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EXHIBIT 4.2
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. THIS DEBENTURE HAS BEEN
ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN
FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS DEBENTURE MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 3.7.
CEPHALON, INC.
DEBENTURE
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New York, New York $__________
, 1998
FOR VALUE RECEIVED, CEPHALON, INC., a Delaware corporation
(hereinafter called the "Company"), hereby promises to pay to ________________,
[Address], or registered assigns (the "Holder") or order, the sum of ________
Dollars ($ ________), on [before signing the Debenture, insert month and day of
Closing Date], 2013, and to pay interest on the unpaid principal balance hereof
at the rate of ten and three quarters percent (10.75%) per annum from the date
hereof, until the same becomes due and payable, whether at maturity or upon
acceleration or by prepayment or otherwise. Any amount of principal of or
interest on this Debenture which is not paid when due shall bear interest at the
rate of twenty percent (20%) per annum from the due date thereof until the same
is paid ("Default Interest"). Interest shall be payable on the 1st day of each
February and August, commencing on February 1, 1999, and at maturity (the
"Interest Payment Dates"). Interest on this Debenture shall be computed on the
basis of a 360-day year of 12 30-day months and actual days elapsed.
All payments of principal of and interest on this Debenture
shall be made in lawful money of the United States of America, or, at the option
of the Company and subject to the provisions of this Debenture, interest payable
on the Interest Payment Dates may be paid in whole or in part in fully paid and
nonassessable shares of Common Stock, $.01 par value, together with the related
Preferred Share Purchase Rights of the Company as such stock and rights exist on
the date of issuance of this Debenture, or any shares of capital stock and
related rights of the Company into which such stock shall hereafter be changed
or reclassified (the "Common Stock"). All cash payments shall be made by wire
transfer of immediately available funds to such account as the Holder may from
time to time designate by written notice in accordance with the provisions of
this Debenture. Whenever any amount expressed to be due by the terms of this
Debenture is due on any day which is not a business day, the same shall instead
be due on the next succeeding day which is not a business day and, in the case
of any Interest Payment Date which is not the date on which this Debenture is
paid in full, the extension of the due date thereof shall not be taken into
account for purposes of determining the amount of interest due on such date. As
used in this Debenture, the term "business day" shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in The City of New York are
authorized or required by law or executive order to remain closed.
The obligations of the Company under this Debenture shall rank
in right of payment on a parity with all other unsubordinated obligations of the
Company for indebtedness for borrowed money or the purchase price of property.
This Debenture is issued pursuant to a Senior Convertible Note, dated
_____________, 1997, issued by the Company (the "Note").
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The following terms shall apply to this Debenture:
ARTICLE I
PREPAYMENT; INTEREST IN COMMON STOCK
1.1 PREPAYMENT. The Company shall have the right to prepay
this Debenture in whole at any time or in any part from time to time.
1.2 ISSUANCE OF COMMON STOCK IN LIEU OF CASH INTEREST. (a) If
the Company exercises its option to make a payment of interest on this Debenture
wholly or partly in shares of Common Stock (herein sometimes called the "Stock
Payment Option"), the issuance of shares of Common Stock upon such exercise of
the Stock Payment Option shall have been authorized by the Board of Directors of
the Company.
(b) The Company shall not be permitted to exercise the Stock
Payment Option with respect to any payment of interest on this Debenture if:
(i) the number of shares of Common Stock authorized,
unissued and unreserved for all purposes, or held in the Company's
treasury, is insufficient to pay the portion of such interest to be paid
in Common Stock;
(ii) the issuance or delivery of shares of Common Stock
pursuant to the Stock Payment Option or the public resale of such shares
by the Holder would require registration with or approval of any
governmental authority under any law or regulation, and such registration
or approval has not been effected or obtained;
(iii) the shares of Common Stock to be issued upon
exercise of the Stock Payment Option have not been authorized for listing,
upon official notice of issuance, on the principal securities exchange on
which the Common Stock is then listed and traded;
(iv) the Computed Price is less than the par value of
the Common Stock;
(v) an Event of Default (as defined herein) has occurred
and is continuing; or
(vi) the Common Stock is neither (i) listed or admitted
for trading on a national securities exchange nor (ii) quoted on the
Nasdaq National Market.
(c) If the Stock Payment Option is elected, the Company shall
issue and dispatch or cause to be dispatched to the Holder one or more
certificates for the aggregate number of whole shares of Common Stock determined
by dividing the per share Computed Price of the Common Stock on the applicable
Interest Payment Date into the total amount of lawful money of the United States
of America which the Holder would receive if the aggregate amount of interest on
this Debenture which is being paid in shares of Common Stock were being paid in
such lawful money; provided, however, that if in connection with any such
election the Company shall have failed to deliver the appropriate number of
shares of Common Stock to the Holder within three business days after the
applicable Interest Payment Date, then the Company shall not be entitled to use
the Stock Payment Option in respect of such Interest Payment Date, such cash
interest shall be immediately due and payable and the Company shall pay the
interest for such Interest Payment Date in cash with Default Interest, at the
rate provided in this Note, from such Interest Payment
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Date until paid. No fractional shares will be issued in payment of interest on
this Debenture. In lieu thereof, the Company may issue a number of shares of
Common Stock which reflects a rounding up to the next whole number or may pay
lawful money of the United States of America. The shares of Common Stock issued
or to be issued by the Company in payment of interest on this Debenture are
sometimes referred to herein as the "Payment Shares."
(d) If the Company exercises the Stock Payment Option with
respect to a payment of interest on this Debenture, the Company shall deliver to
the Holder, on or prior to the date on which Payment Shares for such payment of
interest on this Debenture are to be received by the Holder, a Company
Certificate setting forth (i) the total amount of the interest payment to which
the Holder is entitled, (ii) the portion of the interest payment being made in
Payment Shares, (iii) the number of Payment Shares allocable to such payment, as
calculated pursuant to this Section 1.2, (iv) any rounding adjustment to such
number or any payment necessary to be made pursuant to Section 1.2(c), (v) a
brief statement of the facts requiring such adjustment, (vi) the number of
Payment Shares issuable with respect to each $100 of interest on this Debenture
after such adjustment and (vii) a brief statement that none of the conditions
set forth in Section 1.2(b) has occurred and is existing. Such Company
Certificate shall be accompanied by the certificates, each duly issued in the
name of the Holder, representing the Payment Shares. Such Company Certificate
shall be conclusive evidence of the correctness of the calculation of the number
of Payment Shares allocable to the payments to which such Company Certificate
relates and of any adjustments to such number made pursuant to this Section 1.2
in the absence of manifest error. In addition, on or before the pertinent
payment date, the Company shall cause the transfer agent for the Common Stock to
prepare and issue the certificates representing the Payment Shares in the name
of the Holder before being so delivered by the Company.
(e) The Payment Shares, when issued pursuant to and in
compliance with this Section 1.2, shall be, and for all purposes shall be deemed
to be, validly issued, fully paid and nonassessable shares of Common Stock; the
issuance and delivery thereof is in all respects hereby authorized; and the
issuance thereof, together with lawful money of the United States of America, if
any, paid in lieu of fractional shares of such Common Stock, will be, and for
all purposes shall be deemed to be, in full discharge and satisfaction of the
Company's obligation to pay the interest on this Debenture to which such Payment
Shares relate.
(f) As used in this Debenture, the following terms shall have
the meanings provided herein:
(1) "Company Certificate" means a certificate of the
Company signed by an Officer.
(2) "Computed Price" for any date means the average per
share Trading Price during the Measurement Period with respect to such
date.
(3) "Majority Holders" shall mean at any time holders of
this Debenture and the Other Debentures which hold this Debenture and
Other Debentures which, based on the original principal amount thereof,
represent a majority of the original aggregate principal amount of this
Debenture and the Other Debentures, whether or not outstanding at such
time.
(4) "Measurement Period" means, with respect to any
date, the period of five consecutive trading days ending three trading
days prior to such date.
(5) "Officer" means the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Operating Officer, any Senior
Vice President or the Chief Financial Officer of the Company.
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(6) "Other Debentures" shall mean the several Debentures
issued pursuant to the Other Notes.
(7) "Other Notes" shall mean the several Senior
Convertible Notes dated ___, 1997 issued by the Company.
(8) "Trading Price" on any date means the closing bid
price for one share of the Common Stock on such date, on the first
applicable among the following: (a) the national securities exchange on
which the shares of Common Stock are listed which constitutes the
principal securities market for the Common Stock or (b) the Nasdaq
National Market, in either case as reported by Bloomberg, L.P. (subject to
equitable adjustment from time to time on terms reasonably acceptable to
the Majority Holders for (i) stock splits, (ii) stock dividends, (iii)
combinations, (iv) capital reorganizations, (v) issuance to all holders of
Common Stock of rights or warrants to purchase shares of Common Stock at a
price per share less than the Trading Price which would otherwise be
applicable, (vi) the distribution by the Company to all holders of Common
Stock of evidences of indebtedness of the Company or cash (other than
regular quarterly cash dividends), (vii) tender offers by the Company or
any subsidiary of the Company or other repurchases of shares of Common
Stock in one or more transactions which, individually or in the aggregate,
result in the purchase of more than ten percent of the Common Stock
outstanding and (viii) similar events relating to the Common Stock, in
each such case which occur during a particular Measurement Period).
ARTICLE II
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of
Default") shall occur:
2.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Company fails
(a) to pay the principal hereof when due, whether at maturity, upon redemption,
upon acceleration or otherwise or (b) to pay any installment of interest hereon
when due and, in the case of this clause (b) of this Section 2.1 only, such
failure continues for a period of ten (10) days after the due date thereof;
2.2 BREACH OF COVENANT. The Company breaches any material
covenant or other material term or condition of this Debenture (other than as
specifically provided in Section 2.1 hereof), and such breach continues for a
period of twenty (20) days after written notice thereof to the Company from the
Holder or within 60 days after delivery of such notice if and only if, such
default is reasonably capable of cure and during such 60-day period, the Company
has been diligently taking action to cure such default and such cure cannot be
completed within such 20-day period;
2.3 BREACH OF REPRESENTATIONS AND WARRANTIES. Any
representation or warranty of the Company made herein or in any agreement,
statement or certificate given in writing pursuant hereto or in connection
herewith (including, without limitation, the Note Purchase Agreement) shall be
false or misleading in any material respect when made;
2.4 CERTAIN VOLUNTARY PROCEEDINGS. The Company or any material
subsidiary of the Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or
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shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due or shall admit in
writing its inability generally to pay its debts as they become due;
2.5 CERTAIN INVOLUNTARY PROCEEDINGS. An involuntary case or
other proceeding shall be commenced against the Company or any material
subsidiary of the Company seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) consecutive
days;
2.6 JUDGMENTS. Any court of competent jurisdiction shall enter
one or more final judgments against the Company or any subsidiary of the Company
or any of their respective properties or other assets in an aggregate amount in
excess of $5,000,000, which is not vacated, bonded, stayed, discharged,
satisfied or waived for a period of thirty (30) consecutive days; or
2.7 DEFAULT UNDER OTHER AGREEMENTS. (a) the Company or any
subsidiary shall (i) default in any payment with respect to any indebtedness for
borrowed money (other than this Debenture) which indebtedness has an outstanding
principal amount in excess of $10,000,000 individually or $15,000,000 in the
aggregate for the Company and its subsidiaries, beyond the period of grace, if
any, provided in the instrument or agreement under which such indebtedness was
created or (ii) default in the observance or performance of any agreement,
covenant or condition relating to any such indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, any such indebtedness to become due prior to its stated maturity and such
default or event shall continue beyond the period of grace, if any, provided in
the instrument or agreement under which such indebtedness was created (after
giving effect to any consent or waiver obtained and then in effect thereunder);
or (b) any such indebtedness of the Company or any of its subsidiaries shall, in
accordance with its terms, be declared to be due and payable, or required to be
prepaid other than by a regularly scheduled or required payment prior to the
stated maturity thereof;
then upon the occurrence and during the continuation of any Event of Default
specified in Section 2.1, 2.2, 2.3, 2.6 or 2.7 at the option of the Holder the
Company shall, and upon the occurrence of any Event of Default specified in
Section 2.4 or 2.5, the Company shall, pay to the Holder an amount equal to the
sum of (A) the outstanding principal amount of this Debenture plus (B) accrued
and unpaid interest on such principal amount to the date of payment plus (C)
accrued and unpaid Default Interest, if any, on the amount referred to in the
immediately preceding clause (B) at the rate provided in this Debenture to the
date of payment and all other amounts payable hereunder shall immediately become
due and payable, all without demand, presentment or notice, all of which hereby
are expressly waived, together with all costs, including, without limitation,
legal fees and expenses, of collection, and the Holder shall be entitled to
exercise all other rights and remedies available at law or in equity.
ARTICLE III
MISCELLANEOUS
3.1 FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on
the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver
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thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privileges. All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
3.2 NOTICES. Any notice herein required or permitted to be
given shall be in writing and may be personally served, sent by telephone line
facsimile transmission or delivered by courier or sent by United States mail and
shall be deemed to have been given upon receipt if personally served, sent by
telephone line facsimile transmission or sent by courier or three (3) days after
being deposited in the United States mail, certified, with postage pre-paid and
properly addressed, if sent by mail. For the purposes hereof, the address of the
Holder shall be as shown on the records of the Company (telephone line facsimile
transmission number ( ) - ); and the address of the Company shall be
145 Brandywine Parkway, West Chester, Pennsylvania 19380 Attention: Senior Vice
President, Finance and Chief Financial Officer (telephone line facsimile
transmission number (610) 344-7563). Both the Holder and the Company may change
the address for service by service of written notice to the other as herein
provided.
3.3 AMENDMENT PROVISION. The term "Debenture" and all
reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented.
3.4 ASSIGNABILITY. This Debenture shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of and be
binding upon the Holder and its successors and permitted assigns.
3.5 COST OF COLLECTION. If default is made in the payment of
this Debenture, the Company shall pay the Holder hereof costs of collection,
including attorneys' fees.
3.6 GOVERNING LAW. This Debenture shall be governed by the
internal laws of the State of New York, without regard to the principles of
conflict of laws.
3.7 TRANSFER OF DEBENTURE. (a) This Debenture has not been and
is not being registered under the provisions of the Act or any state securities
laws and this Debenture may not be sold, transferred, pledged or hypothecated
unless the Holder shall have delivered to the Company an opinion of counsel,
reasonably satisfactory in form, scope and substance to the Company, to the
effect that this Debenture may be sold, transferred, pledged or hypothecated
pursuant to an exemption from such registration.
(b) In addition to the requirements of the Act and applicable
state securities or "blue sky" laws which may be applicable to this Debenture,
neither this Debenture nor any interest herein may be sold, assigned, pledged,
hypothecated or otherwise transferred except to a Permitted Transferee. As used
herein, "Permitted Transferee" means (1) a person who is an "accredited
investor" as defined in Regulation D under the Act and (2) an entity of which
70% or more of the beneficial ownership of such entity is beneficially owned by
[NAME OF ORIGINAL BUYER] and which entity has the same investment adviser as
[NAME OF ORIGINAL BUYER]. Prior to any such transfer to a Permitted Transferee,
such Permitted Transferee shall (x) have made written representations and
warranties to the Company with respect to such Permitted Transferee in the form
of Section 2(a) and 2(c) of the Note Purchase Agreement, (y) shall have further
represented in writing to the Company that such Permitted Transferee has
requested and received from the Company all information relating to the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company deemed relevant by such Permitted
Transferee; that such Permitted Transferee has been afforded the opportunity to
ask questions of the Company concerning the foregoing and has had the
opportunity to obtain and review the Registration Statement and the prospectus
included therein, each as amended or supplemented to
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the date of transfer to such Permitted Transferee, and the reports and other
information concerning the Company which at the time of such transfer have been
filed by the Company with the SEC pursuant to the 1934 Act and which are
incorporated by reference in such prospectus as of the date of such transfer and
(z) shall have agreed in writing with the Company to be bound by the applicable
provisions of Section 4(a) of the Note Purchase Agreement.
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IN WITNESS WHEREOF, the Company has caused this Debenture to
be signed in its name by its duly authorized officer on the day and in the year
first above written.
CEPHALON, INC.
By
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Name:
Title:
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