the
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Conversion Price that 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 Offer 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 Twelve.
(h) For purposes of this Section 15.5, the following terms shall have
the meaning indicated:
(1) "Closing Price" with respect to any security 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, as quoted on
the Nasdaq National Market or, if such security is not quoted or
listed or admitted to trading on such Nasdaq National Market, on the
principal national securities exchange or quotation system on which
such security is quoted or listed or admitted to trading or, if not
quoted or listed or admitted to trading on any national securities
exchange or quotation system, the average of the closing bid and asked
prices of such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or
a similar generally accepted reporting service, or if not so
available, in such manner as furnished by any New York Stock Exchange
member firm selected from time to time by the Board of Directors for
that purpose, or a price determined in good faith by the Board of
Directors or, to the extent permitted by applicable law, a duly
authorized committee thereof, whose determination shall be conclusive.
(2) "Current Market Price" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten consecutive
Trading Days immediately prior to the date in question except as
hereinafter provided for purposes of any computation under Section
15.5(f) or (g); provided, however, that (1) if the "ex" date (as
hereinafter defined) for any event (other than the issuance or
distribution requiring such computation and other than the tender or
exchange offer requiring such computation under Section 15.5(f) or
(g)) 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
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 and other than the tender or exchange offer
requiring such computation under Section 15.5(f) or (g)) 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
multiplying such Closing Price by the reciprocal of the fraction by
which the Conversion Price is so required to be adjusted as a result
of such other event, and (3) if the "ex" date for the issuance or
distribution requiring such computation is prior to the day in
question, after taking into account any adjustment required pursuant
to clause (1) or (2) of this proviso, the Closing Price for each
Trading Day on or after such "ex" date shall be adjusted by adding
thereto the amount of any cash and the fair market value (as
determined by the Board of Directors or, to the extent permitted by
applicable law, a duly authorized committee thereof in a manner
consistent with any determination of such value for purposes of
Section 15.5(d), (f) or (g), whose determination shall be conclusive
and described in a
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resolution of the Board of Directors or such duly authorized
committee thereof, as the case may be) of the evidences of
indebtedness, shares of capital stock or assets being distributed
applicable to one share of Common Stock as of the close of business
on the day before such "ex" date. For purposes of any computation
under Section 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 or exchange offer
requiring such computation under Section 15.5(f) or (g)) 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
Expiration Time or Offer Expiration Time, as the case may be, for
the tender or exchange offer requiring such computation and prior
to the day in question, the Closing Price for each Trading Day on
and after the "ex" date for such other event shall be adjusted as
provided in clauses (1), (2) and (3) of the proviso contained in
the first sentence of this Section 15.5(h)(2). For purpose 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 or the Offer
Expiration Time of such offer.
(3) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's-length
transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of
Common Stock have the right to receive any cash, securities or
other property or in which the Common Stock (or other applicable
security) is exchanged for or converted into any combination of
cash, securities or other property, the date fixed for
determination of 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 quoted on the Nasdaq National Market, a day on which trades may
be made thereon or (y) if the applicable security is listed or
admitted for trading on the New York Stock Exchange or another
national securities exchange, a day on which the New York Stock
Exchange or another national securities exchange is open for
business 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) or (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
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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. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall mail to holders of record of the Notes 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 one
percent (1%) in such price; provided, however, that any adjustments that 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 Fifteen shall be made by the Company and shall be made to the
nearest cent or to the nearest one-hundredth (1/100) of a share, as the case may
be. No adjustment need be made for rights to purchase Common Stock pursuant to a
Company plan for reinvestment of dividends or interest. To the extent the Notes
become convertible into cash, assets, property or securities (other than capital
stock of the Company), no adjustment need be made thereafter as to the cash,
assets, property or such securities. Interest will not accrue on such cash.
(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. Unless and until a Responsible Officer of
the Trustee shall have received such Officers' Certificate, the Trustee shall
not be deemed to have knowledge of any adjustment of the Conversion Price and
may assume that the last Conversion Price of which it has knowledge is still in
effect. Promptly after delivery of such certificate, the Company shall prepare a
notice of such adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the date on which each adjustment becomes effective and
shall mail such notice of such adjustment of the Conversion Price to the holder
of each Note at his last 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 any
such adjustment.
(l) In any case in which this Section 15.5 provides that an
adjustment shall become effective immediately after (1) a record date or Record
Date for an event, (2) the date fixed for the determination of stockholders
entitled to receive a dividend or distribution pursuant to Section 15.5(a), (3)
a date fixed for the determination of stockholders entitled to receive rights or
warrants pursuant to Section 15.5(b), (4) the Expiration Time for any tender or
exchange offer pursuant to Section 15.5(f), or (5) the Offer Expiration Time for
a tender or exchange offer pursuant to Section 15.5(g) (each a "Determination
Date"), the Company may elect to defer until the occurrence of the relevant
Adjustment Event (as hereinafter defined) (x) issuing to the holder of any Note
converted after such Determination Date and before the occurrence of such
Adjustment Event, the additional shares of Common Stock or other securities
issuable upon such conversion by reason of the adjustment required by such
Adjustment Event over and above the Common Stock issuable upon such conversion
before giving effect to such adjustment and (y) paying to such holder any amount
in cash in lieu of any fraction pursuant to Section 15.3. For purposes of this
Section 15.5(l), the term "Adjustment Event" shall mean:
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(a) in any case referred to in clause (1) hereof, the
occurrence of such event,
(b) in any case referred to in clause (2) hereof, the date
any such dividend or distribution is paid or made,
(c) in any case referred to in clause (3) hereof, the date
of expiration of such rights or warrants, and
(d) in any case referred to in clause (4) or clause (5)
hereof, the date a sale or exchange of Common Stock pursuant to
such tender or exchange offer is consummated and becomes
irrevocable.
(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.
Section 15.6. Effect of Reclassification, Consolidation, Merger or Sale.
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If any of the following events occur, namely (i) any reclassification or change
of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 15.5(c) applies), (ii) any consolidation, merger or
combination of the Company with another Person as a result of which holders of
Common Stock shall be entitled to receive stock, other 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 all or substantially all of the
properties and assets of the Company to any other Person as a result of which
holders of Common Stock shall be entitled to receive stock, other 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 Person, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture) providing that such Note shall be convertible
into the kind and amount of shares of stock, other securities or other 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 are
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 stock, other securities or other property or assets
(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance (provided that, if the kind or amount of
stock, other securities or other property or assets (including cash) receivable
upon such reclassification, change, consolidation, merger, combination, sale or
conveyance is not the same for each share of Common Stock in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purposes of this Section 15.6 the kind and amount of stock, other
securities or other property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
for each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). Such
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
Fifteen.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at its address appearing on the
Note register provided for in Section 2.5 of this Indenture,
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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; Compliance
----------------------------------------------------------
with Governmental Requirements; 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 of Common Stock 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.
The Company covenants that all shares of Common Stock which may be issued
upon conversion of Notes will upon issue be fully paid and non-assessable by the
Company and free from all taxes, liens (other than those created by the holder
of such Notes) and charges with respect to the issue thereof.
The Company covenants that, if any shares of Common Stock to be provided
for the purpose of conversion of Notes hereunder require registration with or
approval of any governmental authority under any federal or state law before
such shares may be validly issued upon conversion, the Company will in good
faith and as expeditiously as possible, to the extent then permitted by the
rules and interpretations of the Securities and Exchange Commission (or any
successor thereto), endeavor to secure such registration or approval, as the
case may be.
The Company further covenants that, if at any time the Common Stock shall
be listed on the Nasdaq National Market or any other national securities
exchange or automated quotation system, the Company will, if permitted by the
rules of such exchange or automated quotation system, list and keep listed, so
long as the Common Stock shall be so listed on such exchange or automated
quotation system, all Common Stock issuable upon conversion of the Note;
provided, however, that, if the rules of such exchange or automated quotation
system permit the Company to defer the listing of such Common Stock until the
first conversion of the Notes into Common Stock in accordance with the
provisions of this Indenture, the Company covenants to list such Common Stock
issuable upon conversion of the Notes in accordance with the requirements of
such exchange or automated quotation system at such time.
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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 the Conversion Price or 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. 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 Fifteen. 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
all or substantially all of its Common Stock of rights or warrants to subscribe
for or purchase any share of any class or any other rights or warrants; or
(c) of any reclassification or reorganization of the Common
Stock of the Company (other than a subdivision or combination of its outstanding
Common Stock, or a change in par value, or from par value to no par value, or
from no par value to par value), or of any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company or any Significant Subsidiary; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company or any Significant Subsidiary;
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 ten (10) 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
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<PAGE>
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 SIXTEEN
MISCELLANEOUS PROVISIONS
Section 16.1. Provisions Binding on Company's Successors. All the
------------------------------------------
covenants, stipulations, promises and agreements by the Company contained in
this Indenture shall bind its successors and assigns whether so expressed or
not.
Section 16.2. Official Acts by Successor Corporation. Any act or
--------------------------------------
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any Person that shall at the time be the lawful sole successor of the
Company.
Section 16.3. Addresses for Notices, Etc. Any notice or demand which by
--------------------------
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the holders of 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 ViroPharma Incorporated, 405 Eagleview Boulevard, Exton,
Pennsylvania, Attention: Treasurer. Any notice, direction, request or demand
hereunder to or upon the Trustee shall be deemed to have been sufficiently given
or made, for all purposes, if given or served by being deposited, postage
prepaid, by registered or certified mail in a post office letter box addressed
to the Corporate Trust Office, which office is, at the date as of which this
Indenture is dated, located at 210 Main Street, 6/th/ Floor, Hackensack, New
Jersey 07601, Attention: Corporate Trust Administration (ViroPharma
Incorporated, 6% Convertible Subordinated Notes due 2007).
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Noteholder shall be mailed to him
by first class mail, postage prepaid, at his address as it appears on the Note
register and shall be sufficiently given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Noteholder or any defect in
it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 16.4. Governing Law. This Indenture and each Note shall be deemed
-------------
to be a contract made under the laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of the State of New
York, without regard to the conflict of laws provisions thereof.
Section 16.5. Evidence of Compliance with Conditions Precedent;
-------------------------------------------------
Certificates to Trustee. Upon any application or demand by the Company to the
- -----------------------
Trustee to take any action under any of the provisions of this Indenture, 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
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<PAGE>
an Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture shall include: (1) a statement that the person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statement or opinion contained in such certificate or opinion is
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Section 16.6. Legal Holidays. In any case in which 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 the date of
maturity or the date fixed for redemption, and no interest shall accrue for the
period from and after such date.
Section 16.7. 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 or as hereafter amended or modified;
provided further that this Section 16.7 shall not require this Indenture or the
Trustee to 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 to the
Indenture 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 16.8. 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 in which property of the
Company or its subsidiaries is located.
Section 16.9. Benefits of Indenture. Nothing in this Indenture or in the
---------------------
Notes, express 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 16.10. Table of Contents, Headings, Etc. The table of contents and
--------------------------------
the titles and headings of the articles and Sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 16.11. Authenticating Agent. The Trustee may appoint an
--------------------
authenticating agent that shall be authorized to act on its behalf, and subject
to its direction, in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under
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<PAGE>
Sections 2.4, 2.5, 2.6, 2.7, 3.3 and 3.5, as fully to all intents and purposes
as though the authenticating agent had been expressly authorized by this
Indenture and those Sections to authenticate and deliver Notes. For all purposes
of this Indenture, the authentication and delivery of Notes by the
authenticating agent shall be deemed to be authentication and delivery of such
Notes "by the Trustee" and a certificate of authentication executed on behalf of
the Trustee by an authenticating agent shall be deemed to satisfy any
requirement hereunder or in the Notes for the Trustee's certificate of
authentication. Such authenticating agent shall at all times be a Person
eligible to serve as trustee hereunder pursuant to Section 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 16.11, without the execution or filing of any paper or any further act
on the part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written notice of
resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any authenticating agent by giving written notice of
termination to such authenticating agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time any
authenticating agent shall cease to be eligible under this Section , the Trustee
shall either promptly appoint a successor authenticating agent or itself assume
the duties and obligations of the former authenticating agent under this
Indenture and, upon such appointment of a successor authenticating agent, if
made, shall give written notice of such appointment of a successor
authenticating agent to the Company and shall mail notice of such appointment of
a successor authenticating agent to all holders of Notes as the names and
addresses of such holders appear on the Note register.
The Company agrees to pay to the authenticating agent from time to time
such reasonable compensation for its services as shall be agreed upon in writing
between the Company and the authenticating agent.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 16.11 shall
be applicable to any authenticating agent.
Section 16.12. Execution in Counterparts. This Indenture may be executed in
-------------------------
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 16.13. Severability. In case any provision in this Indenture or in
------------
the Notes shall be invalid, illegal or unenforceable, then (to the extent
permitted by law) the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
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<PAGE>
Summit Bank hereby accepts the trusts in this Indenture declared and
provided, upon the terms and conditions herein above set forth.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed.
VIROPHARMA INCORPORATED
By: /s/ Vincent J. Milano
----------------------------------------
Name: Vincent J. Milano
Title: Vice President, Chief Financial
Officer
SUMMIT BANK,
as Trustee
By: /s/ Debra A. Schwalb
----------------------------------------
Name: Debra A. Schwalb
Title: Vice President
-69-
<PAGE>
EXHIBIT A
For Global Note only: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) (THE "DEPOSITARY", WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE
CERTIFICATES) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY (AND ANY PAYMENT HEREIN IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR"); (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THIS NOTE UNDER RULE 144(K) UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS NOTE OR THE
COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE EXCEPT (A) TO VIROPHARMA
INCORPORATED 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 SUMMIT BANK AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT
OF NOTES LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (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); (3) AGREES THAT, PRIOR TO SUCH TRANSFER (OTHER
THAN A TRANSFER PURSUANT TO CLAUSE (2)(F) ABOVE), IT WILL FURNISH TO SUMMIT BANK
AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE, SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
<PAGE>
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT;
AND (4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THIS NOTE PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO SALES OF THIS NOTE UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR
ANY SUCCESSOR PROVISION), 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 SUMMIT BANK AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE).
IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A
PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO SUMMIT BANK AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS SUCH TRUSTEE MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER
OF THE TRANSFER OF THIS NOTE PURSUANT TO CLAUSE (2)(F) ABOVE OR UPON ANY
TRANSFER OF THIS NOTE UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY
SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF ANY NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
A-2
<PAGE>
VIROPHARMA INCORPORATED
6% CONVERTIBLE SUBORDINATED NOTE DUE 2007
CUSIP:________________
No. __________ $_______________
ViroPharma Incorporated, a corporation duly organized and validly existing
under the laws of the State of Delaware (herein called the "Company", which term
includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received hereby promises to pay to CEDE & CO or its
registered assigns, the principal sum of One Hundred Fifty Million Dollars
($150,000,000) on March 1, 2007, at the office or agency of the Company
maintained for that purpose in accordance with the terms of the Indenture, in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, and to pay
interest, semi-annually on March 1 and September 1 of each year, commencing
September 1, 2000, on said principal sum at said office or agency, in like coin
or currency, at the rate per annum of 6%, from March 1 or September 1, as the
case may be, next preceding the date of this Note to which interest has been
paid or duly provided for, unless the date hereof is a date to which interest
has been paid or duly provided for, in which case from the date of this Note, or
unless no interest has been paid or duly provided for on the Notes, in which
case from March 1, 2000, until payment of said principal sum has been made or
duly provided for. Notwithstanding the foregoing, if the date hereof is after
any February 15 or August 15, as the case may be, and before the following March
1 or September 1, this Note shall bear interest from such March 1 or September
1; provided, however, that if the Company shall default in the payment of
-------- -------
interest due on such March 1 or September 1, then this Note shall bear interest
from the next preceding March 1 or September 1 to which interest has been paid
or duly provided for or, if no interest has been paid or duly provided for on
such Note, from March 1, 2000. Except as otherwise provided in the Indenture,
the interest payable on the Note pursuant to the Indenture on any March 1 or
September 1 will be paid to the Person entitled thereto as it appears in the
Note register at the close of business on the record date, which shall be the
February 15 or August 15 (whether or not a Business Day) next preceding such
March 1 or September 1, as provided in the Indenture; provided, however, that
any such interest not punctually paid or duly provided for shall be payable as
provided in the Indenture. Interest may, at the option of the Company, be paid
either (i) by check mailed to the registered address of such Person (provided
that the holder of Notes with an aggregate principal amount in excess of
$2,000,000 shall, at the written election of such holder, be paid by wire
transfer of immediately available funds) or (ii) by transfer to an account
maintained by such Person located in the United States; provided, however, that
-------- -------
payments to the Depositary will be made by wire transfer of immediately
available funds to the account of the Depositary or its nominee.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on the Notes to the
prior payment in full of all Senior Indebtedness, as defined in the Indenture,
and provisions giving the holder of this Note the right to convert this Note
into Common Stock of the Company on the terms and subject to the limitations
referred to on the reverse hereof and as more fully specified in the Indenture.
Such further provisions shall for all purposes have the same effect as though
fully set forth at this place.
A-3
<PAGE>
This Note shall be deemed to be a contract made under the laws of the State
of New York, and for all purposes shall be construed in accordance with and
governed by the laws of the State of New York, without regard to principles of
conflicts of laws.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.
VIROPHARMA INCORPORATED
By:__________________________________
Name:________________________________
Title:_______________________________
Attest:______________________________
Name:________________________________
Title:_______________________________
Dated:_________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
SUMMIT BANK, as Trustee
By:__________________________________
Name:
Title:
A-4
<PAGE>
FORM OF REVERSE OF NOTE
VIROPHARMA INCORPORATED
6% CONVERTIBLE SUBORDINATED NOTE DUE 2007
This Note is one of a duly authorized issue of Notes of the Company,
designated as its 6% Convertible Subordinated Notes due 2007 (herein called the
"Notes"), limited to the aggregate principal amount of $150,000,000,
($180,000,000, if the Initial Purchasers fully exercise their option pursuant to
Section 2 of the Purchase Agreement) all issued or to be issued under and
pursuant to an Indenture dated as of March 1, 2000 (herein called the
"Indenture"), between the Company and Summit Bank, as trustee (herein called the
"Trustee"), to which Indenture and all indentures supplemental thereto reference
is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Notes.
In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest (including Liquidated Damages (as defined in the Registration Rights
Agreement), if any) on all Notes may be declared by either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, to execute supplemental
indentures adding any provisions to or changing in any manner or eliminating any
of the provisions of the Indenture or of any supplemental indenture or modifying
in any manner the rights of the holders of the Notes; provided, 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 upon redemption thereof, or impair the right of any Noteholder to
institute suit for the payment thereof, or make the principal thereof or
interest or premium, if any, thereon payable in any coin or currency other than
that provided in the Notes, or modify the provisions of the Indenture with
respect to the subordination of the Notes in a manner adverse to the Noteholders
in any material respect, or change the obligation of the Company to redeem any
Note upon the happening of a Fundamental Change (as defined in the Indenture) in
a manner adverse to the holder of the Notes, or impair the right to convert the
Notes into Common Stock subject to the terms set forth in the Indenture,
including Section 15.6 thereof, without the consent of the holder of each 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. Subject to the provisions
of the Indenture, the holders of a majority in aggregate principal amount of the
Notes at the time outstanding may on behalf of the holders of all of the Notes
waive any past default or Event of Default under the Indenture and its
consequences except a default in the payment of interest (including Liquidated
Damages, if any) or any premium on, or the principal of, any of the Notes, or a
failure by the Company to convert any Notes into Common Stock of the Company, or
a default in the payment of the redemption price pursuant to Article Three of
the Indenture, or a default in respect of a covenant or provisions of the
Indenture which under Article Eleven of the Indenture cannot be modified without
the consent of the holders of each or all Notes then outstanding or affected
thereby. Any such consent or waiver by the holder of this Note (unless revoked
A-5
<PAGE>
as provided in the Indenture) shall be conclusive and binding upon such holder
and upon all future holders and owners of this Note and any Notes which may be
issued in exchange or substitution hereof, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the manner
provided in the Indenture, expressly subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
whether outstanding at the date of the Indenture or thereafter incurred, and
this Note is issued subject to the provisions of the Indenture with respect to
such subordination. Each holder of this Note, by accepting the same, agrees to
and shall be bound by such provisions and authorizes the Trustee on its behalf
to take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee his attorney-in-fact for such
purpose.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
(including Liquidated Damages, if any) on this Note at the place, at the
respective times, at the rate and in the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day year of
twelve 30-day months.
The Notes are issuable in fully registered form, without coupons, in
denominations of $1,000 principal amount and any integral multiple of $1,000.
At the office or agency of the Company referred to on the face hereof, and in
the manner and subject to the limitations provided in the Indenture, without
payment of any service charge but with payment of a sum sufficient to cover any
tax, assessment or other governmental charge that may be imposed in connection
with any registration or exchange of Notes, Notes may be exchanged for a like
aggregate principal amount of Notes of any other authorized denominations.
The Notes will not be redeemable at the option of the Company prior to
March 6, 2003. At any time on or after March 6, 2003, and prior to maturity, the
Notes may be redeemed at the option of the Company, in whole or in part, upon
mailing a notice of such redemption not less than 30 days but not more than 60
days before the date fixed for redemption to the holders of Notes at their last
registered addresses, all as provided in the Indenture, at the following
optional redemption prices (expressed as percentages of the principal amount),
together in each case with accrued and unpaid interest (including Liquidated
Damages, if any) to, but excluding, the date fixed for redemption:
Period Redemption Price
- ------- ----------------
Beginning on March 6, 2003 and ending on February 29, 2004..... 103.429%
Beginning on March 1, 2004 and ending on February 28, 2005..... 102.571
Beginning on March 1, 2005 and ending on February 28, 2006..... 101.714
Beginning on March 1, 2006 and ending on February 28, 2007..... 100.857
and 100% on March 1, 2007; provided, however, that if the date fixed for
redemption is on a March 1 or September 1, then the interest payable on such
date shall be paid to the holder of record on the preceding February 15 or
August 15, respectively.
The Company may not give notice of any redemption of the Notes if a default
in the payment of interest or premium, if any, on the Notes has occurred and is
continuing.
The Notes are not subject to redemption through the operation of any
sinking fund.
A-6
<PAGE>
If a Fundamental Change occurs at any time prior to maturity of the Notes,
the Notes will be redeemable on the 30th day after notice thereof (the
"Repurchase Date") at the option of the holder of the Notes at a redemption
price equal to 100% of the principal amount thereof, together with accrued
interest to (but excluding) the date of redemption; provided, however, that, if
such Repurchase Date is a March 1 or September 1, the interest payable on such
date shall be paid to the holder of record of the Notes on the preceding
February 15 or August 15, respectively. The Notes will be redeemable in
multiples of $1,000 principal amount. The Company shall mail to all holders of
record of the Notes a notice of the occurrence of a Fundamental Change and of
the redemption right arising as a result thereof on or before the 10th day after
the occurrence of such Fundamental Change. For a Note to be so redeemed at the
option of the holder, the Company must receive at the office or agency of the
Company maintained for that purpose in accordance with the terms of the
Indenture, such Note with the form entitled "Option to Elect Repayment Upon a
Fundamental Change" on the reverse thereof duly completed, together with such
Note, duly endorsed for transfer, on or before the 30th day after the date of
such notice of a Fundamental Change (or if such 30th day is not a Business Day,
the immediately succeeding Business Day).
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time after the original issuance of any Notes
through the close of business on the final maturity date of the Notes, or, as to
all or any portion hereof called for redemption, prior to the close of business
on the Business Day immediately preceding the date fixed for redemption (unless
the Company shall default in payment due upon redemption thereof), to convert
the principal hereof or any portion of such principal which is $1,000 or an
integral multiple thereof into that number of shares of the Company's Common
Stock (as such shares shall be constituted at the date of conversion) obtained
by dividing the principal amount of this Note or portion thereof to be converted
by the Conversion Price of $109.15, as may adjusted from time to time as
provided in the Indenture, upon surrender of this Note, together with a
conversion notice as provided in the Indenture (the form entitled "Conversion
Notice" on the reverse hereof), to the Company at the office or agency of the
Company maintained for that purpose in accordance with the terms of the
Indenture, or at the option of such holder, the Corporate Trust Office, and,
unless the shares issuable on conversion are to be issued in the same name as
this Note, duly endorsed by, or accompanied by instruments of transfer in form
satisfactory to the Company duly executed by, the holder or by his duly
authorized attorney. No adjustment in respect of interest on any Note converted
or dividends on any shares issued upon conversion of such Note will be made upon
any conversion except as set forth in the next sentence. If this Note (or
portion hereof) is surrendered for conversion during the period from the close
of business on any record date for the payment of interest to the close of
business on the Business Day preceding the following interest payment date and
either (x) has not been called for redemption on a redemption date that occurs
during such period or (y) is not to be redeemed in connection with a Fundamental
Change on a Repurchase Date that occurs during such period, this Note (or
portion hereof being converted) must be accompanied by an amount, in New York
Clearing House funds or other funds acceptable to the Company, equal to the
interest payable on such interest payment date on the principal amount being
converted; provided, however, that no such payment shall be required if there
shall exist at the time of conversion a default in the payment of interest on
the Notes. No fractional shares will be issued upon any conversion, but an
adjustment and payment in cash will be made, as provided in the Indenture, in
respect of any fraction of a share which would otherwise be issuable upon the
surrender of any Note or Notes for conversion. A Note in respect of which a
holder is exercising its right to require redemption upon a Fundamental Change
may be converted only if such holder withdraws its election to exercise such
right in accordance with the terms of the Indenture. Any Notes called for
redemption, unless surrendered for conversion by the holders thereof on or
before the close of business on the Business Day preceding the date fixed for
redemption, may be deemed to be redeemed from the holders of such Notes for an
amount equal to the applicable redemption price, together with accrued but
unpaid interest (including Liquidated Damages, if any) to (but excluding) the
date fixed for redemption, by one or more investment
A-7
<PAGE>
banks or other purchasers who may agree with the Company (i) to purchase such
Notes from the holders thereof and convert them into shares of the Company's
Common Stock and (ii) to make payment for such Notes as aforesaid to the Trustee
in trust for the holders.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company maintained for that purpose in accordance with
the terms of the Indenture, a new Note or Notes of authorized denominations for
an equal aggregate principal amount will be issued to the transferee in exchange
thereof; subject to the limitations provided in the Indenture, without charge
except for any tax, assessment or other governmental charge imposed in
connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent, any
conversion agent and any Note registrar may deem and treat the registered holder
hereof as the absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar) for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.
No recourse for the payment of the principal of or any premium or interest
on this Note, or for any claim based hereon or otherwise in respect hereof, and
no recourse under or upon any obligation, covenant or agreement of the Company
in the Indenture or any 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, all such liability
being, by acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
This 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 principles of conflicts of laws.
Terms used in this Note and defined in the Indenture are used herein as
therein defined.
A-8
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _______ Custodian ______
TEN ENT - as tenant by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right
of survivorship and not as under Uniform Gifts to Minors Act
tenants in common ____________________________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
A-9
<PAGE>
CONVERSION NOTICE
TO: VIROPHARMA INCORPORATED
SUMMIT BANK
The undersigned registered owner of this Note hereby irrevocably exercises
the option to convert this Note, or the portion thereof (which is $1,000 or an
integral multiple thereof) below designated, into shares of Common Stock of
ViroPharma Incorporated in accordance with the terms of the Indenture referred
to in this Note, and directs that the shares issuable and deliverable upon such
conversion, together with any check in payment for fractional shares and any
Notes representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
provide the appropriate information below and pay all transfer taxes payable
with respect thereto. Any amount required to be paid by the undersigned on
account of interest accompanies this Note.
Dated: ___________________
________________________________________
________________________________________
Signature(s)
Signature(s) must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Note registrar,
which requirements include membership or
participation in the Security Transfer
Agent Medallion Program ("STAMP") or
such other "signature guarantee program"
as may be determined by the Note
registrar in addition to, or in
substitution for, STAMP, all in
accordance with the Securities Exchange
Act of 1934, as amended.
________________________________________
Signature Guarantee
Fill in the registration of shares of Common Stock if to be issued, and
Notes if to be delivered, other than to and in the name of the registered
holder:
____________________________________
(Name)
____________________________________
(Street Address)
____________________________________
(City, State and Zip Code)
A-10
<PAGE>
____________________________________
Please print name and address
Principal amount to be converted
(if less than all):
$___________________________________
Social Security or Other Taxpayer
Identification Number:
____________________________________
A-11
<PAGE>
OPTION TO ELECT REPAYMENT
UPON A FUNDAMENTAL CHANGE
TO: VIROPHARMA INCORPORATED
SUMMIT BANK
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from ViroPharma Incorporated (the "Company")
as to the occurrence of a Fundamental Change with respect to the Company and
requests and instructs the Company to repay the entire principal amount of this
Note, or the portion thereof (which is $1,000 or an integral multiple thereof)
below designated, in accordance with the terms of the Indenture referred to in
this Note at the price of 100% of such entire principal amount or portion
thereof, together with accrued interest to, but excluding, such repayment date,
to the registered holder hereof.
Dated: ___________________
________________________________________
________________________________________
Signature(s)
NOTICE: The above signatures of the
holder(s) hereof must correspond
with the name as written upon the
face of the Note in every
particular without alteration or
enlargement or any change whatever.
Principal amount to be repaid (if
less than all):
$__________________________________
___________________________________
Social Security or Other
Taxpayer Identification Number
A-12
<PAGE>
ASSIGNMENT
For value received __________________________________________ hereby
sell(s) assign(s) and transfer(s) unto _________________________________________
(Please insert social security or other Taxpayer Identification Number of
assignee) the within Note, and hereby irrevocably constitutes and appoints
____________________________________ attorney to transfer said Note on the books
of the Company, with full power of substitution in the premises.
In connection with any transfer of the Note prior to the expiration of the
holding period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision) (other than any transfer pursuant to
a registration statement that has been declared effective under the Securities
Act), the undersigned confirms that such Note is being transferred:
[_] To ViroPharma Incorporated or a subsidiary thereof; or
[_] Inside the United States pursuant to and in compliance with Rule 144A
under the Securities Act of 1933, as amended; or
[_] Inside the United States to an Institutional Accredited Investor
pursuant to and in compliance with the Securities Act of 1933, as
amended, in a minimum denomination of $100,000; or
[_] Outside the Unites States in compliance with Rule 904 under the
Securities Act; or
[_] Pursuant to and in compliance with Rule 144 under the Securities Act
of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate").
[_] The transferee is an Affiliate of the Company.
Dated: ___________________
________________________________________
________________________________________
Signature(s)
Signature(s) must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Note registrar,
which requirements include membership or
participation in the Security Transfer
Agent Medallion Program ("STAMP") or
such other "signature guarantee program"
as may be determined by the Note
registrar in addition to, or in
substitution for, STAMP, all in
accordance with the Securities Exchange
Act of 1934, as amended.
A-13
<PAGE>
________________________________________
Signature Guarantee
NOTICE: The signature of the conversion notice, the option to elect repayment
upon a Fundamental Change or the assignment must correspond with the name as
written upon the face of the Note in every particular without alteration or
enlargement or any change whatever.
A-14
<PAGE>
EXHIBIT 10.27
Portions of this exhibit were omitted and filed separately with the Secretary of
the Commission pursuant to an application for confidential treatment filed with
the Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.
Such portions are marked by a series of asterisks.
$150,000,000
VIROPHARMA INCORPORATED
6% Convertible Subordinated Debentures Due 2007
PURCHASE AGREEMENT
February 24, 2000
<PAGE>
February 24, 2000
Morgan Stanley & Co. Incorporated
U.S. Bancorp Piper Jaffray Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
VIROPHARMA INCORPORATED, a Delaware corporation (the "Company"), proposes
to issue and sell to the several purchasers named in Schedule I hereto (the
"Initial Purchasers") $150,000,000 principal amount of its 6% Convertible
Subordinated Notes due 2007 (the "Firm Securities") to be issued pursuant to the
provisions of an Indenture (the "Indenture") between the Company and Summit
Bank, as Trustee (the "Trustee"). The Company also proposes to issue and sell to
the Initial Purchasers not more than an additional $30,000,000 principal amount
of its 6% Convertible Subordinated Notes due 2007 (the "Additional Securities")
if and to the extent that you shall have determined to exercise, on behalf of
the Initial Purchasers, the right to purchase such 6% Convertible Subordinated
Notes due 2007 granted to the Initial Purchasers in Section 2 hereof. The Firm
Securities and the Additional Securities are hereinafter collectively referred
to as the "Securities". The Securities will be convertible into shares of Common
Stock, $.002 par value, of the Company (the "Underlying Securities").
The Securities and the Underlying Securities will be offered without being
registered under the Securities Act of 1933, as amended (the "Securities Act"),
only to qualified institutional buyers in compliance with the exemption from
registration provided by Rule 144A under the Securities Act and to a limited
number of institutional accredited investors (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) that deliver a letter in the form annexed
to the Final Memorandum (as defined below).
The Initial Purchasers and their direct and indirect transferees will be
entitled to the benefits of a Registration Rights Agreement dated the date
hereof between the Company and the Initial Purchasers (the "Registration Rights
Agreement").
In connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum (the "Preliminary Memorandum") and a
<PAGE>
final offering memorandum (the "Final Memorandum" and, with the Preliminary
Memorandum, each a "Memorandum") including a description of the terms of the
Securities and the Underlying Securities, the terms of the offering and a
description of the Company. Unless otherwise indicated, any reference herein to
a Memorandum shall include all documents incorporated therein by reference. The
terms "supplement", "amendment" and "amend" as used herein with respect to a
Memorandum shall include all documents deemed to be incorporated by reference in
the Preliminary Memorandum or Final Memorandum that are filed subsequent to the
date of such Memorandum and before the date you have sold all of the Securities
in accordance with this Agreement with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
1. Representations and Warranties. The Company represents and warrants to
and agrees with, the Initial Purchasers that:
(a) (i) Each document, if any, filed or to be filed pursuant to
the Exchange Act and incorporated by reference in either Memorandum
complied, or will comply when so filed, in all material respects with
the Exchange Act and the applicable rules and regulations of the
Commission thereunder and (ii) the Preliminary Memorandum does not
contain and the Final Memorandum, in the form used by the Initial
Purchasers to confirm sales and on the Closing Date (as defined in
below) and the Option Closing Date (as defined below), will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this
paragraph do not apply to statements or omissions in either Memorandum
based upon information relating to any Initial Purchaser furnished to
the Company in writing by such Initial Purchaser through you expressly
for use therein.
(b) The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the State of
Delaware, has the corporate power and authority to own its property
and to conduct its business as described in each Memorandum and is
duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company.
(c) The Company does not own or control, directly or
<PAGE>
indirectly, any interest in any other corporation, association, or
other business entity.
(d) This Agreement has been duly authorized, executed and
delivered by the Company.
(e) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Final
Memorandum.
(f) The shares of the Company's capital stock outstanding on the
date hereof have been duly authorized and are validly issued, fully
paid and non-assessable.
(g) The Securities have been duly authorized and, when executed
and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers in accordance
with the terms of this Agreement, will be valid and binding
obligations of the Company, enforceable in accordance with their
terms, subject to applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and general principles of
equity, and will be entitled to the benefits of the Indenture and the
Registration Rights Agreement.
(h) The Underlying Securities reserved for issuance upon
conversion of the Securities have been duly authorized and reserved
and, when issued upon conversion of the Securities in accordance with
the terms of the Securities, will be validly issued, fully paid and
non-assessable, and the issuance of the Securities is not, and the
issuance of the Underlying Securities will not be, subject to any
preemptive or similar rights.
(i) Each of the Indenture and the Registration Rights Agreement
has been duly authorized, and when executed and delivered by the
Company, will be a valid and binding agreement of the Company,
enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity, and except as rights to
indemnification and contribution under the Registration Rights
Agreement may be limited under applicable law.
(j) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Indenture, the Registration Rights Agreement and the Securities
will not contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or
<PAGE>
any agreement or other instrument binding upon the Company that is
material to the Company, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the
Company, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for
the performance by the Company of its obligations under this
Agreement, the Indenture, the Registration Rights Agreement or the
Securities, except such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale
of the Securities and by Federal and state securities laws with
respect to the Company's obligations under the Registration Rights
Agreement.
(k) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company from that set forth in the Final Memorandum
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement).
(l) There are no legal or governmental proceedings pending or
threatened to which the Company is a party or to which any of the
properties of the Company is subject other than proceedings that would
not have a material adverse effect on the Company or on the power or
ability of the Company to perform its obligations under this
Agreement, the Indenture, the Registration Rights Agreement or the
Securities or to consummate the transactions contemplated by the Final
Memorandum.
(m) The Company is not, and after giving effect to the offering
and sale of the Securities and the application of the proceeds thereof
as described in each Memorandum, will not be an "investment company"
as such term is defined in the Investment Company Act of 1940, as
amended.
(n) The Company (i) is in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants (including,
without limitation, all laws and regulations relating to biohazardous
substances materials or radioactive materials) ("Environmental Laws"),
(ii) has received all permits, licenses or other approvals required of
it under applicable Environmental Laws to conduct its business and
(iii) is in compliance with all terms and conditions of any such
permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses
<PAGE>
or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company.
(o) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) which would be reasonably expected,
singly or in the aggregate, to have a material adverse effect on the
Company.
(p) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act, an "Affiliate") of
the Company has directly, or through any agent, (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Securities Act) which is or will be
integrated with the sale of the Securities in a manner that would
require the registration under the Securities Act of the Securities or
(ii) engaged in any form of general solicitation or general
advertising in connection with the offering of the Securities (as
those terms are used in Regulation D under the Securities Act) or
solicited offers to buy or offered to sell any of the Securities in
any manner involving a public offering within the meaning of Section
4(2) of the Securities Act.
(q) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Initial Purchasers in the manner
contemplated by this Agreement to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture
Act of 1939, as amended.
(r) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
(s) Subsequent to the respective dates as of which information
is given in each Memorandum, (i) the Company has not incurred any
material liability or obligation, direct or contingent, nor entered
into any material transaction not in the ordinary course of business;
(ii) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock other than ordinary and
customary dividends; and (iii) there has not been any material change
in the capital stock, short-term debt or long-term debt of the
Company, except in each case as described in such Memorandum.
<PAGE>
(t) The Company has good and marketable title in fee simple to
all real property and good and marketable title to all personal
property owned by it which is material to the business of the Company,
in each case free and clear of all liens, encumbrances and defects
except such as are described in each Memorandum or such as do not
materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company;
and any real or personal property and buildings held under lease by
the Company are held by it under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company, in each case except as described in each
Memorandum.
(u) The Company owns or possesses adequate licenses or other
rights to use the patents and patent applications set forth on Exhibit
-------
A hereto (the "Company Patents"), copyrights, trademarks, service
-
marks, trade names, technology and know-how (including trade secrets
and other unpatented and/or unpatentable proprietary rights) necessary
(in any material respect) to conduct its business in the manner
described in each Memorandum (collectively, the "Company Intellectual
Property"); the Company is not obligated to pay a royalty, grant a
license, or provide other consideration to any third party in
connection with the Company Intellectual Property other than as
disclosed in such Memorandum, and, except as disclosed in the Final
Memorandum, the Company has not received any notice of infringement or
conflict with (and the Company does not know of any infringement of
conflict with) asserted rights of others with respect to the Company
Intellectual Property, in each case which would reasonably be expected
to result in any material adverse effect on the condition, financial
or otherwise, or in the earnings, business or operations of the
Company; and, except as disclosed in each Memorandum, the discoveries,
inventions, products or processes of the Company referred to in such
Memorandum do not, to the best knowledge of the Company, infringe or
conflict with any right or patent of any third party, or any
discovery, invention, product or process which is the subject of a
patent application filed by any third party, known to the Company,
which could reasonably be expected to have a material adverse effect
on the condition, financial or otherwise, or in the earnings, business
or operations of the Company. Except as described in each Memorandum,
no third party, including any academic or governmental organization,
possesses rights to the Company Intellectual Property which, if
exercised, could enable such party to develop products competitive to
those of the Company or could reasonably be expected to have a
<PAGE>
material adverse effect on the ability of the Company to conduct its
business in the manner described in such Memorandum
(v) The Company has duly and properly filed or caused to be
filed with the United States Patent and Trademark Office (the "PTO")
and applicable foreign and international patent authorities all patent
applications listed on Exhibit A (the "Company Patent Applications");
---------
in connection with the filing of the Company Patent Applications, the
Company conducted reasonable investigations of the published
literature and patent references relating to the inventions claimed in
such applications; to the Company's knowledge, it has complied with
the PTO's duty of candor and disclosure for the Company Patent
Applications and has made no misrepresentation in the Company Patent
Applications; the Company is unaware of any facts material to a
determination of patentability regarding the Company Patent
Applications not called to the attention of the PTO; the Company is
unaware of any facts not called to the attention of the PTO which
would preclude the grant of a patent for the Company Patent
Applications; and the Company has no knowledge of any facts which
would preclude it from having clear title to the Company Patent
Applications.
(w) No material labor dispute with the employees of the Company
exists, except as described in or contemplated by each Memorandum, or,
to the knowledge of the Company, is imminent; and the Company is not
aware of any existing, threatened or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or
contractors that could result in any material adverse effect on the
Company.
(x) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the business in which it is engaged; the
Company has not been refused any insurance coverage sought or applied
for; and the Company has no reason to believe that it will not be able
to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that could not have a
material adverse effect on the Company.
(y) The Company possesses all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business as presently conducted,
including without limitation, all such
<PAGE>
certificates, authorizations and permits required by the United States
Food and Drug Administration (the "FDA"), the Nuclear Regulatory
Commission (the "NRC") or any other federal, state or foreign agencies
or bodies engaged in the regulation of pharmaceuticals or biohazardous
substances, except where the failure to possess such certificates,
authorizations and permits would not, singly or in the aggregate, have
a material adverse effect on the Company; and the Company has not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, could result in a material adverse effect on the
Company. The Company is in compliance in all material respects with
all applicable federal, state, local and foreign laws, regulations,
orders and decrees governing its business as currently conducted,
including without limitation, all regulations prescribed by the FDA,
the NRC or any other federal, state or foreign agencies or bodies
engaged in the regulation of pharmaceuticals, biohazardous substances
or radioactive materials, except where noncompliance would not, singly
or in the aggregate, have a material adverse effect on the Company.
(z) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset
accountability; (iii) access to assets is permitted only in accordance
with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(aa) KPMG LLP are, and during the periods covering their report
included or incorporated by reference in each Memorandum were,
independent accountants with respect to the Company as required by the
Securities Act. The financial statements of the Company (together with
the related notes thereto) included in or incorporated by reference in
each Memorandum present fairly the financial position and results of
operations of the Company at the respective dates and for the
respective periods to which they apply, subject to normal year-end
adjustments. Such financial statements (together with the related
notes thereto) have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods involved except as otherwise stated therein.
<PAGE>
(bb) Except as described in each Memorandum, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Securities and Underlying Securities to be
registered pursuant to the Registration Rights Agreement. All persons
who possess such rights have effectively waived them with respect to
the registration of the Underlying Shares pursuant to the Registration
Rights Agreement.
(cc) Each material contract, agreement and license to which the
Company is bound is legal, valid, binding, enforceable, and in full
force and effect against the Company, and to the knowledge of the
Company, each other party thereto. Neither the Company nor, to the
Company's knowledge, any other party is in breach or default with
respect to any such contract, agreement and license, and, to the
Company's knowledge, no event has occurred which with notice or lapse
of time would constitute a breach or default, or permit termination,
modification, or acceleration, under any such contract, agreement or
license. No party has repudiated any provision of any such contract,
agreement or license.
(dd) The Company has reviewed its operations to evaluate the
extent to which the business or operations of the Company has been or
will be affected by the Year 2000 Problem (that is, any significant
risk that computer hardware or software applications used by the
Company did not or will not, in the case of dates or time periods
occurring after December 31, 1999, function at least as effectively as
in the case of dates or time periods occurring prior to January 1,
2000); as a result of such review, (i) the Company has no reason to
believe, and does not believe, that (A) there are any issues related
to the Company's preparedness to address the Year 2000 Problem that
are of a character required to be described or referred to in each
Memorandum which have not been accurately described in such Memorandum
and (B) the Year 2000 Problem had or will have a material adverse
effect on the Company, or result in any material loss or interference
with the business or operations of the Company; and (ii) the Company
reasonably believes, after due inquiry, that the suppliers, vendors,
customers or other material third parties used or served by the
Company have addressed or will address the Year 2000 Problem in a
timely manner, except to the extent that a failure to address the Year
2000 Problem by any supplier, vendor, customer or material third party
would not have a material adverse effect on the Company.
<PAGE>
2. Agreements to Sell and Purchase. The Company hereby agrees to sell to
the several Initial Purchasers, and each Initial Purchaser, upon the basis of
the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly, to purchase
from the Company the respective principal amount of Firm Securities set forth in
Schedule I hereto opposite its name at a purchase price of 97% of the principal
amount thereof (the "Purchase Price") plus accrued interest, if any, to the
Closing Date.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Initial Purchasers the Additional Securities, and the Initial Purchasers
shall have a one-time right to purchase, severally and not jointly, up to
$30,000,000 principal amount of Additional Securities at the Purchase Price plus
accrued interest, if any, to the date of payment and delivery. If Morgan Stanley
& Co. Incorporated ("Morgan Stanley"), on behalf of the Initial Purchasers,
elects to exercise such option, Morgan Stanley shall so notify the Company in
writing not later than 30 days after the date of this Agreement, which notice
shall specify the principal amount of Additional Securities to be purchased by
the Initial Purchasers and the date on which such Additional Securities are to
be purchased. Such date may be the same as the Closing Date but not earlier than
the Closing Date nor later than ten business days after the date of such notice.
Additional Securities may be purchased as provided in Section 4 hereof solely
for the purpose of covering over-allotments made in connection with the offering
of the Firm Securities. If any Additional Securities are to be purchased, each
Initial Purchaser agrees, severally and not jointly, to purchase the principal
amount of Additional Securities (subject to such adjustments to eliminate
fractional Securities as you may determine) that bears the same proportion to
the total principal amount of Additional Securities to be purchased as the
principal amount of Firm Securities set forth in Schedule I opposite the name of
such Initial Purchaser bears to the total principal amount of Firm Securities.
The Company hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Initial Purchasers, it will not, during the period
ending 90 days after the date of the Final Memorandum, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the sale of the
Securities under this Agreement, (B) the issuance of the Underlying Securities
upon conversion of the Securities, (C) the issuance by the Company of shares of
Common Stock upon the exercise of an option or warrant or the conversion of a
security outstanding on
<PAGE>
the date of and described in the Final Memorandum, (D) the issuance of
additional options under the Company's existing stock option plans, provided
that such stock options are not exercisable during such 90 day period, or (E)
the issuance by the Company of Common Stock pursuant to the Stock Purchase
Agreement between the Company and American Home Products Corporation, dated as
of December 9, 1999. The Initial Purchasers acknowledge that discussions by the
Company during such 90 day period regarding the issuance of shares of the
Company's Common Stock following such 90 day period to a marketing, development
or manufacturing collaborator will not violate the terms of this paragraph.
3. Terms of Offering. You have advised the Company that the Initial
Purchasers will make an offering of the Securities purchased by the Initial
Purchasers hereunder on the terms to be set forth in the Final Memorandum, as
soon as practicable after this Agreement is entered into as in your judgment is
advisable.
4. Payment and Delivery. Payment for the Firm Securities shall be made to
the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Securities for the respective accounts of the
several Initial Purchasers at 10:00 a.m., New York City time, on March 1, 1999
at a closing to be held at the offices of Ropes & Gray, One International Place,
Boston, Massachusetts or at such other time and place on the same or such other
date, not later than March 10, 2000, as shall be designated in writing by you.
The time and date of such payment are hereinafter referred to as the "Closing
Date."
Payment for any Additional Securities shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Securities for the respective accounts of the several Initial
Purchasers at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 2 at a closing to be held at the offices of Ropes &
Gray, One International Place, Boston, Massachusetts or at such other time on
the same or on such other date, in any event not later than April 14, 2000, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "Option Closing Date."
Notes representing the Firm Securities and Additional Securities shall be
in certificated form or global form, as specified by you, and registered in such
names and in such denominations as you shall request in writing not later than
one full business day prior to the Closing Date or the Option Closing Date, as
the case may be. The notes evidencing the Firm Securities and Additional
Securities shall be delivered to you on the Closing Date or the Option Closing
Date, as the case may be, for the respective accounts of the several Initial
Purchasers, with any transfer taxes payable in connection with the transfer of
the Securities to the Initial Purchasers duly paid, against payment of the
Purchase Price therefor plus accrued interest, if any, to the date of payment
and delivery.
<PAGE>
5. Conditions to the Initial Purchasers' Obligations. The several
obligations of the Initial Purchasers to purchase and pay for the Securities on
the Closing Date and the Option Closing Date, as the case may be, are subject to
the following conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date and the Option Closing Date, as the case
may be, there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded the Company or any of
the Company's securities or in the rating outlook for the Company by
any "nationally recognized statistical rating organization," as such
term is defined for purposes of Rule 436(g)(2) under the Securities
Act.
(b) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date and the Option Closing Date, as the case
may be, there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company
from that set forth in the Final Memorandum (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement) that, in your judgment, is material and adverse and that
makes it, in your judgment, impracticable to market the Securities on
the terms and in the manner contemplated in the Final Memorandum.
(c) The Initial Purchasers shall have received on the Closing
Date and the Option Closing Date, as the case may be, a certificate,
dated such date and signed by an executive officer of the Company, to
the effect set forth in Section 5(a) and to the effect that the
representations and warranties of the Company contained in this
Agreement are true and correct as of such date and that the Company
has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or
before such date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(d) The Initial Purchasers shall have received on the Closing
Date and the Option Closing Date, as the case may be, an opinion of
Pepper, Hamilton LLP, outside counsel for the Company, dated such
date, to the effect set forth in Exhibit B hereto.
---------
(e) The Initial Purchasers shall have received on the
<PAGE>
Closing Date and the Option Closing Date, as the case may be, an
opinion dated such date of Dann, Dorfman, Herrell and Skillman, P.C.,
special patent counsel to the Company, to the effect set forth in
Exhibit C.
(f) The Initial Purchasers shall have received on the Closing
Date and the Option Closing Date, as the case may be, an opinion dated
such date of Roberto Cuca, Esq., internal regulatory counsel to the
Company, to the effect set forth in Exhibit D hereto.
---------
(g) The Initial Purchasers shall have received on the Closing
Date and the Option Closing Date, as the case may be, an opinion of
Ropes & Gray, counsel for the Initial Purchasers, dated such date, in
a form satisfactory to the Initial Purchasers.
The opinions of Pepper, Hamilton LLP Dann, Dorfman, Herrell and
Skillman, P.C., and Roberto Cuca, Esq. described, respectively, in
Sections 5(d), 5(e) and 5(f) above shall be rendered to the Initial
Purchasers at the request of the Company and shall so state therein.
(h) The Initial Purchasers shall have received, on each of the
date hereof, the Closing Date and the Option Closing Date, a letter
dated such date, in form and substance satisfactory to the Initial
Purchasers, from KPMG LLP, independent public accountants, containing
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in or
incorporated by reference into the Final Memorandum; provided that the
letter delivered on the Closing Date shall use a "cut-off date" not
earlier than the date hereof.
(i) The "lock-up" agreements, each substantially in the form of
Exhibit E hereto, between you and certain shareholders, officers and
---------
directors of the Company relating to sales and certain other
dispositions of shares of Common Stock or certain other securities,
delivered to you on or before the date hereof, shall be in full force
and effect on the Closing Date and the Option Closing Date, as the
case may be.
(j) The Company shall have executed and delivered the Indenture
and the Registration Rights Agreement and the Trustee shall have
executed and delivered the Indenture.
The several obligations of the Initial Purchasers to purchase Additional
Securities hereunder are subject to the delivery to you on the Option Closing
Date of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization, execution and authentication of
the Additional
<PAGE>
Securities and other matters related to the execution and authentication of the
Additional Securities.
6. Covenants of the Company. In further consideration of the agreements
of the Initial Purchasers contained in this Agreement, the Company covenants
with each Initial Purchaser as follows:
(a) To furnish to you in New York City, without charge, prior to
10:00 a.m. New York City time on the business day next succeeding the
date of this Agreement and during the period mentioned in Section
6(c), as many copies of the Final Memorandum, any documents
incorporated by reference therein and any supplements and amendments
thereto as you may reasonably request.
(b) Before amending or supplementing either Memorandum, to
furnish to you a copy of each such proposed amendment or supplement
and not to use any such proposed amendment or supplement to which you
reasonably object.
(c) If, during such period after the date hereof and prior to
the date on which all of the Securities shall have been sold by the
Initial Purchasers in accordance with this Agreement, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Final Memorandum in order to make the statements
therein, in the light of the circumstances when the Final Memorandum
is delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Initial Purchasers, it is necessary to amend or
supplement the Final Memorandum to comply with applicable law,
forthwith to prepare and furnish, at its own expense, to the Initial
Purchasers, either amendments or supplements to the Final Memorandum
so that the statements in the Final Memorandum as so amended or
supplemented will not, in the light of the circumstances when the
Final Memorandum is delivered to a purchaser, be misleading or so that
the Final Memorandum, as amended or supplemented, will comply with
applicable law.
(d) To endeavor to qualify the Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request.
(e) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the issuance and sale of
<PAGE>
the Securities and all other fees or expenses in connection with the
preparation of each Memorandum and all amendments and supplements
thereto, including all printing costs associated therewith, and the
delivering of copies thereof to the Initial Purchasers, in the
quantities hereinabove specified, (ii) all costs and expenses related
to the transfer and delivery of the Securities to the Initial
Purchasers, including any transfer or other taxes payable thereon,
(iii) the cost of printing or producing any Blue Sky or legal
investment memorandum in connection with the offer and sale of the
Securities under state securities laws and all expenses in connection
with the qualification of the Securities for offer and sale under
state securities laws as provided in Section 6(d) hereof, including
filing fees and the reasonable fees and disbursements of one counsel
for the Initial Purchasers in connection with such qualification and
in connection with the Blue Sky or legal investment memorandum, (iv)
any fees charged by rating agencies for the rating of the Securities,
(v) the fees and expenses, if any, incurred in connection with the
admission of the Securities for trading in PORTAL or any appropriate
market system, (vi) the costs and charges of the Trustee and any
transfer agent, registrar or depositary, (vii) the cost of the
preparation, issuance and delivery of the Securities, (viii) the costs
and expenses of the Company relating to investor presentations on any
"road show" undertaken in connection with the marketing of the
offering of the Securities, including, without limitation, expenses
associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road
show presentations with the prior approval of the Company and lodging
expenses of the representatives and officers of the Company and any
such consultants, and the cost of any aircraft chartered in connection
with the road show, and (ix) all other costs and expenses incident to
the performance of the obligations of the Company hereunder for which
provision is not otherwise made in this Section. It is understood,
however, that except as provided in this Section, Section 8, and the
last paragraph of Section 10, the Initial Purchasers will pay all of
their costs and expenses, including fees and disbursements of their
counsel, transfer taxes payable on resale of any of the Securities by
them and any advertising expenses connected with any offers they may
make.
(f) Neither the Company nor any Affiliate will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) which would be integrated
with the sale of the Securities in a manner which would require the
registration under the Securities Act of the Securities.
<PAGE>
(g) Neither the Company nor any Affiliate will solicit any offer
to buy or offer or sell the Securities or the Underlying Securities by
means of any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) or in
any manner involving a public offering within the meaning of Section
4(2) of the Securities Act.
(h) While any of the Securities or the Underlying Securities
remain "restricted securities" within the meaning of the Securities
Act, to make available, upon request, to any seller of such Securities
the information specified in Rule 144A(d)(4) under the Securities Act,
unless the Company is then subject to Section 13 or 15(d) of the
Exchange Act.
(i) To use its best efforts to permit the Securities to be
designated PORTAL securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers,
Inc. relating to trading in the PORTAL Market.
(j) During the period of two years after the Closing Date or the
Option Closing Date, if later, the Company will not, and will not
permit any of its affiliates (as defined in Rule 144 under the
Securities Act) to resell any of the Securities or the Underlying
Securities which constitute "restricted securities" under Rule 144
that have been reacquired by any of them.
(k) To comply with all of the terms and conditions of the
Registration Agreement, and all agreements set forth in the
representation letters of the Company to DTC relating to the approval
of the Securities by DTC for "book entry" transfer.
(l) Prior to any registration of the Securities pursuant to the
Registration Rights Agreement, or at such earlier time as may be so
required, to qualify the Indenture under the 1939 Act and to enter
into any necessary supplemental indentures in connection therewith.
7. Offering of Securities. Each Initial Purchaser, severally and not
jointly, represents and warrants that such Initial Purchaser is a qualified
institutional buyer as defined in Rule 144A under the Securities Act (a "QIB").
Each Initial Purchaser, severally and not jointly, agrees with the Company that
(i) it will not solicit offers for, or offer or sell, such Securities by any
form of general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act and (ii) it
will solicit offers for such Securities only from, and will offer such
Securities only to, persons that it reasonably believes to be (A) QIBs or (B)
within the United States, other institutional accredited investors (as defined
in Rule 501(a)(1), (2), (3) or (7)
<PAGE>
under the Securities Act ("institutional accredited investors"), that, in each
case, in purchasing such Securities are deemed to have represented and agreed as
provided in the Final Memorandum under the caption "Transfer Restrictions";
provided that in the case of an institutional accredited investor, each such
institutional accredited investor shall, prior to its purchase of the
Securities, deliver to such Initial Purchaser a letter containing the
representations and agreements set forth in Annex A to the Final Memorandum.
8. Indemnity and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Initial Purchaser and each person, if any, who controls any Initial
Purchaser within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim)
caused by any untrue statement or alleged untrue statement of a
material fact contained in either Memorandum (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to
state therein a material fact necessary to make the statements therein
in the light of the circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating
to any Initial Purchaser furnished to the Company in writing by such
Initial Purchaser through you expressly for use therein; provided,
--------
however, that the foregoing indemnity agreement with respect to the
-------
Preliminary Memorandum shall not inure to the benefit of any Initial
Purchaser from whom the person asserting any such losses, claims,
damages or liabilities purchased Securities, or any person controlling
such Initial Purchaser, if a copy of the Final Memorandum (as then
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on
behalf of such Initial Purchaser to such person at or prior to
delivery of written confirmation of the sale of the Securities to such
person, and if the Final Memorandum (as so amended or supplemented)
would have cured the defect giving rise to such losses, claims,
damages or liabilities, unless such failure is the result of
noncompliance by the Company with Section 6(a) hereof.
(b) Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers
and each person, if any, who controls the Company
<PAGE>
within the meaning of either 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 such Initial Purchaser, but only with
reference to information relating to such Initial Purchaser furnished
to the Company in writing by such Initial Purchaser through you
expressly for use in either Memorandum or any amendments or
supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to Section 8(a) or 8(b), such
person (the "indemnified party") shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party")
in writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified
party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In
any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of
both parties by the same counsel would be inappropriate due to actual
or potential differing interests between them. It is understood that
the indemnifying party shall not, in respect of the legal expenses of
any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local
counsel) for all such indemnified parties and that all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley, in the case of parties
indemnified pursuant to Section 8(a), and by the Company, in the case
of parties indemnified pursuant to Section 8(b). The indemnifying
party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any
loss or liability by reason of such settlement or judgment. 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
<PAGE>
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.
(d) To the extent the indemnification provided for in Section
8(a) or 8(b) is applicable by its terms but unavailable to an
indemnified party or insufficient in respect of any losses, claims,
damages or liabilities referred to therein, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Initial Purchasers on the other hand from the offering of the
Securities or (ii) if the allocation provided by clause (i) of this
sentence is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) of this sentence but also the relative fault of the Company
on the one hand and of the Initial Purchasers on the other hand in
connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the
Company on the one hand and the Initial Purchasers on the other hand
in connection with the offering of the Securities shall be deemed to
be in the same respective proportions as the net proceeds from the
offering of the Securities (before deducting expenses) received by the
Company and the total discounts and commissions received by the
Initial Purchasers, bear to the aggregate offering price of the
Securities. The relative fault of the Company on the one hand and of
the Initial Purchasers on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company
or by the Initial Purchasers and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Initial Purchasers' respective
obligations to contribute pursuant to this Section 8 are several in
proportion to the respective principal amount of Securities they have
purchased hereunder, and not joint.
(e) The Company and the Initial Purchasers agree that it would
not be just or equitable if contribution pursuant to this Section 8
were determined by pro rata allocation (even if the Initial Purchasers
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the
<PAGE>
equitable considerations referred to in Section 8(d). The amount paid
or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in Section 8(d) shall be deemed to
include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities resold by it in the
initial placement of such Securities were offered to investors exceeds
the amount of any damages that such Initial Purchaser 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 remedies
provided for in this Section 8 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of
the Company contained in this Agreement shall remain operative and in
full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any Initial
Purchaser or any person controlling any Initial Purchaser or by or on
behalf of the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of
the Securities.
9. Termination. This Agreement shall be subject to termination by notice
given by you to the Company, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (i) through (iv) above, such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Securities on the terms and in the manner contemplated in the Final
Memorandum.
<PAGE>
10. Effectiveness; Defaulting Initial Purchasers. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may be, any
one or more of the Initial Purchasers shall fail or refuse to purchase
Securities that it has or they have agreed to purchase hereunder on such date,
and the aggregate principal amount of Securities which such defaulting Initial
Purchaser or Initial Purchasers agreed but failed or refused to purchase is not
more than one-tenth of the aggregate principal amount of Securities to be
purchased on such date, the other Initial Purchasers shall be obligated
severally in the proportions that the principal amount of Firm Securities set
forth opposite their respective names in Schedule I bears to the aggregate
principal amount of Firm Securities set forth opposite the names of all such
non-defaulting Initial Purchasers, or in such other proportions as you may
specify, to purchase the Securities which such defaulting Initial Purchaser or
Initial Purchasers agreed but failed or refused to purchase on such date;
provided that in no event shall the principal amount of Securities that any
Initial Purchaser has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 10 by an amount in excess of one-ninth of such
principal amount of Securities without the written consent of such Initial
Purchaser. If, on the Closing Date any Initial Purchaser or Initial Purchasers
shall fail or refuse to purchase Firm Securities which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of Securities
with respect to which such default occurs is more than one-tenth of the
aggregate principal amount of Firm Securities to be purchased on such date, and
arrangements satisfactory to you and the Company for the purchase of such Firm
Securities are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Initial Purchaser
or of the Company. In any such case either you or the Company shall have the
right to postpone the Closing Date, but in no event for longer than seven days,
in order that the required changes, if any, in the Final Memorandum or in any
other documents or arrangements may be effected. If, on the Option Closing Date,
any Initial Purchaser or Initial Purchasers shall fail or refuse to purchase
Additional Securities and the aggregate principal amount of Additional
Securities with respect to which such default occurs is more than one-tenth of
the aggregate principal amount of Additional Securities to be purchased, the
non-defaulting Initial Purchasers shall have the option to (a) terminate their
obligation hereunder to purchase Additional Securities or (b) purchase not less
than the principal amount of Additional Securities that such non-defaulting
Initial Purchasers would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Initial Purchaser from liability in respect of any default of such Initial
Purchaser under this Agreement.
If this Agreement shall be terminated by the Initial Purchasers, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Initial Purchasers or such Initial
Purchasers as have
<PAGE>
so terminated this Agreement with respect to themselves, severally, for all out-
of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Initial Purchasers in connection with this Agreement
or the offering contemplated hereunder.
11. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
13. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
<PAGE>
Very truly yours,
VIROPHARMA INCORPORATED
By: /s/ Claude H. Nash
------------------
Name: Claude H. Nash
Title: Chief Executive Officer
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
U.S. Bancorp Piper Jaffray Inc.
Acting severally on behalf of themselves and
the several Initial Purchasers named in
Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By: /s/ Albert L. Lord
------------------
Name: Albert L. Lord
Title: Vice President
<PAGE>
SCHEDULE I
Principal Amount of Firm
Initial Purchaser Securities to be Purchased
- ----------------- --------------------------
Morgan Stanley & Co. Incorporated $120,000,000
U.S. Bancorp Piper Jaffray Inc. 30,000,000
Total: $150,000,000
============
<PAGE>
2
EXHIBIT A
---------
"Company Patents"
-----------------
<TABLE>
<CAPTION>
Number Title Date
- --------------- ----- -----------------
<S> <C> <C>
U.S. Pat. No. 5,633,388 Compounds, Compositions and Methods for Granted 5/27/97
Treatment of Hepatitis C.
U.S. Pat. No. 5,684,024 Compounds Compositions and Methods for Granted 11/4/97
Treating Influenza.
U.S. Pat. No. 5,830,894 Methods for Preventing and Treating Granted 11/3/98
Pestivirus Infection and Associated Diseases.
U.S. Pat. No. 5,830,905 Compounds Compositions and Methods for Granted 11/3/98
Treatment of Hepatitis C.
U.S. Pat. No. 5,821,243 Compounds, Compositions and Methods for Granted 10/13/98
Treating Influenza.
U.S. Pat. No. 5,935,957 Compounds, Compositions and Methods for Granted 8/10/99
Treating Influenza.
"Company Patent Applications"
-----------------------------
U.S. Pat. Appl. No. Compounds Compositions and Methods for Filed 5/26/98
09/084,538 Treatment of Hepatitis C.
U.S. Pat. Appl. No. Compounds, Compositions and Methods for Filed 5/24/99
60/135,585 Treating or Preventing viral Infections and
Associated Diseases.
U.S. Pat. Appl. No. Compounds, Compositions and Methods for Filed 5/24/99
60/135,586 Treating or Preventing viral Infections and
Associated Diseases.
U.S. Pat. Appl. No. Methods for Identifying Inhibitors of RNA Filed 7/11/96
08/678,771 Viruses a.k.a. Methods for Identifying
Inhibitors of Helicase Activity from
Hepatitis C Virus.
************** ************** ******
"Foreign/International Patent Applications"
-------------------------------------------
PCT/US97/01614 Methods for Identifying Inhibitors of RNA Filed 1/17/97
(EPO Appl. No. Viruses.
97904912.9; Canada
Appl. No. 2,244,372;
Japan Appl. No. 527126/
1997)
PCT/US99/01985; Compounds, Compositions and Methods for Filed 1/29/99
also India Appl. Preventing Pneumovirus Infection.
No. 959/Del
</TABLE>
<PAGE>
3
<TABLE>
<S> <C> <C>
PCT/US98/03452 Methods for Preventing and Treating Filed 2/23/98
(Australia Appl. Pestivirus Infection and Associated Diseases.
No.88365/98;
Brazil Appl. No.
PI 9804769.8;
Canada Appl. No.
2,251,646; EPO
Appl. No. 98910034.2;
Japan Appl. No.536935/
1998; S.Korea Appl. No.
98-708402; New Zealand
Appl. No. 332364);
Argentina Appl. Methods of Preventing and Treating Post Filed 7/8/98
No. P 98 01 Virus Infection and Asscociated Diseases
03315, 7/8/98
PCT/US99/07404 Improved Hepatitis C Polymerase Encoding Filed 4/1/99
Nucleic Acids and Methods of Use Thereof
a.k.a Hepatitis C Virus NS5B Compositions and
Methods of Use Thereof.
PCT/US97/12799 Compounds Compositions and Methods for Filed 7/21/97
(Canada Appl. No. Treating Influenza
2,260,799; EPO
Appl. No.
97938013.6; Japan
Serial No. 507182/
1998; S.Korea Appl.
No. 10-1999-7000449)
PCT/US99/18785 Compounds, Compositions and Methods for Filed 8/19/99
Treating or Preventing Viral Infections and
Associated Diseases.
Argentina, Chile, Compounds, Compositions and Methods for Treating Filed before
Pakistan, or Preventing Viral Infections and Associated 2/21/00 (or
Philippines, Diseases. earlier)
Taiwan and
Venezuela (No.
Appl. number yet)
(based on text of
RT105918785)
PCT/US99/20402 Methods for Treating or Preventing Viral Filed 9/3/99
Infections and Associated Diseases.
PCT/US99/22195 Methods for Treating or Preventing Viral Filed 9/24/99
Infections and Associated Diseases.
<CAPTION>
"Patents and patent applications licensed to the Company"
-------------------------------------------------------
<S> <C> <C>
U.S. Pat. No. 5,453,433 Thiadiazoles and Antipicornaviral Granted 9/26/95
Compositions.
U.S. Pat. No. 5,464,848 1,2,4-Oxadiazolyl-phenoxyalkylisoxazoles and Granted 11/7/95
Their Use as Antiviral Agents.
Canadian Pat. Appl. 1,2,4-Oxadiazolyl-phenoxyalkylisoxazoles and Filed 4/14/93
No. 2094012 Their Use as Antiviral Agents.
PCT/US/95/05790 Thiadiazoles and Their Use as Filed 5/10/95
(Canada Appl. No. Antipicornaviral Agents.
2190130)
</TABLE>
<PAGE>
4
<TABLE>
<S> <C> <C>
PCT/US/95/05790 Thiadiazoles and Their Use as Filed 5/10/95
(Canada Appl. No. Antipicornaviral Agents.
2190130)
</TABLE>
<PAGE>
5
EXHIBIT B
OPINION OF PEPPER, HAMILTON LLP
The opinion of Pepper, Hamilton LLP, to be delivered pursuant to Section
5(c) of the Purchase Agreement shall be to the effect that:
A. The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware, has the
corporate power and authority to own its property and to conduct its business as
described in the Final Memorandum and is duly qualified to transact business and
is in good standing in the Commonwealth of Pennsylvania.
B. The Purchase Agreement has been duly authorized, executed and delivered
by the Company.
C. The authorized capital stock of the Company conforms in all material
respects as to legal matters to the description thereof contained in the Final
Memorandum.
D. The shares of common stock outstanding on the Closing Date and the
Option Closing Date, as the case may be, have been duly authorized and are
validly issued, fully paid and non-assessable.
E. The Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers in accordance with the
terms of the Purchase Agreement, will be valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
general principles of equity, and will be entitled to the benefits of the
Indenture and the Registration Rights Agreement pursuant to which such
Securities are to be issued.
F. The Underlying Securities reserved for issuance upon conversion of the
Securities have been duly authorized and reserved and, when issued upon
conversion of the Securities in accordance with the terms of the Securities,
will be validly issued, fully paid and non-assessable and the issuance of the
Underlying Securities will not be subject to any preemptive or similar rights.
<PAGE>
6
G. Each of the Indenture and the Registration Rights Agreement has been
duly authorized, executed and delivered by, and is a valid and binding agreement
of, the Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
general principles of equity and except as rights to indemnification and
contribution under the Registration Rights Agreement may be limited under
applicable law.
H. The execution and delivery by the Company of, and the performance by
the Company of its obligations under the Purchase Agreement, the Indenture, the
Registration Rights Agreement and the Securities will not contravene any
provision of applicable law or the certificate of incorporation or by-laws of
the Company or, to the best of such counsel's knowledge, any agreement or other
instrument binding upon the Company that is an exhibit to any of the documents
incorporated by reference into the Final Memorandum or, to the best of such
counsel's knowledge, any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company or any subsidiary, and no
consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company of
its obligations under the Purchase Agreement, the Indenture, the Registration
Rights Agreement or the Securities, except such as may be required by the
securities or Blue Sky laws of the various states in connection with the offer
and sale of the Securities and by Federal and state securities laws with respect
to the Company's obligations under the Registration Rights Agreement.
I. After due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened which the Company is a party or
to which any of the properties of the Company is subject other than proceedings
which such counsel believes are not likely to have a material adverse effect on
the Company or on the power or ability of the Company to perform its obligations
under the Purchase Agreement, the Indenture, the Registration Rights Agreement
or the Securities or to consummate the transactions contemplated by the Final
Memorandum.
J. The Company is not, and after giving effect to the offering and sale
of the Securities and the application of the proceeds thereof as described in
the Final Memorandum, will not be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
K. The statements in the Final Memorandum under the captions "Business--
Strategic Relationships," "Description of Notes," "Description of Capital
Stock," "Private Placement" and "Transfer Restrictions" insofar as such
<PAGE>
7
statements constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly summarize the matters referred to therein.
L. The statements in the Final Memorandum under the caption "Certain
Federal Income Tax Considerations," insofar as such statements constitute a
summary of the United States federal tax laws referred to therein, are accurate
and fairly summarize in all material respects the United States federal tax laws
referred to therein.
M. To the best of such counsel's knowledge, there are no contracts,
agreements or understandings between the Company and any person granting such
person the right to require the Company to include any securities with the
Securities and Underlying Securities to be registered pursuant to the
Registration Rights Agreement, which have been effectively waived with respect
thereto.
N. Each document incorporated by reference in the Final Memorandum
(except for financial statements and schedules and other financial and
statistical data included therein as to which such counsel need not express any
opinion), complied as to form when filed with the Commission in all material
respects with the Exchange Act and the rules and regulations of the Commission
thereunder.
O. Such counsel has no reason to believe that (except for financial
statements and schedules and other financial and statistical data as to which
such counsel need not express any belief) the Final Memorandum when used by the
Initial Purchasers to confirm sales contained, or as of the date such opinion is
delivered contains, any untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
P. Based upon the representations, warranties and agreements of the
Company in Sections 1(p), 1(r), 6(f), 6(g) and 6(j) of the Purchase Agreement
and of the Initial Purchasers in Section 7 of the Purchase Agreement, it is not
necessary in connection with the offer, sale and delivery of the Securities to
the Initial Purchasers under the Purchase Agreement or in connection with the
initial resale of such Securities by the Initial Purchasers in accordance with
Section 7 of the Purchase Agreement to register the Securities under the
Securities Act of 1933 or to qualify the Indenture under the Trust Indenture Act
of 1939, it being understood that no opinion is expressed as to any subsequent
resale of any Security or Underlying Security.
<PAGE>
8
EXHIBIT C
OPINION OF DANN, DORFMAN, HERRELL AND SKILLMAN, P.C.
The opinion of Dann, Dorfman, Herrell and Skillman, P.C., to be delivered
pursuant to Section 5(d) of the Purchase Agreement shall be to the effect that:
A. Such counsel represents the Company in certain matters relating to
intellectual property, including patents, and is familiar with the technology
used by the Company in its business and the manner of its use and has read the
portions of the Final Memorandum entitled "Risk Factors - We depend on patents
and propriety rights, which may offer only limited protection against potential
infringement. If we are unable to protect our patents and proprietary rights,
our business, financial condition and results of operations will be harmed" and
"Business - Patents and Proprietary Technology" (collectively, the "Intellectual
Property Portion").
B. The Intellectual Property Portion contains accurate descriptions of the
Company Patents and patents licensed to the Company and the statements in the
Intellectual Property Portion therein insofar as such statements constitute
summaries of the legal matters, documents or proceedings referred to therein,
fairly present the information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters referred to therein.
C. Such counsel has reviewed the Company Patent Applications filed in the
United States and outside the United States and in the opinion of such counsel
the Company Patent Applications have been properly prepared and filed on behalf
of the Company, and are being diligently pursued by the Company; the inventions
described in the Company Patent Applications are assigned or licensed to the
Company; to such counsel's knowledge, no other entity or individual has any
right or claim of ownership in any of said inventions, Company Patent
Applications, or any patent to be issued therefrom, and in such counsel's
opinion each of the Company Patent Applications discloses patentable subject
matter; to such counsel's knowledge, there are no legal or governmental
proceedings pending (other than the Company Patent Applications) relating to the
Company, the claimed inventions of the Company Patents, or the Company
Intellectual Property, and to such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or others.
D. Such counsel has no knowledge of any facts which would preclude the
Company from having valid license rights or clear title to the Company Patents,
and based on representations by the Company that no interests have been conveyed
to third parties which have not been recorded in the PTO, the Company
<PAGE>
9
has clear record title to the Company Patents free and clear of any liens or
encumbrances that have been recorded with the PTO.
E. To the best of such counsel's knowledge, the Company has complied with
the PTO duty of candor and disclosure for each of the Company Patents, and such
counsel has no knowledge that the Company lacks or will be unable to obtain
patent rights to inventions claimed in the Company Patents and the Company
Patent Applications necessary for the conduct of its business as now proposed to
be conducted by the Company as described in the Final Memorandum.
F. Such counsel has no knowledge of any facts material to a determination
of patentability regarding the Company Patent Applications not called to the
attention of the PTO, and is unaware of any facts not called to the attention of
the PTO which would preclude the grant of a patent for the Company Patent
Applications.
G. Such counsel if not aware of any basis for a finding of
unenforceability or invalidity of any Company Patents, and (except as disclosed
in the Final Memorandum) to the best of such counsel's knowledge, the Company
has not received any notice of infringement of or conflict with rights or claims
of others with respect to the Company Intellectual Property;
H. Based on a review of the third party patent rights made known to
counsel and discussion with Company scientific personnel, such counsel has no
knowledge of any patent rights of others which are or would be infringed by
specific products or processes referred to in the Final Memorandum, which
infringement, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in any material adverse effect on the
condition, financial or otherwise, or in the earnings, business or operations of
the Company; and
I. Such counsel has no reason to believe that the Intellectual Property
Portion of the Final Memorandum, in the form used by the Initial Purchasers to
confirm sales contained, or as of the Closing Date or the Option Closing Date,
as the case may be, contains any untrue statement of a material fact or omitted,
or as of the Closing Date or the Option Closing Date, as the case may be, omits
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
With respect to paragraph I above, counsel may state that its belief is based
upon its participation in the preparation of the Final Memorandum (and any
<PAGE>
10
amendments or supplements thereto) and review and discussion of the contents
thereof (including the review of, but not participation in the preparation of,
the documents incorporated by reference therein), but are without independent
check or verification except as specified.
<PAGE>
11
EXHIBIT D
OPINION OF ROBERTO CUCA, ESQ.
The Opinion of Roberto Cuca, Esq., to be delivered pursuant to Section 5(e)
of the Purchase Agreement shall be to the effect that:
A. I represent the Company in certain matters relating to the United
States Federal Food Drug, and Cosmetic Act (the "FFDC Act") and related
government regulatory matters, and I am familiar with the drugs under
development and clinical testing by the Company. I have made such investigations
of fact and law as I have deemed necessary in connection with the opinion set
forth below.
B. Based upon and subject to the foregoing, and subject to the additional
qualifications set forth below, I am of the opinion that the portions of the
Final Memorandum entitled "Risk Factors" and "Business-Government Regulation",
insofar as they describe the FFDC Act, related government regulatory matters and
FDA regulations and requirements and the application thereof to the Company's
business and operations (collectively, the "Regulatory Portion"), are accurate
and complete in all material respects and fairly present such matters.
C. In addition to rendering the foregoing opinion, I confirm that I have
participated in conferences with other officers and representatives of the
Company, representatives of the independent accountants for the Company, counsel
for the Initial Purchasers and representatives of the Initial Purchasers in
which the contents of the Final Memorandum and related matters were discussed
and that, while I did not participate in similar conferences in respect of the
documents filed by the Company under the Exchange Act and incorporated by
reference in the Final Memorandum, and except for the matters referred to above,
am not passing upon and do not assume responsibility for the factual accuracy,
completeness or fairness of the statements contained in the Final Memorandum, no
facts have come to my attention that would cause me to have reason to believe
that the Regulatory Portion of the Final Memorandum, in the form used by the
Initial Purchasers to confirm sales contained, or as of the Closing Date or the
Option Closing Date, as the case may be, contains any untrue statement of a
material fact or omitted, or as of the Closing Date or the Option Closing Date,
as the case may be, omits to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
<PAGE>
12
With respect to paragraph C above, counsel may state that its belief is based
upon its participation in the preparation of the Final Memorandum (and any
amendments or supplements thereto) and review and discussion of the contents
thereof (including the review of, but not participation in the preparation of,
the documents incorporated by reference therein), but are without independent
check or verification except as specified.
<PAGE>
1
EXHIBIT E
[FORM OF LOCK-UP LETTER]
_____________, 2000
Morgan Stanley & Co. Incorporated
U.S. Bancorp Piper Jaffray Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated ("Morgan
Stanley") proposes to enter into a Purchase Agreement (the "Purchase Agreement")
with ViroPharma Incorporated, a Delaware corporation (the "Company"), providing
for the offering (the "Offering") by the several Initial Purchasers, including
Morgan Stanley (the "Initial Purchasers"), of approximately $100,000,000
principal amount of the Company's [__%] Convertible Subordinated Debentures Due
2007 (the "Securities"). The Securities will be convertible into shares of
Common Stock, $.002 par value of the Company (the "Common Stock").
To induce the Initial Purchasers that may participate in the Offering to
continue their efforts in connection with the Offering, the undersigned hereby
agrees that, without the prior written consent of Morgan Stanley on behalf of
the Initial Purchasers, it will not, during the period commencing on the date
hereof and ending 90 days after the date of the final offering memorandum
relating to the Offering (the "Final Memorandum"), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to transactions
relating to shares of Common Stock or
<PAGE>
2
other securities acquired in open market transactions after the completion of
the Offering. In addition, the undersigned agrees that, without the prior
written consent of Morgan Stanley on behalf of the Initial Purchasers, it will
not, during the period commencing on the date hereof and ending 90 days after
the date of the Final Memorandum, make any demand for or exercise any right with
respect to, the registration of any shares of Common Stock or any security
convertible into or exercisable or exchangeable for Common Stock.
Notwithstanding the foregoing (i) gifts and transfers by will or intestacy
or (ii) transfers to (A) the undersigned's members, partners, affiliates or
immediate family or (B) a trust, the beneficiaries of which are the undersigned
and/or members of the undersigned's immediate family, shall not be prohibited by
this agreement; provided, that (x) the donee or transferee agrees in writing to
be bound by the foregoing in the same manner as it applies to the undersigned
and (y) if the donor or transferor is a reporting person subject to Section
16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), any gifts or
transfers made in accordance with this paragraph shall not require such person
to, and such person shall not voluntarily, file a report of such transaction on
Form 4 under the Exchange Act. "Immediate family" shall mean spouse, lineal
descendants, father, mother, brother or sister of the transferor and father,
mother, brother or sister of the transferor's spouse.
Whether or not the Offering actually occurs depends on a number of factors,
including market conditions. Any Offering will only be made pursuant to a
Purchase Agreement, the terms of which are subject to negotiation between the
Company and the Initial Purchasers.
This agreement shall automatically terminate in the event that the Purchase
Agreement is not entered into by March 31, 2000.
Very truly yours,
_________________________
(Name)
_________________________
(Address)
<PAGE>
Exhibit 10.28
REGISTRATION RIGHTS AGREEMENT
by and among
VIROPHARMA INCORPORATED
as Issuer,
and
MORGAN STANLEY & CO. INCORPORATED
and
U.S. BANCORP PIPER JAFFRAY INC.
as Initial Purchasers
Dated as of March 1, 2000
<PAGE>
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of March 1,
2000, by and among ViroPharma Incorporated, a Delaware corporation (the
"Company"), and Morgan Stanley & Co. Incorporated and U.S. Bancorp Piper Jaffray
Inc. (together, the "Initial Purchasers") pursuant to the Purchase Agreement,
dated February 24, 2000 (the "Purchase Agreement") among the Company and the
Initial Purchasers. In order to induce the Initial Purchasers to enter into the
Purchase Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution of this Agreement is a condition to
the closing under the Purchase Agreement.
The Company agrees with the Initial Purchasers, (i) for their benefit as
Initial Purchasers and (ii) for the benefit of the beneficial owners (including
the Initial Purchasers) from time to time of the Notes (as defined herein) and
the beneficial owners from time to time of the Underlying Common Stock (as
defined herein) issued upon conversion of the Notes (each of the foregoing a
"Holder" and together the "Holders"), as follows:
Section 1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:
"Affiliate" means with respect to any specified person, an "affiliate," as
defined in Rule 144, of such person.
"Amendment Effectiveness Deadline Date" has the meaning set forth in
Section 2(d) hereof.
"Applicable Conversion Price" as of any date of determination means the
Conversion Price in effect as of such date of determination or, if no Notes are
then outstanding, the Conversion Price that would be in effect were Notes then
outstanding.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.
"Common Stock" means the shares of common stock, par value $.002 per share,
of the Company and any other shares of common stock as may constitute "Common
Stock" for purposes of the Indenture, including the Underlying Common Stock.
"Conversion Price" has the meaning assigned such term in the Indenture.
"Damages Accrual Period" has the meaning set forth in Section 2(e) hereof.
"Damages Payment Date" means each interest payment date under the Indenture
in the case of Notes, and each March 1 and September 1 in the case of the
Underlying Common Stock.
"Deferral Notice" has the meaning set forth in Section 3(i) hereof.
-1-
<PAGE>
"Deferral Period" has the meaning set forth in Section 3(i) hereof.
"Effectiveness Deadline Date" has the meaning set forth in Section 2(a)
hereof.
"Effectiveness Period" means the period commencing on the date hereof and
ending on the date that all Registrable Securities have ceased to be Registrable
Securities.
"Event" has the meaning set forth in Section 2(e) hereof.
"Event Date" has the meaning set forth in Section 2(e) hereof.
"Event Termination Date" has the meaning set forth in Section 2(e) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Filing Deadline Date" has the meaning set forth in Section 2(a) hereof.
"Holder" has the meaning set forth in the second paragraph of this
Agreement.
"Indenture" means the Indenture, dated as of March 1, 2000, between the
Company and Summit Bank, as trustee, pursuant to which the Notes are being
issued.
"Initial Purchasers" means Morgan Stanley & Co. Incorporated and U.S.
Bancorp Piper Jaffray Inc.
"Initial Shelf Registration Statement" has the meaning set forth in Section
2(a) hereof.
"Issue Date" means March 1, 2000.
"Liquidated Damages Amount" has the meaning set forth in Section 2(e)
hereof.
"Losses" has the meaning set forth in Section 6 hereof.
"Material Event" has the meaning set forth in Section 3(i) hereof.
"Notes" means the 6% Convertible Subordinated Notes due 2007 of the Company
to be purchased pursuant to the Purchase Agreement.
"Notice and Questionnaire" means a written notice delivered to the Company
containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire attached as Annex B to the Offering
Memorandum of the Company issued February 24, 2000 relating to the Notes.
"Notice Holder" means, on any date, any Holder that has delivered a Notice
and Questionnaire to the Company on or prior to such date.
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"Purchase Agreement" has the meaning set forth in the preamble hereof.
"Prospectus" means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any amendment or prospectus supplement, including
post-effective amendments, and all materials incorporated by reference or
explicitly deemed to be incorporated by reference in such Prospectus.
"Record Holder" means (i) with respect to any Damages Payment Date relating
to any Notes as to which any such Liquidated Damages Amount has accrued, the
holder of record 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 the Underlying
Common Stock as to which any such Liquidated Damages Amount has accrued, the
registered holder of such Underlying Common Stock on the preceding February 15
in the case of a March 1 Damages Payment Date and on the preceding August 15 in
the case of a September 1 Damages Payment Date.
"Registrable Securities" means the Notes until such Notes have been
converted into or exchanged for the Underlying Common Stock and, at all times
subsequent to any such conversion or exchange the Underlying Common Stock and
any securities into or for which such Underlying Common Stock has been converted
or exchanged, and any security issued with respect thereto upon any stock
dividend, split or similar event until, in the case of any such security, (A)
the earliest of (i) its effective registration under the Securities Act and
resale in accordance with the Registration Statement covering it, (ii)
expiration of the holding period that would be applicable thereto under Rule
144(k) were it not held by an Affiliate of the Company or (iii) its sale to the
public pursuant to Rule 144 (or any similar provision then in force, but not
Rule 144A) under the Securities Act, and (B) as a result of the event or
circumstance described in any of the foregoing clauses (i) through (iii), the
legend with respect to transfer restrictions required under the Indenture are
removed or removable in accordance with the terms of the Indenture or such
legend, as the case may be.
"Registration Expenses" has the meaning set forth in Section 5 hereof.
"Registration Statement" means any registration statement of the Company
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all materials incorporated by reference or explicitly deemed to be incorporated
by reference in such registration statement.
"Restricted Securities" means "Restricted Securities" as defined in Rule
144.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
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"Rule 144A" means Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"Shelf Registration Statement" has the meaning set forth in Section 2(a)
hereof.
"Special Counsel" means Ropes & Gray or such other single successor counsel
as shall be specified by the Holders of a majority of the Registrable
Securities, but which may, with the written consent of the Initial Purchasers
(which shall not be unreasonably withheld), be another nationally recognized law
firm experienced in securities law matters designated by the Company, the
reasonable fees and expenses of which will be paid by the Company pursuant to
Section 5 hereof.
"Subsequent Shelf Registration Statement" has the meaning set forth in
Section 2(b) hereof.
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trustee" means Summit Bank, the Trustee under the Indenture.
"Underlying Common Stock" means the Common Stock into which the Notes are
convertible or issued upon any such conversion.
Section 2. Shelf Registration. (a) The Company shall use its best efforts
to prepare and file or cause to be prepared and filed with the SEC, as soon as
practicable but in any event by the date (the "Filing Deadline Date") ninety
(90) days after the Issue Date, a Registration Statement for an offering to be
made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act
(a "Shelf Registration Statement") registering the resale from time to time by
Holders thereof of all of the Registrable Securities (the "Initial Shelf
Registration Statement"). The Initial Shelf Registration Statement shall be on
Form S-3 or another appropriate form permitting registration of such Registrable
Securities for resale by such Holders in accordance with the methods of
distribution elected by the Holders and set forth in the Initial Shelf
Registration Statement. The Company shall use its reasonable efforts to cause
the Initial Shelf Registration Statement to be declared effective under the
Securities Act as promptly as is practicable but in any event by the date (the
"Effectiveness Deadline Date") that is one hundred eighty (180) days after the
Issue Date, and to keep the Initial Shelf Registration Statement (or any
Subsequent Shelf Registration Statement) continuously effective under the
Securities Act until the expiration of the Effectiveness Period. At the time the
Initial Shelf Registration Statement is declared effective, each Holder that
became a Notice Holder on or prior to the date ten (10) Business Days prior to
such time of effectiveness shall be named as a selling securityholder in the
Initial Shelf Registration Statement and the related Prospectus in such a manner
as to permit
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such Holder to deliver such Prospectus to purchasers of Registrable Securities
in accordance with applicable law. None of the Company's security holders (other
than the Holders of Registrable Securities) shall have the right to include any
of the Company's securities in the Shelf Registration Statement. The Holders
acknowledge that the filing of a separate registration statement for an offering
to be made on a continuous basis pursuant to Rule 415 of the Securities Act
registering the resale of shares of Common Stock held by, or issuable upon
conversion of outstanding securities held by, PSV, LP (the "PSV Shelf
Registration Statement") will not be deemed to be a breach of this Agreement.
(b) If the Initial Shelf Registration Statement or any Subsequent Shelf
Registration Statement ceases to be effective for any reason at any time during
the Effectiveness Period (other than because all Registrable Securities
registered thereunder shall have been resold pursuant thereto or shall have
otherwise ceased to be Registrable Securities), the Company shall use its
reasonable efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within thirty (30) days of such
cessation of effectiveness in a manner reasonably expected to obtain the
withdrawal of the order suspending the effectiveness thereof, or file either an
amendment to the Shelf Registration Statement or an additional Shelf
Registration Statement covering all of the securities that as of the date of
such filing are Registrable Securities (a "Subsequent Shelf Registration
Statement"). If a Subsequent Shelf Registration Statement is filed, the Company
shall use its reasonable efforts to cause the Subsequent Shelf Registration
Statement to become effective as promptly as is practicable after such filing
and to keep such Registration Statement (or subsequent Shelf Registration
Statement) continuously effective until the end of the Effectiveness Period.
(c) The Company shall supplement and amend the Shelf Registration
Statement if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration Statement,
if required by the Securities Act or as reasonably requested by the Initial
Purchasers or by the Trustee on behalf of the Holders of the Registrable
Securities covered by such Shelf Registration Statement.
(d) Each Holder of Registrable Securities agrees that if such Holder
wishes to sell Registrable Securities pursuant to a Shelf Registration Statement
and related Prospectus, it will do so only in accordance with this Section 2(d)
and Section 3(i). Each Holder of Registrable Securities wishing to sell
Registrable Securities pursuant to a Shelf Registration Statement and related
Prospectus agrees to deliver a Notice and Questionnaire to the Company at least
three (3) Business Days prior to any intended distribution of Registrable
Securities under the Shelf Registration Statement. From and after the date the
Initial Shelf Registration Statement is declared effective, the Company shall,
as promptly as practicable after the date a Notice and Questionnaire is
delivered, and in any event upon the later of (x) five (5) Business Days after
such date or (y) five (5) Business Days after the expiration of any Deferral
Period in effect when the Notice and Questionnaire is delivered, or put into
effect within five (5) Business Days of such delivery date, (i) if required by
applicable law, file with the SEC a post-effective amendment to the Shelf
Registration Statement or prepare and, if required by applicable law, file a
supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by
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reference or file any other required document so that the Holder delivering such
Notice and Questionnaire is named as a selling securityholder in the Shelf
Registration Statement and the related Prospectus in such a manner as to permit
such Holder to deliver such Prospectus to purchasers of the Registrable
Securities in accordance with applicable law and, if the Company shall file a
post-effective amendment to the Shelf Registration Statement, use its reasonable
efforts to cause such post-effective amendment to be declared effective under
the Securities Act as promptly as is practicable, but in any event by the date
(the "Amendment Effectiveness Deadline Date") that is forty-five (45) days after
the date such post-effective amendment is required by this clause to be filed;
(ii) provide such Holder copies of any documents filed pursuant to Section
2(d)(i); and (iii) notify such Holder as promptly as practicable after the
effectiveness under the Securities Act of any post-effective amendment filed
pursuant to Section 2(d)(i); provided, that if such Notice and Questionnaire is
delivered during a Deferral Period, the Company shall so inform the Holder
delivering such Notice and Questionnaire and shall take the actions set forth in
clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in
accordance with Section 3(i). Notwithstanding anything contained herein to the
contrary, (i) the Company shall be under no obligation to name any Holder that
is not a Notice Holder as a selling securityholder in any Registration Statement
or related Prospectus and (ii) the Amendment Effectiveness Deadline Date shall
be extended by up to ten (10) Business Days from the expiration of a Deferral
Period (and the Company shall incur no obligation to pay Liquidated Damages
during such extension) if such Deferral Period shall be in effect on the
Amendment Effectiveness Deadline Date.
(e) The parties hereto agree that the Holders of Registrable Securities
will suffer damages, and that it would not be feasible to ascertain the extent
of such damages with precision, if (i) the Initial Shelf Registration Statement
has not been filed on or prior to the Filing Deadline Date, (ii) the Initial
Shelf Registration Statement has not been declared effective under the
Securities Act on or prior to the Effectiveness Deadline Date, (iii) the Company
has failed to perform its obligations set forth in Section 2(d) within the time
period required therein, (iv) the aggregate duration of Deferral Periods in any
period exceeds the number of days permitted in respect of such period pursuant
to Section 3(i) hereof or (v) the number of Deferral Periods in any period
exceeds the number permitted in respect of such period pursuant to Section 3(i)
hereof (each of the events of a type described in any of the foregoing clauses
(i) through (v) are individually referred to herein as an "Event," and the
Filing Deadline Date in the case of clause (i), the Effectiveness Deadline Date
in the case of clause (ii), the date by which the Company is required to perform
its obligations set forth in Section 2(d) in the case of clause (iii) (including
the filing of any post-effective amendment prior to the Amendment Effectiveness
Deadline Date), the date on which the aggregate duration of Deferral Periods in
any period exceeds the number of days permitted by Section 3(i) hereof in the
case of clause (iv), and the date of the commencement of a Deferral Period that
causes the limit on the number of Deferral Periods in any period under Section
3(i) hereof to be exceeded in the case of clause (v), being referred to herein
as an "Event Date"). Events shall be deemed to continue until the "Event
Termination Date," which shall be the following dates with respect to the
respective types of Events: the date the Initial Shelf Registration Statement is
filed in the case of an Event of the type described in
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clause (i); the date the Initial Shelf Registration Statement is declared
effective under the Securities Act in the case of an Event of the type described
in clause (ii); the date the Company performs its obligations set forth in
Section 2(d) in the case of an Event of the type described in clause (iii)
(including, without limitation, the date the relevant post-effective amendment
to the Shelf Registration Statement is declared effective under the Securities
Act); termination of the Deferral Period that caused the limit on the aggregate
duration of Deferral Periods in a period set forth in Section 3(i) to be
exceeded in the case of the commencement of an Event of the type described in
clause (iv) and termination of the Deferral Period the commencement of which
caused the number of Deferral Periods in a period permitted by Section 3(i) to
be exceeded in the case of an Event of the type described in clause (v).
Accordingly, commencing on (and including) any Event Date and ending on
(but excluding) the next date on which there are no Events that have occurred
and are continuing (a "Damages Accrual Period"), the Company agrees to pay, as
liquidated damages and not as a penalty, an amount (the "Liquidated Damages
Amount"), payable on the Damages Payment Dates to Record Holders of Notes that
are Registrable Securities and of shares of Underlying Common Stock issued upon
conversion of Notes that are Registrable Securities, as the case may be,
accruing, for each portion of such Damages Accrual Period beginning on and
including a Damages Payment Date (or, in respect of the first time that the
Liquidated Damages Amount is to be paid to Holders on a Damages Payment Date as
a result of the occurrence of any particular Event, from the Event Date) and
ending on but excluding the first to occur of (A) the date of the end of the
Damages Accrual Period or (B) the next Damages Payment Date, at a rate per annum
equal to one-half of one percent (0.5 %) of the aggregate principal amount of
such Notes or, in the case of Notes that have been converted into or exchanged
for Underlying Common Stock, the Applicable Conversion Price of such shares of
Underlying Common Stock, as the case may be, in each case determined as of the
Business Day immediately preceding the next Damages Payment Date; provided, that
in the case of a Damages Accrual Period that is in effect solely as a result of
an Event of the type described in clause (iii) of the immediately preceding
paragraph, such Liquidated Damages Amount shall be paid only to the Holders that
have delivered Notice and Questionnaires that caused the Company to incur the
obligations set forth in Section 2(d) the non-performance of which is the basis
of such Event, provided further, that any Liquidated Damages Amount accrued with
respect to any Note or portion thereof called for redemption on a redemption
date or converted into Underlying 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 or conversion on the
applicable redemption date or conversion date, as the case may be, on such date
(or promptly following the conversion date, in the case of conversion).
Notwithstanding the foregoing, no Liquidated Damages Amounts shall accrue as to
any Registrable Security from and after the earlier of (x) the date such
security is no longer a Registrable Security and (y) expiration of the
Effectiveness Period. The rate of accrual of the Liquidated Damages Amount with
respect to any period shall not exceed the rate provided for in this paragraph
notwithstanding the occurrence of multiple concurrent Events. The Liquidated
Damages Amount shall be computed on the basis of a 360-day year comprised of
twelve (12) 30-day months. Following the cure of all Events requiring the
payment by the
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Company of Liquidated Damages Amounts to the Holders of Registrable Securities
pursuant to this Section, the Damages Accrual Period shall end and the accrual
of Liquidated Damages Amounts will cease (without in any way limiting the effect
of any subsequent Event requiring the payment of Liquidated Damages Amount by
the Company).
The Trustee shall be entitled, on behalf of Holders of Notes or Underlying
Common Stock, to seek any available remedy for the enforcement of this
Agreement, including for the payment of any Liquidated Damages Amount.
Notwithstanding the foregoing, the parties agree that the sole damages payable
for a violation (i) of the terms of this Agreement and (ii) Section 6(k) of the
Purchase Agreement (insofar as it relates to the Company's Obligations under
this Agreement), in each case with respect to which liquidated damages are
expressly provided, shall be such liquidated damages. Nothing shall preclude a
Notice Holder or Holder of Registrable Securities from pursuing or obtaining
specific performance or other equitable relief with respect to this Agreement.
All of the Company's obligations set forth in this Section 2(e) that are
outstanding with respect to any Registrable Security at the time such security
ceases to be a Registrable Security shall survive until such time as all such
obligations with respect to such security have been satisfied in full
(notwithstanding termination of this Agreement pursuant to Section 8(k)).
The parties hereto agree that the liquidated damages provided for in this
Section 2(e) constitute a reasonable estimate of the damages that may be
incurred by Holders of Registrable Securities by reason of the failure of the
Shelf Registration Statement to be filed or declared effective or available for
effecting resales of Registrable Securities in accordance with the provisions
hereof.
Section 3. Registration Procedures. In connection with the registration
obligations of the Company under Section 2 hereof, the Company shall:
(a) Prepare and file with the SEC a Registration Statement or Registration
Statements on any appropriate form under the Securities Act available for the
sale of the Registrable Securities by the Holders thereof in accordance with the
intended method or methods of distribution thereof, and use its reasonable
efforts to cause each such Registration Statement to become effective and remain
effective as provided herein; provided, that before filing any Registration
Statement or Prospectus or any amendments or supplements thereto with the SEC,
the Company shall furnish to the Initial Purchasers and the Special Counsel
copies of all such documents proposed to be filed and use its reasonable efforts
to reflect in each such document when so filed with the SEC such comments as the
Special Counsel reasonably shall propose to the Company within three (3)
Business Days after the date on which the Company delivered such copies to the
Initial Purchasers and the Special Counsel.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective until the expiration of the
Effectiveness Period; cause the related
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Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions then in
force) under the Securities Act; and use its reasonable efforts to comply with
the provisions of the Securities Act applicable to it with respect to the
disposition of all securities covered by such Registration Statement during the
Effectiveness Period in accordance with the intended methods of disposition by
the sellers thereof set forth in such Registration Statement as so amended or
such Prospectus as so supplemented.
(c) As promptly as practicable give notice to the Notice Holders, the
Initial Purchasers and the Special Counsel (i) when any Prospectus, Prospectus
supplement, Registration Statement or post-effective amendment to a Registration
Statement has been filed with the SEC and, with respect to a Registration
Statement or any post-effective amendment, when the same has been declared
effective, (ii) of any request, following the effectiveness of the Initial Shelf
Registration Statement under the Securities Act, by the SEC or any other federal
or state governmental authority for amendments or supplements to any
Registration Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of any Registration
Statement or the initiation or threatening of any proceedings for that purpose,
(iv) 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
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (v) of the occurrence of (but
not the nature of or details concerning) a Material Event and (vi) of the
determination by the Company that a post-effective amendment to a Registration
Statement will be filed with the SEC, which notice may, at the discretion of the
Company (or as required pursuant to Section 3 (i)), state that it constitutes a
Deferral Notice, in which event the provisions of Section 3(i) shall apply.
(d) Use reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction in which they have been
qualified for sale, in either case at the earliest possible moment, and provide
prompt notice to each Notice Holder and the Initial Purchasers of the withdrawal
of any such order.
(e) If reasonably requested by the Initial Purchasers or any Notice
Holder, as promptly as practicable incorporate in a Prospectus supplement or
post-effective amendment to a Registration Statement such information as the
Initial Purchasers, the Special Counsel or such Notice Holder shall, on the
basis of a written opinion of nationally-recognized counsel experienced in such
matters, reasonably determine to be required to be included therein by
applicable law and make any required filings of such Prospectus supplement or
such post-effective amendment.
(f) As promptly as practicable furnish to each Notice Holder, the Special
Counsel and the Initial Purchasers, without charge, at least one (1) conformed
copy of the Registration
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Statement and any 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 to the
Company by such Notice Holder, Special Counsel, counsel or Initial Purchasers).
(g) During the Effectiveness Period, deliver to each Notice Holder, in
connection with any sale of Registrable Securities pursuant to a Registration
Statement, without charge, as many copies of the Prospectus or Prospectuses
relating to such Registrable Securities (including each preliminary prospectus)
and any amendment or supplement thereto as such Notice Holder may reasonably
request; and the Company hereby consents (except during such periods that a
Deferral Notice is outstanding and has not been revoked) to the use of such
Prospectus or each amendment or supplement thereto by each Notice Holder, in
connection with any offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto in the manner set forth
therein.
(h) Prior to any public offering of the Registrable Securities pursuant to
the Shelf Registration Statement, register or qualify or cooperate with the
Notice Holders in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Notice Holder reasonably requests
in writing (which request may be included in the Notice and Questionnaire);
prior to any public offering of the Registrable Securities pursuant to the Shelf
Registration Statement, keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period in connection
with such Notice Holder's offer and sale of Registrable Securities pursuant to
such registration or qualification (or exemption therefrom) and do any and all
other acts or things reasonably necessary or advisable to enable the disposition
in such jurisdictions of such Registrable Securities in the manner set forth in
the relevant Registration Statement and the related Prospectus; provided, that
nothing contained in this Section 3(h) shall require the Company to (i) qualify
as a foreign corporation or as a dealer in securities in any jurisdiction where
it would not otherwise be required to qualify but for this Agreement or (ii)
take any action that would subject it to general service of process in suits or
to taxation in any such jurisdiction where it is not then so subject.
(i) Upon (A) the issuance by the SEC of a stop order suspending the
effectiveness of the Shelf Registration Statement or the initiation of
proceedings with respect to the Shelf Registration Statement under Section 8(d)
or 8(e) of the Securities Act, (B) the occurrence of any event or the existence
of any fact (a "Material Event") as a result of which any Registration Statement
shall 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, or any Prospectus shall 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 the light of the circumstances
under which they were made, not misleading, or (C) the occurrence or existence
of any pending corporate development that, in the reasonable discretion of the
Company, makes it appropriate to suspend the availability of the Shelf
Registration Statement and the related
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Prospectus, (i) in the case of clause (B) above, subject to the next sentence,
as promptly as practicable prepare and file, if necessary pursuant to applicable
law, a post-effective amendment to such Registration Statement or a supplement
to the related Prospectus or any document incorporated therein by reference or
file any other required document that would be incorporated by reference into
such Registration Statement and Prospectus so that such Registration Statement
does 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 such Prospectus does 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 the light of the
circumstances under which they were made, not misleading, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder,
and, in the case of a post-effective amendment to a Registration Statement,
subject to the next sentence, use its reasonable efforts to cause it to be
declared effective as promptly as is practicable, and (ii) give notice to the
Notice Holders and the Special Counsel that the availability of the Shelf
Registration Statement is suspended (a "Deferral Notice") and, upon receipt of
any Deferral Notice, each Notice Holder agrees not to sell any Registrable
Securities pursuant to the Registration Statement until such Notice Holder's
receipt of copies of the supplemented or amended Prospectus provided for in
clause (i) above, or until it is advised in writing by the Company that the
Prospectus may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such Prospectus. The Company will use all reasonable efforts to ensure that
the use of the Prospectus may be resumed (x) in the case of clause (A) above, as
promptly as is practicable, (y) in the case of clause (B) above, as soon as, in
the sole judgment of the Company, public disclosure of such Material Event would
not be prejudicial to or contrary to the interests of the Company or, if
necessary to avoid unreasonable burden or expense, as soon as practicable
thereafter and (z) in the case of clause (C) above, as soon as, in the
discretion of the Company, such suspension is no longer appropriate. The Company
shall be entitled to exercise its right under this Section 3(i) to suspend the
availability of the Shelf Registration Statement or any Prospectus, without
incurring or accruing any obligation to pay liquidated damages pursuant to
Section 2(e), no more than six (6) times in any twelve (12) month period, and
any such period during which the availability of the Registration Statement and
any Prospectus is suspended (the "Deferral Period") shall, without incurring any
obligation to pay liquidated damages pursuant to Section 2(e), not exceed 30
days; provided, that in the case of a Material Event relating to an acquisition
or a probable acquisition or financing, recapitalization, business combination,
sale of the Company or other similar transaction, the Company may, without
incurring any obligation to pay liquidated damages pursuant to Section 2(e),
deliver to Notice Holders a second notice to the effect set forth above, which
shall have the effect of extending the Deferral Period by up to an additional 30
days, or such shorter period of time as is specified in such second notice,
provided, that the aggregate duration of any Deferral Periods shall not, without
incurring any obligation to pay liquidated damages pursuant to Section 2(e),
exceed 30 days in any three month period (or 60 days in any three month period
in the event of a Material Event pursuant to which the Company has delivered a
second notice as required above) or 90 days in any twelve (12) month period.
(j) If requested in writing in connection with a disposition of
Registrable Securities pursuant to a Registration Statement, make reasonably
available for inspection during normal
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business hours and cause the appropriate officers, directors and employees of
the Company and its subsidiaries to make reasonably available for inspection
during normal business hours, in each case upon at least three (3) business
days' prior written notice, by a representative for the Notice Holders of such
Registrable Securities and any managing underwriter, broker-dealers, attorneys
and accountants retained by such Notice Holders, all relevant information
reasonably requested by such representative for the Notice Holders or any such
managing underwriter, broker-dealers, attorneys or accountants in connection
with such disposition, in each case as is customary for similar "due diligence"
examinations afforded to selling shareholders in secondary offerings or in the
case of any party which the special counsel deems to be potentially entitled to
a "due diligence" defense under the securities laws, afforded to underwriters in
a registered public offering; 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 of such information shall be kept confidential by such persons and
shall be used solely for the purposes of exercising rights under this Agreement,
unless (i) disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory authorities, (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 referred to in this
Agreement), (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 any direct or
indirect obligation to the Company not disclose such information, and provided,
that the foregoing inspection and information gathering shall, to the greatest
extent possible, be coordinated on behalf of all the Notice Holders and the
other parties entitled thereto by the counsel referred to in Section 5 and
provided further, that the Company shall not be required to disclose any
information subject to the attorney-client or attorney work product privilege if
and to the extent such disclosure would constitute a waiver of such privilege.
(k) Use all reasonable efforts to comply with all applicable rules and
regulations of the SEC and make generally available to its securityholders
earning statements (which need not be audited) satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the end of any
3-month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) commencing on the first day of the first fiscal quarter of the
Company commencing after the effective date of a Registration Statement, which
statements shall cover said periods.
(l) Cooperate with each Notice Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
sold or to be sold pursuant to a Registration Statement, which certificates
shall not bear any restrictive legends, and cause such Registrable Securities to
be in such denominations as are permitted by the Indenture and registered in
such names as such Notice Holder may request in writing at least two (2)
Business Days prior to any sale of such Registrable Securities.
-12-
<PAGE>
(m) Provide a CUSIP number for all Registrable Securities covered by
each Registration Statement not later than the effective date of such
Registration Statement and provide the Trustee and the transfer agent for the
Common Stock with printed certificates for the Registrable Securities that are
in a form eligible for deposit with The Depository Trust Company.
(n) Cooperate and assist in any filings required to be made with the
National Association of Securities Dealers, Inc.
(o) Upon (i) the filing of the Initial Registration Statement and (ii)
the effectiveness of the Initial Registration Statement, announce the same, in
each case by release to Reuters Economic Services and Bloomberg Business News.
Section 4. Holder's Obligations. Each Holder agrees, by acquisition of
the Registrable Securities, that no Holder of Registrable Securities shall be
entitled to sell any of such Registrable Securities pursuant to a Registration
Statement or to receive a Prospectus relating thereto, unless such Holder has
furnished the Company with a Notice and Questionnaire as required pursuant to
Section 2(d) hereof (including the information required to be included in such
Notice and Questionnaire) and the information set forth in the next sentence.
Each Notice Holder agrees promptly to furnish to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Notice Holder not misleading and any other information
regarding such Notice Holder and the distribution of such Registrable Securities
as the Company may from time to time reasonably request. Any sale of any
Registrable Securities by any Holder shall constitute a representation and
warranty by such Holder that the information relating to such Holder and its
plan of distribution is as set forth in the Prospectus delivered by such Holder
in connection with such disposition, that such Prospectus does not as of the
time of such sale contain any untrue statement of a material fact relating to or
provided by such Holder or its plan of distribution and that such Prospectus
does not as of the time of such sale omit to state any material fact relating to
or provided by such Holder or its plan of distribution necessary to make the
statements in such Prospectus, in the light of the circumstances under which
they were made, not misleading.
Section 5. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance by the Company of its
obligations under Sections 2 and 3 of this Agreement whether or not any of the
Registration Statements are declared effective. Such fees and expenses shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (x) with respect to filings required to be
made with the National Association of Securities Dealers, Inc. and (y) of
compliance with federal and state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of the Special Counsel in
connection with Blue Sky qualifications of the Registrable Securities under the
laws of such jurisdictions as the Notice Holders of a majority of the
Registrable Securities being sold pursuant to a Registration Statement may
designate), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities in a form eligible for deposit
with The Depository Trust Company), (iii) duplication expenses relating to
copies of any Registration Statement or Prospectus delivered
-13-
<PAGE>
to any Holders hereunder, (iv) reasonable fees and disbursements of counsel for
the Company and the Special Counsel in connection with the Shelf Registration
Statement (provided that the Company shall not be liable for the fees and
expenses of more than one separate firm for all parties participating in any
transaction hereunder), (v) reasonable fees and disbursements of the Trustee and
its counsel and of the registrar and transfer agent for the Common Stock and
(vi) Securities Act liability insurance obtained by the Company in its sole
discretion. In addition, the Company shall pay the internal expenses of the
Company (including, without limitation, all salaries and expenses of officers
and employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing by the
Company of the Registrable Securities on any securities exchange on which
similar securities of the Company are then listed and the fees and expenses of
any person, including special experts, retained by the Company. Notwithstanding
the provisions of this Section 5, each seller of Registrable Securities shall
pay selling expenses, which shall include, without limitation, all underwriting
discounts, selling commissions, transfer taxes and other similar expenses and
all registration expenses, to the extent required by applicable law.
Section 6. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and hold
harmless each Notice Holder and each person, if any, who controls any Notice
Holder (within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act) from and against any losses, liabilities, claims,
damages and expenses (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) (collectively, "Losses"), 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 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 light of the circumstances under which they were made not
misleading, provided, however, that the Company shall not be liable in any such
case to the extent that any such Losses are caused by an untrue statement or
alleged untrue statement contained in or omission or alleged omission from any
of such documents in reliance upon and conformity with any of the information
relating to the Holders furnished to the Company in writing by a Holder
expressly for use therein; provided further, that the indemnification contained
in this paragraph shall not inure to the benefit of any Holder of Registrable
Securities (or to the benefit of any person controlling such Holder) on account
of any such Losses caused by an untrue statement or alleged untrue statement or
omission or alleged omission made in any preliminary prospectus provided in each
case the Company has performed its obligations under Section 3(a) hereof if
either (A) (i) such Holder failed to send or deliver a copy of the Prospectus
with or prior to the delivery of written confirmation of the sale by such Holder
to the person asserting the claim from which such Losses arise and (ii) the
Prospectus would have corrected such untrue statement or alleged untrue
statement or such omission or alleged omission, or (B) (x) such untrue statement
or alleged untrue statement, omission or alleged omission is corrected in an
amendment or supplement to the Prospectus and (y) having previously been
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented, such Holder thereafter
-14-
<PAGE>
fails to deliver such Prospectus as so amended or supplemented, with or prior to
the delivery of written confirmation of the sale of a Registrable Security to
the person asserting the claim from which such Losses arise.
(b) Indemnification by Holders of Registrable Securities. Each Holder
agrees severally and not jointly to indemnify and hold harmless the Company and
its respective directors and officers, and each person, if any, who controls the
Company (within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act) or any other Holder, from and against all Losses
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 arising out of or based
upon any omission or alleged omission to state therein 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, to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
information furnished to the Company by such Holder expressly for use in such
Registration Statement or Prospectus or amendment or supplement thereto. In no
event shall the liability of any selling Holder of Registrable Securities
hereunder be greater in amount than the dollar amount of the proceeds received
by such Holder upon the sale of the Registrable Securities pursuant to the
Registration Statement giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 6(a) or
6(b), such person (the "indemnified party") shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the reasonable fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all
indemnified parties, and that all such fees and expenses shall be reimbursed as
they are incurred. Such separate firm shall be designated in writing by, in the
case of parties indemnified pursuant to Section 6(a), the Holders of a majority
(with Holders of Notes deemed to be the Holders, for purposes of determining
such majority, of the number of shares of Underlying Common Stock into which
such Notes are or would be convertible or exchangeable as of the date
-15-
<PAGE>
on which such designation is made) of the Registrable Securities covered by the
Registration Statement held by Holders that are indemnified parties pursuant to
Section 6(a) and, in the case of parties indemnified pursuant to Section 6(b),
the Company. The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. 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.
(d) Contribution. To the extent that the indemnification provided for
in Section 6(a) or 6(b) is applicable by its terms but unavailable to an
indemnified party or insufficient in respect of any Losses, then each applicable
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 (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand 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 indemnifying party or
parties on the one hand and of the indemnified party or parties on the other
hand in connection with the statements or omissions that resulted in such
Losses, as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the initial placement pursuant to the Purchase Agreement (before deducting
expenses) of the Registrable Securities to which such Losses relate. Benefits
received by any Holder shall be deemed to be equal to the value of receiving
Registrable Securities that are registered under the Securities Act. The
relative fault of the Holders on the one hand and the Company on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Holders or by
the Company, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this paragraph are several in
proportion to the respective number of Registrable Securities they have sold
pursuant to a Registration Statement, and not joint.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
--- ----
allocation or by any other method or allocation that does not take into account
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
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding this
-16-
<PAGE>
Section 6(d), an indemnifying party that is a selling Holder of Registrable
Securities shall not be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities sold by such
indemnifying party and distributed to the public were offered to the public
exceeds the amount of any damages that such indemnifying party 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.
(e) The indemnity, contribution and expense reimbursement obligations of
the parties hereunder shall be in addition to any liability any indemnified
party may otherwise have hereunder, under the Purchase Agreement or otherwise.
(f) The indemnity and contribution provisions contained in this Section
6 shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Holder or any person controlling any Holder, or the Company, or the
Company's officers or directors or any person controlling the Company and (iii)
the sale of any Registrable Securities by any Holder.
Section 7. Information Requirements. (a) The Company covenants that, if
at any time before the end of the Effectiveness Period the Company is not
subject to the reporting requirements of the Exchange Act, it will cooperate
with any Holder of Registrable Securities and take such further reasonable
action as any Holder of Registrable Securities may reasonably request in writing
(including, without limitation, making such reasonable representations as any
such Holder may reasonably request), all to the extent required from time to
time to enable such Holder to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144 and Rule 144A under the Securities Act and customarily taken in
connection with sales pursuant to such exemptions. Upon the written request of
any Holder of Registrable Securities, the Company shall deliver to such Holder a
written statement as to whether it has complied with such filing requirements,
unless such a statement has been included in the Company's most recent report
filed pursuant to Section 13 or Section 15(d) of Exchange Act. Notwithstanding
the foregoing, nothing in this Section 7 shall be deemed to require the Company
to register any of its securities (other than the Common Stock) under any
section of the Exchange Act.
(b) The Company shall file the reports required to be filed by it under
the Exchange Act and shall comply with all other requirements set forth in the
instructions to Form S-3 in order to allow the Company to be eligible to file
registration statements on Form S-3.
Section 8. Miscellaneous.
(a) No Conflicting Agreements. The Company is not, as of the date
hereof, a party to, nor shall it, on or after the date of this Agreement, enter
into, any agreement with respect to its securities that conflicts with the
rights granted to the Holders of Registrable Securities in this Agreement,
except such conflict as has been validly waived. The Company represents and
-17-
<PAGE>
warrants that the rights granted to the Holders of Registrable Securities
hereunder do not in any way conflict with the rights granted to the holders of
the Company's securities under any other agreements, other than such rights as
have been waived. The Holders acknowledge that the filing of the PSV Shelf
Registration Statement will not be deemed a breach of this Agreement.
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company has obtained the written consent of Holders of a
majority of the then outstanding Underlying Common Stock constituting
Registrable Securities (with Holders of Notes deemed to be the Holders, for
purposes of this Section, of the number of outstanding shares of Underlying
Common Stock into which such Notes are or would be convertible or exchangeable
as of the date on which such consent is requested). 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 of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other Holders of
Registrable Securities may be given by Holders of at least a majority of the
Registrable Securities being sold by such Holders pursuant to such Registration
Statement; provided, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence. Each Holder of Registrable Securities
outstanding at the time of any such amendment, modification, supplement, waiver
or consent or thereafter shall be bound by any such amendment, modification,
supplement, waiver or consent effected pursuant to this Section 8(b), whether or
not any notice, writing or marking indicating such amendment, modification,
supplement, waiver or consent appears on the Registrable Securities or is
delivered to such Holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, by telecopier, by
courier guaranteeing overnight delivery or by first-class mail, return receipt
requested, and shall be deemed given (i) when made, if made by hand delivery,
(ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after
being deposited with such courier, if made by overnight courier or (iv) on the
date indicated on the notice of receipt, if made by first-class mail, to the
parties as follows:
(w) if to a Holder of Registrable Securities, at the most current
address given by such Holder to the Company in a Notice and
Questionnaire or any amendment thereto;
(x) if to the Company, to:
ViroPharma Incorporated
405 Eagleview Boulevard
Exton, PA 19341
Attention: General Counsel
-18-
<PAGE>
Telecopy No.: (610) 458-7380
and
Pepper, Hamilton LLP
1235 Westlakes Drive, Suite 400
Berwyn, PA 19312
Attention: Jeffrey P.- Libson, Esq.
Telecopy No.: (610) 640-7835
(y) if to the Initial Purchasers, to:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York
Attention: Equity Capital Markets
Telecopy No.: (212) 761-0538
and
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Patrick O'Brien, Esq.
Telecopy No. (617) 951-7050
or to such other address as such person may have furnished to the other persons
identified in this Section 8(c) in writing in accordance herewith.
(d) Approval of Holders. Whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its affiliates (as such term is
defined in Rule 405 under the Securities Act) (other than the Initial Purchasers
or subsequent Holders of Registrable Securities if such subsequent Holders are
deemed to be such affiliates solely by reason of their holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
(e) Successors and Assigns. Any person who purchases any Registrable
Securities from the Initial Purchasers shall be deemed, for purposes of this
Agreement, to be an assignee of the Initial Purchasers. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties and shall inure to the benefit of and be binding upon each Holder
of any Registrable Securities.
-19-
<PAGE>
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be original and all of which taken together
shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
(i) Severability. If any term provision, covenant or restriction of this
Agreement is held 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 thereby, 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
being intended that all of the rights and privileges of the parties shall be
enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and the registration rights
granted by the Company with respect to the Registrable Securities. Except as
provided in the Purchase Agreement, there are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
undertakings among the parties with respect to such registration rights. No
party hereto shall have any rights, duties or obligations other than those
specifically set forth in this Agreement. In no event will such methods of
distribution take the form of an underwritten offering of the Registrable
Securities without the prior agreement of the Company.
(k) Termination. This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Effectiveness Period, except for
any liabilities or obligations under Section 4, 5 or 6 hereof and the
obligations to make payments of and provide for liquidated damages under Section
2(e) hereof to the extent such damages accrue prior to the end of the
Effectiveness Period, each of which shall remain in effect in accordance with
its terms.
-20-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
VIROPHARMA INCORPORATED
By: /s/ Vincent J. Milano
---------------------
Name: Vincent J. Milano
Title: Vice President, Chief
Financial Officer
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
U.S. BANCORP PIPER JAFFRAY INC.
By: /s/ Albert L. Lord
------------------
Name: Albert L. Lord
Title: Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 24,996,793
<SECURITIES> 206,586,538
<RECEIVABLES> 1,106,106
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 235,553,926
<PP&E> 5,318,727
<DEPRECIATION> 1,388,693
<TOTAL-ASSETS> 245,668,252
<CURRENT-LIABILITIES> 9,578,072
<BONDS> 180,000,000
0
2,300
<COMMON> 30,313
<OTHER-SE> 51,832,567
<TOTAL-LIABILITY-AND-EQUITY> 245,668,252
<SALES> 0
<TOTAL-REVENUES> 1,250,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,680,866
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 935,711
<INCOME-PRETAX> (6,769,928)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,769,928)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,769,928)
<EPS-BASIC> (0.46)
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