EXHIBIT 4.1
ENCYSIVE PHARMACEUTICALS INC.
2.50% Convertible Senior Notes due 2012
----------
INDENTURE
Dated as of March 16, 2005
----------
THE BANK OF NEW YORK TRUST COMPANY, N.A.
TRUSTEE
----------
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions............................................. 1
Section 1.02. Other Definitions....................................... 7
Section 1.03. Incorporation by Reference of Trust Indenture Act....... 8
Section 1.04. Rules of Construction................................... 9
Section 1.05. Acts of Holders......................................... 9
ARTICLE II NOTES
Section 2.01. Designation Amount and Issue of Notes................... 10
Section 2.02. Form of Notes........................................... 10
Section 2.03. Execution and Authentication............................ 11
Section 2.04. Note Registrar, Paying Agent and Conversion Agent....... 11
Section 2.05. Paying Agent to Hold Money and Notes in Trust........... 12
Section 2.06. Noteholder Lists........................................ 12
Section 2.07. Transfer and Exchange; Restrictions on Transfer;
Depositary........................................... 12
Section 2.08. Replacement Notes....................................... 19
Section 2.09. Outstanding Notes; Determination of Holders' Action..... 19
Section 2.10. Temporary Notes......................................... 20
Section 2.11. Cancellation............................................ 20
Section 2.12. Persons Deemed Owners................................... 21
Section 2.13. CUSIP Numbers........................................... 21
Section 2.14. Default Interest........................................ 21
ARTICLE III REDEMPTION AND REPURCHASE
Section 3.01. Company's Right to Redeem............................... 21
Section 3.02. Notice of Optional Redemption; Selection of Notes....... 22
Section 3.03. Payment of Notes Called for Redemption by the Company... 23
Section 3.04. Conversion Arrangement on Call for Redemption........... 24
Section 3.05. Purchase of Notes at Option of the
Holder Upon Fundamental Change....................... 24
Section 3.06. Effect of Fundamental Change Purchase Notice............ 30
Section 3.07. Deposit of Fundamental Change Purchase Price............ 31
Section 3.08. Notes Purchased in Part................................. 32
Section 3.09. Covenant to Comply with Securities Laws Upon
Purchase of Notes.................................... 32
Section 3.10. Repayment to the Company................................ 32
ARTICLE IV COVENANTS
Section 4.01. Payment of Principal, Premium, Interest on the Notes.... 32
Section 4.02. Reports by the Company.................................. 33
Section 4.03. Compliance Certificate.................................. 33
Section 4.04. Further Instruments and Acts............................ 33
Section 4.05. Maintenance of Office or Agency......................... 34
Section 4.06. Delivery of Certain Information......................... 34
Section 4.07. Existence............................................... 34
Section 4.08. Maintenance of Properties............................... 34
Section 4.09. Payment of Taxes and Other Claims....................... 35
Section 4.10. Liquidated Damages Notice............................... 35
ARTICLE V SUCCESSOR CORPORATION
Section 5.01. When Company May Merge or Transfer Assets............... 35
ARTICLE VI DEFAULTS AND REMEDIES
Section 6.01. Events of Default....................................... 36
Section 6.02. Acceleration............................................ 38
Section 6.03. Other Remedies.......................................... 39
Section 6.04. Waiver of Past Defaults................................. 39
Section 6.05. Control By Majority..................................... 39
Section 6.06. Limitation on Suits..................................... 39
Section 6.07. Rights of Holders to Receive Payment.................... 40
Section 6.08. Collection Suit by Trustee.............................. 40
Section 6.09. Trustee May File Proofs of Claim........................ 40
Section 6.10. Priorities.............................................. 41
Section 6.11. Undertaking for Costs................................... 41
Section 6.12. Waiver of Stay, Extension or Usury Laws................. 42
ARTICLE VII TRUSTEE
Section 7.01. Duties and Responsibilities of the Trustee;
During Default; Prior to Default..................... 42
Section 7.02. Certain Rights of the Trustee........................... 43
Section 7.03. Trustee Not Responsible for Recitals, Dispositions
of Notes or Application of Proceeds Thereof.......... 44
ii
Section 7.04. Trustee and Agents May Hold Notes; Collections, Etc..... 45
Section 7.05. Moneys Held by Trustee.................................. 45
Section 7.06. Compensation and Indemnification of Trustee and Its
Prior Claim.......................................... 45
Section 7.07. Right of Trustee to Rely on Officers' Certificate,
Etc.................................................. 46
Section 7.08. Conflicting Interests................................... 46
Section 7.09. Persons Eligible for Appointment as Trustee............. 46
Section 7.10. Resignation and Removal; Appointment of Successor
Trustee.............................................. 46
Section 7.11. Acceptance of Appointment by Successor Trustee.......... 47
Section 7.12. Merger, Conversion, Consolidation or Succession to
Business of Trustee.................................. 48
Section 7.13. Preferential Collection of Claims Against the Company... 49
Section 7.14. Reports By The Trustee.................................. 49
Section 7.15. Trustee to Give Notice of Default, But May Withhold
in Certain Circumstances............................. 49
ARTICLE VIII DISCHARGE OF INDENTURE
Section 8.01. Discharge of Indenture.................................. 49
Section 8.02. [Intentionally Omitted]................................. 50
Section 8.03. Paying Agent to Repay Monies Held....................... 50
Section 8.04. Return of Unclaimed Monies.............................. 50
ARTICLE IX SUPPLEMENTAL INDENTURES
Section 9.01. Without Consent of Holders.............................. 50
Section 9.02. With Consent of Holders................................. 51
Section 9.03. Compliance with Trust Indenture Act..................... 52
Section 9.04. Revocation and Effect of Consents, Waivers and
Actions.............................................. 52
Section 9.05. Notation on or Exchange of Notes........................ 52
Section 9.06. Trustee to Sign Supplemental Indentures................. 52
Section 9.07. Effect of Supplemental Indentures....................... 53
ARTICLE X CONVERSION
Section 10.01. Conversion Right and Conversion Rate.................... 53
Section 10.02. Exercise of Conversion Right............................ 53
Section 10.03. Fractions of Shares..................................... 54
Section 10.04. Adjustment of Conversion Rate........................... 54
Section 10.05. Notice of Adjustments of Conversion Rate................ 63
Section 10.06. Notice Prior to Certain Actions......................... 63
iii
Section 10.07. Company to Reserve Common Shares........................ 64
Section 10.08. Taxes on Conversions.................................... 64
Section 10.09. Covenant as to Common Shares............................ 64
Section 10.10. Cancellation of Converted Notes......................... 64
Section 10.11. Effect of Reclassification, Consolidation, Merger or
Sale................................................. 65
Section 10.12. Responsibility of Trustee for Conversion Provisions..... 66
Section 10.13. Shareholder Rights Plans................................ 66
ARTICLE XI RESERVED
ARTICLE XII MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls............................ 67
Section 12.02. Notices................................................. 67
Section 12.03. Communication by Holders with Other Holders............. 68
Section 12.04. Certificate and Opinion as to Conditions Precedent...... 68
Section 12.05. Statements Required in Certificate or Opinion........... 68
Section 12.06. Separability Clause..................................... 69
Section 12.07. Rules by Trustee, Paying Agent, Conversion Agent and
Note Registrar....................................... 69
Section 12.08. Legal Holidays.......................................... 69
Section 12.09. GOVERNING LAW........................................... 69
Section 12.10. No Recourse Against Others.............................. 69
Section 12.11. Successors.............................................. 69
Section 12.12. Benefits of Indenture................................... 69
Section 12.13. Table of Contents, Heading, Etc......................... 69
Section 12.14. Authenticating Agent.................................... 69
Section 12.15. Execution In Counterparts............................... 70
iv
INDENTURE, dated as of March 16, 2005, between ENCYSIVE
PHARMACEUTICALS INC., a Delaware corporation (the "Company") and THE BANK OF NEW
YORK TRUST COMPANY, N.A., a national banking association, as Trustee hereunder
(the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 2.50%
Convertible Senior Notes due 2012 (herein called the "Notes") of substantially
the tenor and amount hereinafter set forth, and to provide therefor the Company
has duly authorized the execution and delivery of this Indenture.
All things necessary to make the Notes, when the Notes are executed by
the Company and authenticated and delivered hereunder, the valid and legally
binding obligations of the Company, and to make this Indenture a valid agreement
of the Company, in accordance with their and its terms, have been done. Further,
all things necessary to duly authorize the issuance of the Common Shares of the
Company issuable upon the conversion of the Notes, and to duly reserve for
issuance the number of Common Shares issuable upon such conversion, have been
done.
This Indenture is subject to, and shall be governed by, the provisions
of the Trust Indenture Act of 1939, as amended, that are required to be a part
of and to govern indentures qualified under the Trust Indenture Act of 1939, as
amended.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions. For all purposes of this Indenture, except
as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
(2) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(3) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Additional Notes" means an unlimited principal amount of Notes (other
than the Initial Notes) issued from time to time with the same terms and
conditions, except for any differences in the issue price and interest accrued
prior to the issue date of the Additional Notes, and the same CUSIP/ISIN number
as the Initial Notes under this Indenture in accordance with Section 2.01
hereof.
"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 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 either the board of directors of the
Company, or any duly authorized committee of such board.
"Board Resolution" means a resolution duly adopted by the Board of
Directors, a copy of which, certified by the Secretary or an Assistant Secretary
of the Company, to be in full force and effect on the date of such
certification, shall have been delivered to the Trustee.
"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.
"Capital Stock" of any corporation means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by that
corporation.
"Closing Price" of any security on any date of determination means:
(1) the closing sale price (or, if no closing sale price is
reported, the last reported sale price) of such security on the NASDAQ
National Market on such date;
(2) if such security is not listed for trading on the NASDAQ
National Market on any such date, the closing sale price as reported
in the composite transactions for the principal U.S. securities
exchange on which such security is so listed;
(3) if such security is not so listed on a U.S. national or
regional securities exchange, the closing sale price as reported by
the NASDAQ OTC Bulletin Board Service (f/k/a Over-the-Counter Bulletin
Board);
(4) if such security is not so reported, the last quoted bid
price for such security in the over-the-counter market as reported by
the Pink Sheets LLC (f/k/a National Quotation Bureau) or similar
organization; or
2
(5) if such bid price is not available, the average of the
mid-point of the last bid and ask prices of such security on such date
from at least three nationally recognized independent investment
banking firms retained for this purpose by the Company.
"Common Shares" means the common shares, par value $0.005 per share,
of the Company.
"common shares" means any share of any class of capital stock 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
issuer.
"Company" means the party named as the "Company" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor. The foregoing sentence shall likewise apply to any subsequent such
successor or successors.
"Company Order" means a written order signed in the name of the
Company by any two Officers of the Company; provided that the Company Order
regarding authentication delivered to the Trustee in connection with the closing
on March 16, 2005 may be signed by one Officer, provided further that this one
Officer will be either the Chief Executive Officer or the Chief Financial
Officer of the Company (or, if the Company does not have an Officer designated
with the title Chief Financial Officer, the Officer with the highest level of
responsibility over the Company's financial matters, including financial
reporting matters, other than the Chief Executive Officer).
"Conversion Agent" means any person authorized by the Company to
convert Notes in accordance with Article 10 hereof.
"Conversion Price" as of any day will equal $1,000 divided by the
Conversion Rate as of such date and rounded to the nearest cent. The Conversion
Price shall initially be approximately $13.95 per Common Share.
"Conversion Rate" has the meaning specified in Section 10.01.
"Corporate Trust Office" means the principal office of the Trustee at
which at any time its corporate trust business shall be administered, which
office at the date hereof is located at 600 North Pearl Street, Suite 420,
Dallas, Texas 75201, or such other address as the Trustee may designate from
time to time by notice to the Holders and the Company, or the principal
corporate trust office of any successor Trustee (or such other address as a
successor Trustee may designate from time to time by notice to the Holders and
the Company).
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in 2.07(d) as the
Depositary with respect to such Notes,
3
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.
"fiscal year" with respect to the Company means the year ended
December 31st.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Holder" or "Noteholder" 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.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof, including the provisions of the TIA
that are deemed to be a part hereof.
"Initial Notes" means Notes issued under this Indenture in an
aggregate principal amount not to exceed (1) if the Initial Purchasers' Option
is not exercised, $115,000,000, or (2) if the Initial Purchasers' Option is
exercised, $115,000,000 plus the aggregate principal amount of the Notes for
which the Initial Purchasers' Option is exercised, not to exceed $130,000,000 in
aggregate principal amount.
"Initial Purchasers" means J.P. Morgan Securities Inc., UBS Securities
LLC and SG Cowen & Co., LLC.
"Initial Purchasers' Option" means the option granted by the Company
to the Initial Purchasers to purchase up to $15,000,000 aggregate principal
amount of Notes pursuant to the Purchase Agreement.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Notes.
"Liquidated Damages" has the meaning specified for "Additional
Interest Amount" in Section 2(e) of the Registration Rights Agreement.
"Notes" has the meaning ascribed to it in the first paragraph under
the caption "Recitals of the Company." The Initial Notes and any Additional
Notes will rank equally and ratably and shall be treated as a single class for
all purposes under this Indenture.
"Offering Memorandum" means the offering memorandum dated March 11,
2005 in connection with the sale of the Notes.
"Officer" means the Chairman of the Board, the Vice Chairman, the
Chief Executive Officer, the President, the Chief Financial Officer, any
Executive Vice President, any Senior Vice President, any Vice President, the
Treasurer or the Secretary or any Assistant Treasurer or Assistant Secretary of
the Company.
4
"Officers' Certificate" means a written certificate containing the
information specified in Sections 12.04 and 12.05, signed in the name of the
Company by any two Officers of the Company, and delivered to the Trustee. An
Officers' Certificate given pursuant to Section 4.03 shall be signed by an
authorized financial or accounting Officer of the Company but need not contain
the information specified in Sections 12.04 and 12.05.
"Opinion of Counsel" means a written opinion containing the
information specified in Sections 12.04 and 12.05, from legal counsel. The
counsel may be an employee of, or counsel to, the Company.
"person" or "Person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, or government or any agency or political
subdivision thereof.
"Portal Market" means the Portal Market operated by the National
Association of Securities Dealers, Inc. or any successor thereto.
"principal" of a Note means the principal amount due on the Stated
Maturity as set forth on the face of the Note or the amount of any Fundamental
Change Purchase Price payable pursuant to Section 3.05(a), whichever is
applicable.
"Purchase Agreement" means the Purchase Agreement dated as of March
11, 2005.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of March 16, 2005, between the Company and the Initial
Purchasers, as amended from time to time in accordance with its terms.
"Regular Record Date" means, with respect to the interest payable on
any Interest Payment Date, the close of business on March 1 and September 1
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date.
"Responsible Officer" means, when used with respect to the Trustee,
any officer within the corporate trust department of the Trustee, including any
vice president, assistant vice president, assistant treasurer, trust officer or
any other officer of the Trustee who customarily performs functions similar to
those performed by the Persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because of such
person's knowledge of and familiarity with the particular subject, and who shall
have direct responsibility for the administration of this Indenture.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"SEC" means the Securities and Exchange Commission.
5
"Securities Act" means the United States Securities Act of 1933 (or
any successor statute), as amended from time to time.
"Share Price" means the price per Common Share paid in connection with
a Fundamental Change transaction pursuant to which Additional Shares are
issuable as set forth in Section 3.05(a) hereof, which shall be equal to (1) if
holders of Common Shares receive only cash in such Fundamental Change
transaction, the cash amount paid per Common Share and (2) in all other cases,
the average of the Closing Prices of the Common Shares on the five Trading Days
prior to, but not including, the effective date of such Fundamental Change
transaction.
"Significant Subsidiary" means any direct or indirect Subsidiary of
the Company that meets any of the following conditions:
(1) the Company's and its other Subsidiaries' investments in and
advances to such Subsidiary exceed 10% of the total assets of the
Company and its Subsidiaries consolidated as of the end of the most
recently completed fiscal year;
(2) the Company's and its other Subsidiaries' proportionate share
of the total assets (after intercompany eliminations) of such
Subsidiary exceed 10% of the total assets of the Company and its
Subsidiaries consolidated as of the end of the most recently completed
fiscal year; or
(3) the Company's and its other Subsidiaries' equity in the
income from continuing operations before income taxes, extraordinary
items and cumulative effect of a change in accounting principle of
such Subsidiary exceed 10% of such income of the Company and its
Subsidiaries consolidated for the most recently completed fiscal year.
"Stated Maturity," when used with respect to any Note or any
installment of interest thereon, means the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable.
"Subsidiary" means (1) a corporation, a majority of whose Capital
Stock with voting power, under ordinary circumstances, to elect directors is, at
the date of determination, directly or indirectly owned by the Company, by one
or more Subsidiaries of the Company or by the Company and one or more
Subsidiaries of the Company, (2) a partnership in which the Company or a
Subsidiary of the Company holds a majority interest in the equity capital or
profits of such partnership, or (3) any other person (other than a corporation)
in which the Company, a Subsidiary of the Company or the Company and one or more
Subsidiaries of the Company, directly or indirectly, at the date of
determination, has (x) at least a majority ownership interest or (y) the power
to elect or direct the election of a majority of the directors or other
governing body of such person.
"TIA" means the Trust Indenture Act of 1939 as in effect on the date
of this Indenture; provided, however, that in the event the TIA is amended after
such date, TIA means, to the extent required by any such amendment, the TIA as
so amended.
6
"Trading Day" means a day during which trading in Common Shares
generally occurs on the NASDAQ National Market or, if the Common Shares are not
listed on the NASDAQ National Market, on the principal other national or
regional securities exchange on which the Common Shares are then listed or, if
the Common Shares are not listed on a national or regional securities exchange,
on the principal other market on which the Common Shares are then traded.
"Trustee" means the party named as the "Trustee" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor. The foregoing sentence shall likewise apply to any subsequent such
successor or successors.
"United States" means the United States of America (including the
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction (its "possessions" including Puerto Rico, the
U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana
Islands).
"Voting Stock" means with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors
of such Person.
Section 1.02. Other Definitions.
Term Defined in Section
- ---- ------------------
"Act" ..................................................... 1.05(a)
"Accepted Purchased Shares" ............................... 10.04(f)
"Additional Shares" ....................................... 3.05(a)
"Adjustment Event" ........................................ 10.04(j)
"Administrative Expense" .................................. 7.06
"Agent Members" ........................................... 2.07(d)
"Authenticating Agent" .................................... 12.14
"Bankruptcy Law" .......................................... 6.01(i)
"beneficial ownership" .................................... 3.05(a)
"Certificated Notes" ...................................... 2.07(b)
"Change of Control" ....................................... 3.05(a)
"Conversion Obligation" ................................... 10.01
"Current Market Price" .................................... 10.04(g)
"Custodian" ............................................... 6.01(i)
"Determination Date" ...................................... 10.04(j)
"Event of Default" ........................................ 6.01
"Ex-Dividend Date" ........................................ 10.04(d)
"Ex-Dividend Trading" ..................................... 10.04(d)
"Exchange Act" ............................................ 3.05(a)
"Expiration Time" ......................................... 10.04(f)
"Fair Market Value" ....................................... 10.04(h)
"Fundamental Change" ...................................... 3.05(a)
7
"Fundamental Change Purchase Date" ........................ 3.05(a)
"Fundamental Change Purchase Notice" ...................... 3.05(d)
"Fundamental Change Purchase Price" ....................... 3.05(a)
"Global Note" ............................................. 2.07(b)
"Legal Holiday" ........................................... 12.08
"Liquidated Damages Notice" ............................... 4.10
"Make-Whole Eligible Transaction" ......................... 3.05(a)
"Non-Electing Share" ...................................... 10.11
"Note Register" ........................................... 2.04
"Note Registrar" .......................................... 2.04
"Notice of Default" ....................................... 6.01(i)
"Offer Expiration Time" ................................... 10.04(f)
"Paying Agent" ............................................ 2.04
"Principal Amount" ........................................ 2.07(b)
"Public Acquirer Change of Control" ....................... 3.05(b)
"Public Acquirer Common Stock" ............................ 3.05(b)
"Purchased Shares" ........................................ 10.04(f)
"Record Date" ............................................. 10.04(h)
"Redemption Date" ......................................... 3.02(a)
"Redemption Notice" ....................................... 3.02(a)
"Redemption Price" ........................................ 3.01
"Restricted Note" ......................................... 10.02
"Restricted Securities" ................................... 2.07(d)
"Rule 144A Information" ................................... 4.06
"Securities" .............................................. 10.04(d)
"Termination in Trading" .................................. 3.05(a)
"transfer" ................................................ 2.07(d)
"Trigger Event" ........................................... 10.04(d)
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture Notes" means the Notes.
"indenture Note holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture Notes means the Company.
8
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
Section 1.04. Rules of Construction. Unless the context otherwise
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) "including" means including, without limitation; and
(e) words in the singular include the plural, and words in the
plural include the singular.
Section 1.05.Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by their agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to such officer the execution thereof.
Where such execution is by a signer acting in a capacity other than such
signer's individual capacity, such certificate or affidavit shall also
constitute sufficient proof of such signer's authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register
or by a certificate of the Note Registrar.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every future
Holder of the same Note and the holder of every Note issued upon the
registration of transfer thereof or in exchange
9
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustee or the Company in reliance thereon, whether or not
notation of such action is made upon such Note.
(e) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Company may, at its option, by or pursuant to a resolution of the Board of
Directors, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
If such a record date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other Act may be given before or after such record
date, but only the Holders of record at the close of business on such record
date shall be deemed to be Holders for purposes of determining whether Holders
of the requisite proportion of outstanding Notes have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other Act, and for that purpose the outstanding Notes shall be
computed as of such record date; provided that no such authorization, agreement
or consent by the Holders on such record date shall be deemed effective unless
it shall become effective pursuant to the provisions of this Indenture not later
than six months after the record date.
ARTICLE II
NOTES
Section 2.01. Designation Amount and Issue of Notes. The Notes shall
be designated as "2.50% Convertible Senior Notes due 2012". Except pursuant to
Sections 2.07, 2.08, 3.08 and 10.02 hereof, Initial Notes may be executed by the
Company and delivered to the Trustee for authentication, and the Trustee shall
thereupon authenticate and deliver said Initial Notes upon a Company Order,
without any further action by the Company hereunder. In addition, the Trustee
shall authenticate and deliver Additional Notes in aggregate principal amounts
specified by the Company, without the consent of the Holders.
Section 2.02. 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
10
Trustee, in such manner and upon instructions given by the holder of such Notes
in accordance with this Indenture. Payment of principal of and interest and
premium, if any, 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 2.03. Execution and Authentication. The Notes shall be
executed on behalf of the Company by an Officer of the Company. The signatures
of such Officer on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signatures of individuals who
were at the time of the execution of the Notes the proper Officers of the
Company shall bind the Company, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and delivery
of such Notes or did not hold such offices at the date of authentication of such
Notes. Notes shall be dated the date of their authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee or an Authenticating Agent by manual signature of an
authorized officer, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
The Notes shall be issued only in registered form without coupons and
only in denominations of $1,000 in principal amount and any whole multiple
thereof.
Section 2.04. Note Registrar, Paying Agent and Conversion Agent. The
Company shall maintain an office or agency where Notes may be presented for
registration of transfer or for exchange ("Note Registrar"), an office or agency
where Notes may be presented for purchase or payment ("Paying Agent") and an
office or agency where Notes may be presented for conversion ("Conversion
Agent"). The Note Registrar shall keep a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe it shall
provide for the registration and transfer of the Notes. The Company may have one
or more co-registrars, one or more additional paying agents and one or more
additional conversion agents. The term Paying Agent includes any additional
paying agent, including any named pursuant to Section 4.05. The term Conversion
Agent includes any additional conversion agent, including any named pursuant to
Section 4.05.
The Company shall notify the Trustee of the name and address of any
such agent. If the Company fails to maintain a Note Registrar, Paying Agent or
Conversion Agent, the Trustee shall act as such and shall be entitled to
appropriate compensation therefor pursuant to Section 7.06. The Company or any
Subsidiary or an Affiliate of either of them may act as Paying Agent, Note
Registrar, Conversion Agent or co-registrar.
11
The Company initially appoints the Trustee as Note Registrar,
Conversion Agent and Paying Agent in connection with the Notes.
Section 2.05. Paying Agent to Hold Money and Notes in Trust. Except as
otherwise provided herein, on or prior to each due date of payments in respect
of any Note, the Company shall deposit with the Paying Agent a sum of money (in
immediately available funds if deposited on the due date) or, to the extent
applicable, Common Shares sufficient to make such payments when so becoming due.
The Company shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of Noteholders
or the Trustee all money and Common Shares held by the Paying Agent for the
making of payments in respect of the Notes and shall notify the Trustee of any
default by the Company in making any such payment. At any time during the
continuance of any such default, the Paying Agent shall, upon the written
request of the Trustee, forthwith pay to the Trustee all money and Common Shares
so held in trust. If the Company, a Subsidiary or an Affiliate of the Company
acts as Paying Agent, it shall segregate the money and Common Shares held by it
as Paying Agent and hold it as a separate trust fund. The Company at any time
may require a Paying Agent to pay all money and Common Shares held by it to the
Trustee and to account for any funds and Common Shares disbursed by it. Upon
doing so, the Paying Agent shall have no further liability for the money or
Common Shares.
Section 2.06. Noteholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Noteholders. If the Trustee is not the Note
Registrar, the Company shall cause to be furnished to the Trustee at least
semiannually on March 1 and September 1 a listing of Noteholders dated within 15
days of the date on which the list is furnished and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Noteholders.
Section 2.07. Transfer and Exchange; Restrictions on Transfer;
Depositary.
(a) Upon surrender for registration of transfer of any Note,
together with a written instrument of transfer satisfactory to the Note
Registrar duly executed by the Noteholder or such Noteholder's attorney duly
authorized in writing, at the office or agency of the company designated as Note
Registrar or co-registrar pursuant to Section 2.04, and satisfaction of the
requirements of such transfer set forth in this Section, 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
denomination or denominations, of a like aggregate principal amount and bearing
such restrictive legends as may be required by this Indenture. The Company shall
not charge a service charge for any registration of transfer or exchange, but
the Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges that may be imposed in connection with
the transfer or exchange of the Notes from the Noteholder requesting such
transfer or exchange.
At the option of the Holder, Notes may be exchanged for other Notes of
any authorized denomination or denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged, together with a written
instrument of transfer satisfactory to the Note Registrar duly executed by the
Noteholder or such Noteholder's attorney duly authorized in
12
writing, at such office or agency. Whenever any Notes are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Notes which the Holder making the exchange is entitled to receive.
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.
The Company shall not be required to make, and the Note Registrar need
not register, transfers or exchanges of any Notes in respect of which a
Fundamental Change Purchase Notice (as defined in Section 3.05(d)) has been
given and not withdrawn by the Holder thereof in accordance with the terms of
this Indenture (except, in the case of Notes to be purchased in part, the
portion thereof not to be purchased).
(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 "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 ("Certificated Notes") and will not be
considered holders of such Global Note.
(c) (i) 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 Certificated Note to a QIB in accordance with Rule 144A that
requests delivery of such Note in the form of an interest in the Global Note,
and upon receipt of the Certificated Note or Notes being so transferred,
together with a certification, substantially in the form of Exhibit B hereto,
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 Certificated Note or Notes in accordance with the standing
instructions and procedures of the Depositary.
(ii) Upon any sale or transfer of a Note to the Company or
any Subsidiary thereof (other than pursuant to a registration statement
that has been declared effective under the Securities Act or after the
expiration of the holding period applicable to sales thereof under Rule
144(k) under the Securities Act), the transferor shall, prior to such sale
or transfer, furnish to the Company and/or Trustee such certifications,
including a certification substantially in the form of Exhibit B hereto,
legal opinions or other information as they may reasonably require to
confirm that the proposed transfer is being made pursuant to
13
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act. Upon any transfer of a beneficial
interest in the Global Note to the Company or such Subsidiary, as the case
may be, 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 Certificated Note or
Notes in exchange therefor, and the Trustee, upon receipt of such
Certificated Note or Notes and a Company Order, shall authenticate and
deliver such Certificated Note or Notes.
(iii) Upon any sale or transfer of a Note pursuant to the
exemption from registration provided by Rule 144 under the Securities Act,
the transferor shall, prior to such sale or transfer, furnish to the
Company and/or the Trustee such certifications, including a certification
substantially in the form of Exhibit B hereto, legal opinions or other
information as they may reasonably require to confirm that the proposed
transfer is being made pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act. Upon
any transfer of a beneficial interest in the Global Note to such
transferee, 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, at the request of the transferee,
either (1) the Company shall execute a Certificated Note or Notes in
exchange therefor, and the Trustee, upon receipt of such Certificated Note
or Notes and a Company Order, shall authenticate and deliver such
Certificated Note or Notes or (2) if a Global Note that does not bear the
legend set forth in Section 2.07(d) has previously been executed and
authenticated, the Trustee shall make an endorsement on such Global Note to
reflect a corresponding increase in the aggregate Principal Amount of Notes
represented by such Global Note.
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 Trustee, 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
2.07(d) to bear the legend set forth in this Section 2.07(d) (together with any
Common Shares issued upon conversion of the Notes and required to bear the
legend set forth in Section 2.07(e), collectively, the "Restricted Securities")
shall be subject to the restrictions on transfer set forth in this Section
2.07(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 2.07(d) and 2.07(c), the term "transfer" encompasses any sale, pledge,
loan, transfer or other disposition whatsoever of any Restricted Security.
14
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 Shares, if any, issued upon
conversion thereof, which shall bear the legend set forth in Section 2.07(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 SECURITY AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY, THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, 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
"RESALE RESTRICTION PERIOD"), ONLY (A) TO ENCYSIVE PHARMACEUTICALS
INC. (THE "COMPANY"), OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (C) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (D) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, INCLUDING UNDER RULE 144, IF AVAILABLE, SUBJECT IN
EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE
DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH INVESTOR ACCOUNT
OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL. EACH HOLDER
ACKNOWLEDGES THAT PRIOR TO THE EXPIRATION
15
OF THE RESALE RESTRICTION PERIOD, THE COMPANY AND THE TRUSTEE RESERVE
THE RIGHT TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER EXPIRATION OF THE RESALE
RESTRICTION PERIOD.
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 2.07, 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 2.07(d).
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in Section 2.07(c), with respect to transfers of beneficial
interests in a Global Note, and in this Section 2.07(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.
Neither any members of, or participants in, the Depositary
(collectively, the "Agent Members") nor any other Persons on whose behalf Agent
Members may act shall have any rights under this Indenture with respect to any
Global Note registered in the name of the Depositary or any nominee thereof, or
under any such Global Note, and the Depositary or such nominee, as the case may
be, may be treated by the Company, the Trustee and any agent of the Company or
the Trustee as the absolute owner and holder of such Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or such nominee, as the case may be, or impair, as between the
Depositary, its Agent Members and any other person on whose behalf an Agent
Member may act, the operation of customary practices of such Persons governing
the exercise of the rights of a holder of any Note.
The Depositary shall be a clearing agency registered under the
Exchange Act. The Company initially appoints The Depository Trust Company to act
as Depositary with respect to the Notes in global form. Initially, the Global
Note shall be issued to the Depositary, registered in the name of Cede & Co., as
the nominee of the Depositary, and deposited with the Trustee, as custodian for
Cede & Co.
If at any time the Depositary for a Global Note notifies the Company
that it is unwilling or unable to continue as Depositary for such Note, the
Company may appoint a
16
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, Certificated Notes, in aggregate principal amount equal to the
principal amount of such Global Note, in exchange for such Global Note.
If a Certificated Note is issued in exchange for any portion of a
Global Note after the close of business at the office or agency where such
exchange occurs on any Regular 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 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.
Certificated Notes issued in exchange for all or a part of a Global
Note pursuant to this Section 2.07 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 Certificated Notes
to the Persons in whose names such Certificated Notes are so registered.
At such time as all interests in a Global Note have been converted,
canceled, exchanged for Certificated Notes, or transferred to a transferee who
receives Certificated Notes 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 Trustee. At any time prior
to such cancellation, if any interest in a Global Note is exchanged for
Certificated Notes, converted, repurchased or canceled, or transferred to a
transferee who receives Certificated Notes therefor or any Certificated Note 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 Trustee, be appropriately reduced or
increased, as the case may be, and an endorsement shall be made on such Global
Note, by 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 share certificate representing Common Shares issued upon
conversion of any Note shall bear a legend in substantially the following form,
unless such Common Shares have 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 Shares have 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:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR
THEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
17
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY, BY
ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL OR OTHERWISE TRANSFER
SUCH SECURITY, 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 "RESALE RESTRICTION PERIOD"), ONLY
(A) TO ENCYSIVE PHARMACEUTICALS INC. (THE "COMPANY"), OR ANY
SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING UNDER
RULE 144, IF AVAILABLE, SUBJECT IN EACH OF THE FOREGOING CASES TO ANY
REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE
PROPERTY OF SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN
ITS OR THEIR CONTROL. EACH HOLDER ACKNOWLEDGES THAT PRIOR TO THE
EXPIRATION OF THE RESALE RESTRICTION PERIOD, THE COMPANY AND THE
TRANSFER AGENT RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE
COMPANY, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE EXPIRATION OF
THE RESALE RESTRICTION PERIOD.
Any such Common Shares 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 Common Shares for exchange in
accordance with the procedures of the transfer agent for the Common Shares, be
exchanged for a new certificate or certificates for a like number of Common
Shares, which shall not bear the restrictive legend required by this Section
2.07(e).
18
(f) Any Note or Common Shares 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 Shares, as the case may be, no longer being "restricted
securities" (as defined under Rule 144).
Section 2.08. Replacement Notes. If (a) any mutilated Note is
surrendered to the Trustee, or (b) the Company, the Trustee and, if applicable,
the Authenticating Agent receive evidence to their satisfaction of the
destruction, loss or theft of any Note, and there is delivered to the Company,
the Trustee and, if applicable, the Authenticating Agent such Note or indemnity
as may be required by them to save each of them harmless, then, in the absence
of notice to the Company, the Trustee or, if applicable, the Authenticating
Agent that such Note has been acquired by a bona fide purchaser, the Company
shall execute and upon its written request the Trustee or the Authenticating
Agent shall authenticate and deliver, in exchange for any such mutilated Note or
in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and
principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, or is about to be purchased by the
Company pursuant to Article 3 hereof, the Company in its discretion may, instead
of issuing a new Note, pay or purchase such Note, as the case may be.
Upon the issuance of any new Notes under this Section 2.08, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee and any Authenticating
Agent) connected therewith.
Every new Note issued pursuant to this Section 2.08 in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Note shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Notes duly issued hereunder.
The provisions of this Section 2.08 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.09. Outstanding Notes; Determination of Holders' Action.
Notes outstanding at any time are all the Notes authenticated by the Trustee
except for those cancelled by it or delivered to it for cancellation, those paid
pursuant to Section 2.08 and those described in this Section 2.09 as not
outstanding. A Note does not cease to be outstanding because the Company or an
Affiliate thereof holds the Note; provided, however, that in determining whether
the Holders of the requisite principal amount of the outstanding Notes have
given or concurred in any request, demand, authorization, direction, notice,
consent or waiver hereunder, Notes owned
19
by the Company or any other obligor upon the Notes or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes which a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded. Subject to the foregoing,
only Notes outstanding at the time of such determination shall be considered in
any such determination (including, without limitation, determinations pursuant
to Articles 6 and 9).
If a Note is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the Paying Agent holds, in accordance with this Indenture, on the
Business Day following the Fundamental Change Purchase Date, or on Stated
Maturity, money or securities, if permitted hereunder, sufficient to pay Notes
payable on that date, then immediately after such Fundamental Change Purchase
Date or Stated Maturity, as the case may be, such Notes shall cease to be
outstanding and interest on such Notes, and Liquidated Damages, if any, shall
cease to accrue.
If a Note is converted in accordance with Article 10, then from and
after the time of conversion on the conversion date, such Note shall cease to be
outstanding and interest, and Liquidated Damages, if any, shall cease to accrue
on such Note.
Section 2.10. Temporary Notes. Pending the preparation of definitive
Notes, the Company may execute, and upon a Company Order the Trustee shall
authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Notes may determine, as conclusively
evidenced by their execution of such Notes.
If temporary Notes are issued, the Company will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Company
designated for such purpose pursuant to Section 2.04, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes the
Company shall execute and the Trustee or an Authenticating Agent shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Notes of authorized denominations. Until so exchanged the temporary
Notes shall in all respects be entitled to the same benefits under this
Indenture as definitive Notes.
Section 2.11. Cancellation. All Notes surrendered for payment,
purchase by the Company pursuant to Article 3, conversion or registration of
transfer or exchange shall, if surrendered to any person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by
20
the Trustee. The Company may not issue new Notes to replace Notes it has paid or
delivered to the Trustee for cancellation or that any Holder has converted
pursuant to Article 10. No Notes shall be authenticated in lieu of or in
exchange for any Notes cancelled as provided in this Section 2.11, except as
expressly permitted by this Indenture. All cancelled Notes held by the Trustee
shall be disposed of by the Trustee in its customary manner.
Section 2.12. Persons Deemed Owners. Prior to due presentment of a
Note for registration of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name such Note is
registered as the owner of such Note for the purpose of receiving payment of
principal of the Note or the payment of any Fundamental Change Purchase Price in
respect thereof, and accrued and unpaid interest thereon, for the purpose of
conversion and for all other purposes whatsoever, whether or not such Note be
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary.
Section 2.13. CUSIP/ISIN Numbers. The Company in issuing the Notes may
use "CUSIP" and "ISIN" numbers (if then generally in use). No representation is
made as to the correctness of such CUSIP numbers and reliance may be placed only
on the other identification numbers printed on the Notes, and any redemption
shall not be affected by any defect in or omission of such number. The Company
will promptly notify the Trustee of any change in the CUSIP numbers.
Section 2.14. Default Interest. If the Company defaults in a payment
of interest on the Notes, it shall pay, or shall deposit with the Paying Agent
money in immediately available funds sufficient to pay, the defaulted interest,
plus (to the extent lawful) any interest payable on the defaulted interest, to
the Persons who are Holders on a subsequent special record date in each case at
the rate specified in the Notes. A special record date, as used in this Section
2.14 with respect to the payment of any defaulted interest, shall mean the 15th
day next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day. At least 15 days before the
subsequent special record date, the Company shall mail to each Holder and to the
Trustee a notice that states the subsequent special record date, the payment
date and the amount of defaulted interest to be paid.
ARTICLE III
REDEMPTION AND REPURCHASE
Section 3.01. Company's Right to Redeem. Prior to March 20, 2010, the
Notes shall not be redeemable at the Company's option. At any time on or after
March 20, 2010 and prior to Stated Maturity, the Company, at its option, may
redeem the Notes, in whole or in part, in accordance with the provisions of
Section 3.02, Section 3.03 and Section 3.04 on the Redemption Date for a
redemption price (the "Redemption Price") in cash equal to 100% of the principal
amount of the Notes plus any accrued and unpaid interest and Liquidated Damages,
if any, on the Notes redeemed to but excluding the Redemption Date if the
Closing Price of the Common Shares has exceeded 140% of the Conversion Price
then in effect for at least 20 Trading Days in the consecutive 30 Trading Day
period ending on the Trading Day prior to the date on which the Redemption
Notice is mailed. The Company shall deliver an Officers' Certificate to the
Trustee, when it delivers the notice to it as provided herein, that the
foregoing
21
conditions to permit the Company to redeem the Notes have been satisfied. If a
Note is converted after the date the Redemption Notice is mailed and before the
close of business on the second Business Day immediately preceding the
Redemption Date, the Company will pay with respect to such Note accrued and
unpaid interest and Liquidated Damages, if any, up to but excluding the
Redemption Date.
Section 3.02. Notice of Optional Redemption; Selection of Notes.
(a) 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
3.01, it shall fix a date for redemption (the "Redemption Date") and it or, at
its written request (which request must include the information listed in
Section 3.02(b) and be received by the Trustee not fewer than thirty-five (35)
days prior (or such shorter period of time as may be acceptable to the Trustee)
to the Redemption Date), 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 (a
"Redemption Notice") not fewer than twenty (20) nor more than sixty (60) days
prior to the Redemption Date to each holder of Notes so to be redeemed as a
whole or in part at its last address as the same appears on the Note Register;
provided that if the Company shall give such notice, it shall also give written
notice of the Redemption Date 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
Redemption Notice, 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.
(b) Each such Redemption Notice shall specify the aggregate
principal amount of Notes to be redeemed, the CUSIP, ISIN or similar number or
numbers of the Notes being redeemed, the Redemption Date (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 and unpaid up to but not including the
Redemption Date will be paid as specified in said notice, and that on and after
said date interest thereon or on the portion thereof to be redeemed will cease
to accrue. Such notice shall also state the current Conversion Price and the
date on which the right to convert such Notes or portions thereof into Common
Shares will expire. If fewer than all the Notes are to be redeemed, the
Redemption Notice shall identify the Notes to be redeemed (including CUSIP, ISIN
or similar number or numbers, if any). In case any Note is to be redeemed in
part only, the Redemption Notice shall state the portion of the principal amount
thereof to be redeemed and shall state that, on and after the Redemption Date,
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion thereof will be issued.
(c) On or prior to the Redemption Date specified in the
Redemption Notice given as provided in this Section 3.02, the Company will
deposit with the Trustee or with one or more Paying Agents an amount of money
(in immediately available funds if deposited on
22
the Redemption Date) 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 Shares) at the appropriate Redemption
Price; provided that if such payment is made on the Redemption Date it must be
received by the Trustee or Paying Agent, as the case may be, by 11:00 a.m., New
York City time, on such date. 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 3.02(c) in excess of amounts required hereunder
to pay the Redemption Price. Subject to the last sentence of Section 7.05, if
any Note called for redemption is converted pursuant hereto prior to such
Redemption Date, 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 thirty-five (35) days (or such shorter period of time as may be
acceptable to the Trustee) prior to the Redemption Date as to the aggregate
principal amount of Notes to be redeemed.
(d) If the Company opts to redeem less than all of the
outstanding Notes, the Trustee shall select or cause to be selected 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 whole multiples thereof) by lot or
at random, 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 possible) to be from the portion
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
Redemption Notice.
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 Redemption Notice 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 3.03. Payment of Notes Called for Redemption by the Company.
If notice of redemption has been given as provided in Section 3.02(a), the Notes
or portion of Notes with respect to which such notice has been given shall,
unless converted into Common Shares pursuant to the terms hereof, become due and
payable on the Redemption Date and at the place or places stated in such notice
at the applicable Redemption Price, unless the Company shall default in the
payment of the Redemption Price. Interest on the Notes or portion of Notes so
called for redemption shall cease to accrue, and after the close of business on
the second Business Day immediately preceding the Redemption Date (unless the
Company shall default in the payment of the Redemption Price), such Notes shall
cease to be convertible into Common Shares and, except as provided in Section
7.05, 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. On presentation and surrender of such
Notes at a place of
23
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; provided that if the applicable Redemption Date is an Interest Payment
Date, the interest payable on such Interest Payment Date shall be paid on such
Interest Payment Date to the holders of record of such Notes on the applicable
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 Note or Notes so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any Notes
or mail any Redemption Notices during the continuance of a default in payment of
interest on the Notes. If any Note called for redemption shall not be so paid
upon surrender thereof for redemption, the principal shall, until paid or duly
provided for, continue to bear interest at the rate borne by the Note, and such
Note shall remain convertible into Common Shares, cash or a combination of cash
and Common Shares until the principal and interest shall have been paid or duly
provided for. The Company will notify all of the holders if the Company redeems
any of the Notes.
Section 3.04. Conversion Arrangement on Call for Redemption. In
connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more investment
banks 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
and unpaid to, but excluding, the date fixed for redemption, of such Notes.
Notwithstanding anything to the contrary contained in this Article 3, the
obligation of the Company to pay the redemption price of such Notes, together
with interest accrued and unpaid 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 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 3.05. Purchase of Notes at Option of the Holder Upon
Fundamental Change.
(a) If there shall have occurred a Fundamental Change, all or any
portion of the Notes of any Holder equal to $1,000 or a whole multiple of
$1,000, shall be
24
repurchased by the Company, at the option of such Holder, at a repurchase price
equal to 100% of the aggregate principal amount of the Notes to be repurchased,
together with accrued and unpaid interest and Liquidated Damages, if any, to,
but excluding, the purchase date (the "Fundamental Change Purchase Price"), on
the date (the "Fundamental Change Purchase Date") that is 45 days after the date
the Company delivered the notice required under Section 3.05(c) (or if such 45th
day is not a Business Day, the next succeeding Business Day); provided, however,
that if the Fundamental Change Purchase Date is after a Regular Record Date but
on or prior to the corresponding Interest Payment Date, the accrued and unpaid
interest becoming due on such Interest Payment Date shall be payable to the
Holders of such Notes, or one or more predecessor Notes, registered as such on
the relevant Regular Record Date according to their terms.
If and only to the extent a Holder timely elects to convert Notes in
connection with a Fundamental Change transaction pursuant to clause (ii) of the
Change of Control definition set forth in this Section 3.05(a) that occurs on or
prior to maturity, pursuant to which 5% or more of the consideration for Common
Shares (excluding cash payments for fractional shares and cash payments made in
respect of dissenters' appraisal rights) in such Fundamental Change transaction
consists of cash or securities (or other property) that are not traded or
scheduled to be traded immediately following such transaction on a U.S. national
securities exchange or the NASDAQ National Market (such a Fundamental Change
transaction referred to herein as a "Make-Whole Eligible Transaction"), then
except as set forth in Section 3.05(b), such holder will be entitled to receive,
in addition to a number of Common Shares equal to the Conversion Rate per $1,000
principal amount of Notes, an additional number of Common Shares (the
"Additional Shares") as described below; provided that if the Share Price paid
in connection with such transaction is greater than $50.00 or less than $10.33
(subject in each case to adjustment as described below), no Additional Shares
shall be issuable. No Additional Shares shall be issuable under this Section
3.05(a) unless the Holder elects to convert the Notes in connection with such
Make-Whole Eligible Transaction and in accordance with this Section 3.05(a).
Notwithstanding this Section 3.05(a), if the Company elects to adjust the
Conversion Rate pursuant to Section 3.05(b), the provisions of Section 3.05(b)
will apply in lieu of the provisions of this Section 3.05(a).
In order to be eligible to receive the Additional Shares, a Noteholder
must exercise his conversion rights at any time from and after the earlier of
the date of the first public announcement that a transaction will constitute a
Make-Whole Eligible Transaction or the date the Company enters into a definitive
agreement which will result in a Make-Whole Eligible Transaction until and
including the fifteenth day after the effective date of such Make-Whole Eligible
Transaction. The number of Additional Shares issuable in connection with the
conversion of Notes as described in the immediately preceding paragraph will be
determined by reference to the table attached as Schedule I hereto, based on the
effective date of such Make-Whole Eligible Transaction and the Share Price paid
in connection with such transaction; provided that if the Share Price is between
two Share Price amounts in the table or such effective date is between two
effective dates in the table, the number of Additional Shares will be determined
by a straight-line interpolation between the number of Additional Shares set
forth for the higher and lower Share Price amounts and the two dates, as
applicable, based on a 365-day year. The "effective date" with respect to a
Fundamental Change transaction means the date that a Fundamental Change becomes
effective.
25
The Share Prices set forth in the first row of the table in Schedule I
hereto will be adjusted as of any date on which the Conversion Rate of the Notes
is adjusted pursuant to Section 10.04. The adjusted Share Prices will equal the
Share Prices applicable immediately prior to such adjustment, multiplied by a
fraction, the numerator of which is the Conversion Rate immediately prior to the
adjustment giving rise to the Share Price adjustment and the denominator of
which is the Conversion Rate as so adjusted. The number of Additional Shares
will be adjusted in the same manner as the Conversion Rate as set forth in
Section 10.04.
Notwithstanding the foregoing, at the Company's option, in lieu of
issuing the Additional Shares, it may elect to make a cash payment to converting
Noteholders equal to the number of Additional Shares issuable pursuant to
Schedule I multiplied by the Share Price paid in connection with the
transaction. The Company must specify its election of the foregoing option in
the notice specified in Section 3.05(c), and once this notice has been provided,
it may not modify or withdraw its election.
Notwithstanding the foregoing, in no event will the total number of
Common Shares issuable upon conversion per $1,000 principal amount of Notes
exceed 96.8054, subject to adjustments in the same manner as the Conversion Rate
as set forth in Section 10.04.
A "Fundamental Change" will be deemed to have occurred upon a Change
of Control or a Termination in Trading.
A "Change of Control" of the Company shall be deemed to have occurred
at such time after the original issuance of the Notes as any of the following
events shall occur:
(i) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), acquires the beneficial ownership (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that such Person shall be
deemed to have "beneficial ownership" of all securities that such Person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, through a
purchase, amalgamation, merger or other acquisition transaction, of 50% or
more of the total voting power of the total outstanding Voting Stock of the
Company other than an acquisition by the Company, any of its Subsidiaries
or any employee benefit plans of the Company; or
(ii) the Company consolidates with, or amalgamates or merges with
or into, another Person or conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any Person, or any Person
consolidates with, or amalgamates or merges with or into, the Company other
than:
(A) any transaction (1) that does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of the Capital Stock of the Company and (2) pursuant to which
holders of the Capital Stock of the Company immediately prior to the
transaction are entitled to exercise,
26
directly or indirectly, 50% or more of the total voting power of the
Capital Stock of the Company entitled to vote generally in the
election of directors of the continuing or surviving person
immediately after the transaction;
(B) any amalgamation or merger for the purpose of changing
the Company's jurisdiction of organization and resulting in a
reclassification, conversion or exchange of outstanding Common Shares
solely into shares of common equity of the surviving or continuing
entity; or
(C) any transaction in which at least 95% of the
consideration for the Common Shares (excluding cash payments for
fractional shares and cash payments made in respect of dissenters'
appraisal rights) in the transaction or transactions otherwise
constituting the Change of Control consists of shares of common equity
traded on a United States national securities exchange or quoted on
the NASDAQ National Market, or which will be so traded or quoted when
issued or exchanged in connection with the Change of Control, and as a
result of such transaction or transactions the Notes become
convertible solely into such shares of common equity, or
(iii) during any consecutive two-year period, individuals who at
the beginning of that two-year period constituted the Board of Directors
(together with any new directors whose election to the Board of Directors,
or whose nomination for election by the shareholders of the Company, was
approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election were previously so approved) cease for any reason
to constitute a majority of the Board of Directors then in office; or
(iv) the shareholders of the Company pass a special resolution
approving a liquidation or dissolution and no additional approvals of the
Company's shareholders are required under applicable law to cause a
liquidation or dissolution.
Beneficial ownership will be determined in accordance with Rule 13d-3
promulgated by the SEC under the Exchange Act. The term "person" includes any
syndicate or group that would be deemed a "person" under Section 13(d)(3) of the
Exchange Act. A "Termination in Trading" will be deemed to have occurred any
time the Common Shares (or other common shares into which the notes are then
convertible) are neither listed for trading on a United States national or
regional securities exchanges nor approved for trading on the NASDAQ National
Market, NASDAQ SmallCap Market or any other established United States system of
automated dissemination of quotations of securities prices.
(b) Notwithstanding the foregoing, in the case of a Public
Acquirer
27
Change of Control (as defined below), the Company may, in lieu of increasing the
Conversion Rate by Additional Shares as described in Section 3.05(a), elect to
adjust the Conversion Rate and the related Conversion Obligation (as defined in
Section 10.01) such that from and after the effective date of such Public
Acquirer Change of Control, Holders of the Notes will be entitled to convert the
Notes into a number of shares of Public Acquirer Common Stock (as defined below)
by multiplying the Conversion Rate in effect immediately before the Public
Acquirer Change of Control by a fraction:
(i) the numerator of which will be (i) in the case of a
consolidation, amalgamation, merger or binding share exchange, pursuant to
which the Common Shares are converted into cash, securities or other
property, the average value of all cash and any other consideration (as
determined by the Board of Directors) paid or payable per Common Share or
(ii) in the case of any other Public Acquirer Change of Control, the
average of the last reported sale price of the Common Shares for the five
consecutive Trading Days prior to but excluding the effective date of such
Public Acquirer Change of Control, and
(ii) the denominator of which will be the average of the
last reported sale prices of the Public Acquirer Common Stock for the five
consecutive Trading Days commencing on the Trading Day next succeeding the
effective date of such Public Acquirer Change of Control.
A "Public Acquirer Change of Control" means any event constituting a
Change of Control that would otherwise obligate the Company to increase the
Conversion Rate as described in Section 3.05(a) and the acquirer (or any entity
that is a directly or indirectly wholly-owned Subsidiary of the acquirer or of
which the acquirer is a directly or indirectly wholly-owned Subsidiary) has a
class of common stock traded on a national securities exchange or quoted on the
NASDAQ National Market or which will be so traded or quoted when issued or
exchanged in connection with such event (the "Public Acquirer Common Stock").
After the adjustment of the Conversion Rate in connection with a
Public Acquirer Change of Control, the Conversion Rate will be subject to
further similar adjustments in the event that any of the events described in
Section 10.01 occur thereafter.
Upon a Public Acquirer Change of Control, if the Company so elects,
Holders may convert the Notes at the adjusted Conversion Rate described in the
third preceding paragraph but will not be entitled to the increased Conversion
Rate described under Section 3.05(a). The Company is required to notify Holders
of its election in writing of such transaction. In addition, the Holder can
also, subject to certain conditions, require the Company to repurchase all or a
portion of its Notes as described under Section 3.05(a).
(c) Prior to or on the 30th day after the occurrence of a
Fundamental Change, the Company, or, at the written request and expense of the
Company prior to or on the 30th day after such occurrence, the Trustee, shall
give to all Holders, in the manner provided in Section 12.02 hereof, notice of
the occurrence of the Fundamental Change and of the purchase right set forth
herein arising as a result thereof. The Company shall also deliver a copy of
such notice of a purchase right to the Trustee. The notice shall include a form
of Fundamental Change
28
Purchase Notice (as defined in Section 3.05(d)) to be completed by the Holder
and shall state:
(1) briefly, the events causing a Fundamental Change and the
date of such Fundamental Change;
(2) the date by which the Fundamental Change Purchase Notice
pursuant to this Section 3.05 must be given;
(3) the Fundamental Change Purchase Date;
(4) the Fundamental Change Purchase Price;
(5) the name and address of the Paying Agent and the
Conversion Agent;
(6) that Notes as to which a Fundamental Change Purchase
Notice has been given may be converted pursuant to Article 10
hereof only if the Fundamental Change Purchase Notice has been
withdrawn in accordance with the terms of this Indenture;
(7) that Notes must be surrendered to the Paying Agent to
collect payment;
(8) that the Fundamental Change Purchase Price for any Note
as to which a Fundamental Change Purchase Notice has been duly
given and not withdrawn will be paid promptly following the later
of the Fundamental Change Purchase Date and the time of surrender
of such Note as described in (7) above;
(9) briefly, the procedures the Holder must follow to
exercise rights under this Section 3.05;
(10) briefly, the conversion rights of the Notes, including
the Conversion Rate and any adjustments thereto;
(11) the procedures for withdrawing a Fundamental Change
Purchase Notice; and
(12) the CUSIP/ISIN number of the Notes.
(d) A Holder may exercise its rights specified in this Section
3.05 upon delivery of a written notice of purchase ("Fundamental Change Purchase
Notice") to the Paying Agent prior to the Fundamental Change Purchase Date,
stating:
(1) the certificate number of the Note, if any, which the
Holder will deliver to be purchased or the appropriate Depositary
procedures if the Notes are not in certificated form;
29
(2) the portion of the principal amount of the Note which
the Holder will deliver to be purchased, which portion must be
$1,000 or any whole multiple thereof; and
(3) that such Note shall be purchased pursuant to the terms
and conditions specified in paragraph 5 on the reverse side of
the Notes and in accordance with this Indenture.
If the Notes are not in certificated form, a Holder's Fundamental
Change Purchase Notice must comply with the appropriate DTC procedures.
The delivery or book-entry transfer of such Note to the Paying Agent
prior to the Fundamental Change Purchase Date (together with all necessary
endorsements) at the offices of the Paying Agent shall be a condition to the
receipt by the Holder of the Fundamental Change Purchase Price therefor;
provided, however, that such Fundamental Change Purchase Price shall be so paid
pursuant to this Section 3.05 only if the Note so delivered to the Paying Agent
shall conform in all respects to the description thereof set forth in the
related Fundamental Change Purchase Notice.
The Company shall purchase from the Holder thereof, pursuant to this
Section 3.05, a portion of a Note so delivered for purchase if the principal
amount of such portion is $1,000 or a whole multiple of $1,000. Provisions of
this Indenture that apply to the purchase of all of a Note also apply to the
purchase of such portion of such Note.
Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.05 shall be consummated by the delivery of the consideration to
be received by the Holder promptly following the later of the Fundamental Change
Purchase Date and the time of delivery or book-entry transfer of the Note to the
Paying Agent in accordance with this Section 3.05.
Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Fundamental Change Purchase Notice contemplated by this
Section 3.05 shall have the right to withdraw such Fundamental Change Purchase
Notice at any time prior to the close of business on the Business Day prior to
the Fundamental Change Purchase Date by delivery of a written notice of
withdrawal to the Paying Agent in accordance with Section 3.06.
The Paying Agent shall promptly notify the Company of the receipt by
it of any Fundamental Change Purchase Notice or written withdrawal thereof.
Section 3.06. Effect of Fundamental Change Purchase Notice. Upon
receipt by the Paying Agent of the Fundamental Change Purchase Notice specified
in Section 3.05(d), the Holder of the Note in respect of which such Fundamental
Change Purchase Notice was given shall (unless such Fundamental Change Purchase
Notice is withdrawn as specified in the following two paragraphs) thereafter be
entitled to receive solely the Fundamental Change Purchase Price with respect to
such Note. Such Fundamental Change Purchase Price shall be paid to such Holder,
subject to receipt of consideration for the Notes by the Paying Agent, promptly
following the later of (x) the Fundamental Change Purchase Date with respect to
such Note (provided the conditions in Section 3.05(d), as the case may be, have
been satisfied) or (y)
30
the time of delivery or book-entry transfer of such Note to the Paying Agent by
the Holder thereof in the manner required by Section 3.05(d), as the case may
be. Notes in respect of which a Fundamental Change Purchase Notice has been
given by the Holder thereof may not be converted pursuant to Article 10 hereof
on or after the date of the delivery of such Fundamental Change Purchase Notice
unless such Fundamental Change Purchase Notice has first been validly withdrawn
as specified in the following two paragraphs.
A Fundamental Change Purchase Notice may be withdrawn by means of a
written notice of withdrawal delivered to the office of the Paying Agent in
accordance with the Fundamental Change Purchase Notice at any time prior to the
close of business on the Business Day immediately preceding the Fundamental
Change Purchase Date specifying:
(1) the certificate number of the Note in respect of which such
notice of withdrawal is being submitted or, if not in certificated
form, the applicable Depositary procedures,
(2) the principal amount of the Note with respect to which such
notice of withdrawal is being submitted, and
(3) the principal amount, if any, of such Note which remains
subject to the original Fundamental Change Purchase Notice and which
has been or will be delivered for purchase by the Company.
There shall be no purchase of any Notes pursuant to Section 3.05 if
there has occurred (prior to, on or after, as the case may be, the giving, by
the Holders of such Notes, of the required Fundamental Change Purchase Notice)
and is continuing an Event of Default (other than a default in the payment of
the Fundamental Change Purchase Price with respect to such Notes). The Paying
Agent will promptly return to the respective Holders thereof any Notes (x) with
respect to which a Fundamental Change Purchase Notice has been withdrawn in
compliance with this Indenture, or (y) held by it during the continuance of an
Event of Default (other than a default in the payment of the Fundamental Change
Purchase Price with respect to such Notes) in which case, upon such return, the
Fundamental Change Purchase Notice with respect thereto shall be deemed to have
been withdrawn.
Section 3.07. Deposit of Fundamental Change Purchase Price. Prior to
11:00 a.m. (New York City time) on the Fundamental Change Purchase Date, the
Company shall deposit with the Trustee or with the Paying Agent (or, if the
Company or a Subsidiary or an Affiliate of either of them is acting as the
Paying Agent, shall segregate and hold in trust as provided in Section 2.05) an
amount of cash (in immediately available funds if deposited on such Business
Day) sufficient to pay the aggregate Fundamental Change Purchase Price of all
the Notes or portions thereof which are to be purchased as of the Fundamental
Change Purchase Date.
If the Trustee or other Paying Agent appointed by the Company, or the
Company or an Affiliate of the Company, if it or such Affiliate is acting as the
Paying Agent, holds cash sufficient to pay the aggregate Fundamental Change
Purchase Price of all the Notes or portions thereof that are to be purchased as
of the Fundamental Change Purchase Date (i) such Notes will
31
cease to be outstanding, (ii) interest on such Notes, and Liquidated Damages, if
any, will cease to accrue and (iii) all other rights of the Holders of such
Notes will terminate other than the right to receive the Fundamental Change
Purchase Price upon delivery of the Notes, whether or not book-entry transfer of
the Notes has been made or the Notes have been delivered to the Trustee or
Paying Agent.
Section 3.08. Notes Purchased in Part. Any Note which is to be
purchased only in part shall be surrendered at the office of the Paying Agent
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing) and the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Note, without service charge, a
new Note or Notes, of any authorized denomination as requested by such Holder in
aggregate principal amount equal to, and in exchange for, the portion of the
principal amount of the Note so surrendered which is not purchased.
Section 3.09. Covenant to Comply with Securities Laws Upon Purchase of
Notes. In connection with any offer to purchase or purchase of Notes under
Section 3.05 hereof (provided that such offer or purchase constitutes an "issuer
tender offer" for purposes of Rule 13e-4 (which term, as used herein, includes
any successor provision thereto) under the Exchange Act at the time of such
offer or purchase), the Company shall (i) comply with Rule 13e-4, Rule 14e-1 and
any other tender offer rules under the Exchange Act which may then be
applicable, (ii) file the related Schedule TO (or any successor schedule, form
or report) or any other schedule required under the Exchange Act, and (iii)
otherwise comply with all federal and state securities laws so as to permit the
rights and obligations under Section 3.05 to be exercised in the time and in the
manner specified in Section 3.05.
Section 3.10. Repayment to the Company. The Trustee and the Paying
Agent shall return to the Company any cash or Common Shares that remain
unclaimed for two years as provided in paragraph 9 of the Notes, together with
interest or dividends, if any, thereon, held by them for the payment of the
Fundamental Change Purchase Price and the holder of any of the Notes shall
thereafter look only to the Company as a general creditor for any payment that
such holder may be entitled to collect when an applicable abandoned property law
designates another Person; provided, however, that to the extent that the
aggregate amount of cash deposited by the Company pursuant to Section 3.07
exceeds the aggregate Fundamental Change Purchase Price of the Notes or portions
thereof which the Company is obligated to purchase as of the Fundamental Change
Purchase Date then promptly after the Business Day following the Fundamental
Change Purchase Date the Trustee shall return any such excess to the Company
together with interest, if any, thereon.
ARTICLE IV
COVENANTS
Section 4.01. Payment of Principal, Premium, Interest on the Notes.
The Company will duly and punctually pay the principal of and premium, if any,
and interest (including Liquidated Damages, if any) in respect of the Notes in
accordance with the terms of the Notes and this Indenture. The Company will
deposit or cause to be deposited with the
32
Trustee as directed by the Trustee, no later than the day of the Stated Maturity
of any Note or installment of interest, all payments so due. The principal
amount, Fundamental Change Purchase Price and cash interest shall be considered
paid on the applicable date due if on such date (or, in the case of a
Fundamental Change Purchase Price on the Business Day following the applicable
Fundamental Change Purchase Date) the Trustee or the Paying Agent holds, in
accordance with this Indenture, money or Notes, if permitted hereunder,
sufficient to pay all such amounts then due.
The Company shall, to the extent permitted by law, pay cash interest
on overdue amounts at the rate per annum set forth in paragraph 1 of the Notes,
which interest shall accrue from the date such overdue amount was originally due
to the date payment of such amount, including interest thereon, has been made or
duly provided for. All such interest shall be payable on demand.
Section 4.02. Reports by the Company. The Company shall file with the
Trustee (and the SEC after the Indenture becomes qualified under the TIA), and
transmit to holders of Notes, such information, documents and other reports and
such summaries thereof, as may be required pursuant to the TIA at the times and
in the manner provided pursuant to the TIA, whether or not the Notes are
governed by the TIA; provided, however, that any such information, documents or
reports required to be filed with the SEC 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 SEC; provided, however, that delivery
may be effected in accordance with the provisions of Rule 19a-1 under the TIA if
and during any time the Company is eligible thereunder; and provided further,
that the Company shall not be required to deliver to the Trustee any material
for which the Company has sought and received confidential treatment by the SEC.
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).
Section 4.03. Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on December 31, 2005) an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
Section 4.04. Further Instruments and Acts. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture. The Company will ensure that all
certificates representing its Common Shares which are issued pursuant to Section
10.01 will be (i) manually signed by one of the authorized officers of the
transfer agent and registrar for the Common Stock, (ii) registered by such
transfer agent and
33
registrar and (iii) consistent with the form authorized by the Company's Board
of Directors.
Section 4.05. Maintenance of Office or Agency. The Company will
maintain in the Borough of Manhattan, the City of New York, an office or agency
of the Trustee, Note Registrar, Paying Agent and Conversion Agent where Notes
may be presented or surrendered for payment, where Notes may be surrendered for
registration of transfer, exchange, purchase or conversion and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Corporate Trust Office and each office or agency of the Trustee in
the Borough of Manhattan, the City of New York, shall initially be one such
office or agency for all of the aforesaid purposes. The Company shall give
prompt written notice to the Trustee of the location, and of any change in the
location, of any such office or agency (other than a change in the location of
the office of 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 address of the Trustee set forth in Section 12.02.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York, for such purposes.
Section 4.06. Delivery of Certain Information. At any time when the
Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the
request of a Holder or any beneficial owner of Notes or Common Shares issued
upon conversion thereof, the Company will promptly furnish or cause to be
furnished Rule 144A Information (as defined below) to such Holder or any
beneficial owner of Notes or holder of Common Shares issued upon conversion of
Notes, or to a prospective purchaser of any such security designated by any such
holder, as the case may be, to the extent required to permit compliance by such
Holder or holder with Rule 144A under the Securities Act in connection with the
resale of any such security. "Rule 144A Information" shall be such information
as is specified pursuant to Rule 144A(d)(4) under the Securities Act. Whether a
person is a beneficial owner shall be determined by the Company to the Company's
reasonable satisfaction.
Section 4.07. Existence. Subject to Article 5, 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 4.08. 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 (ordinary wear and tear excepted) 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
34
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 Significant Subsidiary and not
disadvantageous in any material respect to the Noteholders.
Section 4.09. 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, 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 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 4.10. 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 seven 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. The
Trustee shall not at any time be under any duty or owe a 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 V
SUCCESSOR CORPORATION
Section 5.01. When Company May Merge or Transfer Assets. The Company
may, without the consent of the Holders of the Notes, consolidate or amalgamate
with, merge with or convert into any other Person or convey, transfer or lease
all or substantially all of its properties and assets to any other Person, if:
(a) such Person (other than an individual) is organized and
validly existing under the laws of the United States or any of its political
subdivisions and such Person shall expressly remain liable for or assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of the Company under the
Notes and this Indenture;
35
(b) at the time of such transaction, no Default or Event of
Default shall have happened and be continuing; and
(c) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
amalgamation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture, comply with this Article 5 and that all conditions precedent herein
provided for relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise) of the properties and assets of one or more Subsidiaries
(other than to the Company or another Subsidiary), which, if such assets were
owned by the Company, would constitute all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
The successor person formed by such consolidation or amalgamation or
into which the Company is merged or the successor person to which such
conveyance, transfer or lease is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture with
the same effect as if such successor had been named as the Company herein; and
thereafter, except in the case of a lease and obligations the Company may have
under a supplemental indenture pursuant to Section 10.11, the Company shall be
discharged from all obligations and covenants under this Indenture and the
Notes. Subject to Section 9.06, the Company, the Trustee and the successor
person shall enter into a supplemental indenture to evidence the succession and
substitution of such successor person and such discharge and release of the
Company.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.01. Events of Default. An "Event of Default" occurs if:
(a) the Company fails to pay when due the principal of or
premium, if any, on any of the Notes at maturity, upon exercise of a repurchase
right or otherwise;
(b) the Company fails to pay an installment of interest
(including Liquidated Damages, if any) on any of the Notes that continues for 30
days after the date when due;
(c) the Company fails to deliver Common Shares, together with
cash in lieu of fractional shares, when such Common Shares or cash in lieu of
fractional shares are required to be delivered upon conversion of a Note and
such failure continues for 10 days after such delivery date;
(d) the Company fails to give notice regarding a Fundamental
Change within the time period specified in Section 3.05;
(e) the Company fails to perform or observe any other term,
covenant
36
or agreement contained in the Notes or this Indenture for a period of 60 days
after receipt by the Company of a Notice of Default (as defined below);
(f) the Company or any Significant Subsidiary fails to make any
payment by the end of the applicable grace period, if any, after the final
scheduled payment date for such payment with respect to any indebtedness for
borrowed money in an aggregate amount in excess of $10 million or indebtedness
for borrowed money of the Company or any Significant Subsidiary in an aggregate
amount in excess of $10 million shall have been accelerated or otherwise
declared due and payable, or required to be prepaid or repurchased (other than
by regularly scheduled required prepayment) prior to the scheduled maturity
thereof as a result of a default with respect to such indebtedness, in either
case without such indebtedness referred to in subclause (i) or (ii) of this
clause (f) having been discharged, cured, waived, rescinded or annulled, for a
period of 30 days after receipt by the Company of a Notice of Default;
(g) the Company or any Significant Subsidiary fails to make any
payment on a final judgment in an aggregate amount in excess of $10 million
without such judgment having been paid, discharged or stayed for a period of 60
days;
(h) the Company, or any Significant Subsidiary, or any
Subsidiaries of the Company which in the aggregate would constitute a
Significant Subsidiary pursuant to or under or within the meaning of any
Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for relief against it in
an involuntary case or proceeding or the commencement of any case against
it;
(iii) consents to the appointment of a Custodian of it or for any
substantial part of its property;
(iv) makes a general assignment for the benefit of its creditors;
(v) files a petition in bankruptcy or answer or consent seeking
reorganization or relief; or
(vi) consents to the filing of such a petition or the appointment
of or taking possession by a Custodian; and
(i) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any Significant
Subsidiary or any Subsidiaries of the Company which in the aggregate would
constitute a Significant Subsidiary in an involuntary case or proceeding,
or adjudicates the Company or any Significant Subsidiary or any
Subsidiaries of the Company which in the aggregate would constitute a
Significant Subsidiary insolvent or bankrupt;
37
(ii) appoints a Custodian of the Company or any Significant
Subsidiary or any Subsidiaries of the Company which in the aggregate would
constitute a Significant Subsidiary or for any substantial part of its or
their properties; or
(iii) orders the winding up or liquidation of the Company or any
Significant Subsidiary or any Subsidiaries of the Company which in the
aggregate would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 days.
For purposes of Sections 6.01(h) and 6.01(i) above:
"Bankruptcy Law" means Title 11, United States Code, or any similar
federal or state law for the relief of debtors.
"Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
A Default under clause (e) or (f) above is not an Event of Default
until the Trustee notifies the Company, or the Holders of at least 25% in
aggregate principal amount of the Notes at the time outstanding notify the
Company and the Trustee, of the Default and the Company does not cure such
Default (and such Default is not waived) within the time specified in clause (e)
or (f) above after actual receipt of such notice. Any such notice must specify
the Default, demand that it be remedied and state that such notice is a "Notice
of Default."
The Company shall deliver to the Trustee, within five Business Days of
becoming aware of the occurrence of an Event of Default, written notice thereof.
In addition, the Company shall deliver to the Trustee, within 30 days after it
becomes aware of the occurrence thereof, written notice of any event which with
the lapse of time would become an Event of Default under clause (e) above, its
status and what action the Company is taking or proposes to take with respect
thereto.
The Trustee shall, within 90 days after it is notified of the
occurrence of an Event of Default, give to the Noteholders notice of all uncured
Events of Defaults known to it, provided that the Trustee shall be protected in
withholding such notice if the Trustee, in good faith, determines that the
withholding of such notice is in the best interest of the Noteholders, except in
the case of an Event of Default described in Section 6.01(a) or 6.01(b).
Section 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(h) or 6.01(i)) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least 25%
in aggregate principal amount of the Notes at the time outstanding by notice to
the Company and the Trustee, may declare the Notes due and payable at their
principal amount together with accrued interest (including Liquidated Damages,
if any). Upon a declaration of acceleration, such principal and accrued and
unpaid interest to the date of payment shall be immediately due and payable. If
an Event of Default is cured prior to any such declaration by the Trustee or the
Holders, the Trustee and the Holders shall not be entitled to declare the Notes
due and payable as provided herein as a result of such cured Event
38
of Default and any such cured Event of Default shall be deemed waived by the
Holders and the Trustee.
If an Event of Default specified in Sections 6.01(h) or 6.01(i) above
occurs and is continuing, then the principal and the accrued interest (including
Liquidated Damages, if any) on all the Notes shall become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Noteholders.
The Holders of a majority in aggregate principal amount of the Notes
at the time outstanding, by notice to the Trustee (and without notice to any
other Noteholder) may rescind or annul an acceleration and its consequences if
the rescission would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except nonpayment of the
principal and any accrued cash interest (including Liquidated Damages, if any)
that have become due solely as a result of acceleration and if all amounts due
to the Trustee under Section 7.06 have been paid. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
Section 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of the principal, the premium, if any, and any accrued cash interest (including
Liquidated Damages, if any) on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if the Trustee does not
possess any of the Notes or produce any of the Notes in the proceeding. A delay
or omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of, or acquiescence in, the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
Section 6.04. Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount of the Notes at the time outstanding, by notice to
the Trustee (and without notice to any other Noteholder), may waive an existing
Event of Default and its consequences except (1) an Event of Default described
in Section 6.01(a) or 6.01(b) or (2) an Event of Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Noteholder affected. When an Event of Default is waived, it is deemed cured, but
no such waiver shall extend to any subsequent or other Event of Default or
impair any consequent right.
Section 6.05. Control By Majority. The Holders of a majority in
aggregate principal amount of the Notes at the time outstanding may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or of exercising any trust or power conferred on the Trustee.
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture or that the Trustee determines in good faith is prejudicial to
the rights of other Noteholders or in the event that the Trustee is not offered
indemnity satisfactory to it against loss, liability or expense in connection
with the directions.
Section 6.06. Limitation on Suits. A Noteholder may not pursue any
remedy with respect to this Indenture or the Notes unless:
39
(1) the Holder gives to the Trustee written notice stating that
an Event of Default is continuing;
(2) the Holders of at least 25% in aggregate principal amount of
the Notes at the time outstanding make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of such notice, request and offer of security or
indemnity; and
(5) the Holders of a majority in aggregate principal amount of
the Notes at the time outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day period.
A Noteholder may not use this Indenture to prejudice the rights of any
other Noteholder or to obtain a preference or priority over any other
Noteholder.
Section 6.07. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of the principal amount, premium, if any, Fundamental Change Purchase
Price, or any accrued cash interest (including Liquidated Damages, if any) in
respect of the Notes held by such Holder, on or after the respective due dates
expressed in the Notes or any Fundamental Change Purchase Date, and to convert
the Notes in accordance with Article 10, or to bring suit for the enforcement of
any such payment on or after such respective dates or the right to convert,
shall not be impaired or affected adversely without the consent of such Holder.
Section 6.08. Collection Suit by Trustee. If an Event of Default
described in Section 6.01(a) or 6.01(b) occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against
the Company for the whole amount owing with respect to the Notes and the amounts
provided for in Section 7.06.
Section 6.09. Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Notes or the
property of the Company or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal amount, Fundamental Change Purchase
Price, or any accrued cash interest in respect 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 on the Company for the payment
of any such amount) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(a) to file and prove a claim for the whole amount of the
principal amount, Fundamental Change Purchase Price, or any accrued cash
interest and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee
40
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel or any other amounts due the
Trustee under Section 7.06) and of the Holders allowed in such judicial
proceeding, and
(b) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.06.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
Section 6.10. Priorities. If the Trustee collects any money pursuant
to this Article 6, it shall pay out the money in the following order:
(1) to the Trustee for amounts due under Section 7.06;
(2) to Noteholders for amounts due and unpaid on the Notes for
the principal amount, Fundamental Change Purchase Price or any accrued
cash interest (including Liquidated Damages, if any) as the case may
be, ratably, without preference or priority of any kind, according to
such amounts due and payable on the Notes; and
(3) the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section 6.10. At least 15 days before such record
date, the Trustee shall mail to each Noteholder and the Company a notice that
states the record date, the payment date and the amount to be paid.
Section 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant (other than the Trustee) in the suit of
an undertaking to pay the costs of the suit in the manner and to the extent
provided in the TIA, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees and expenses, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit
by Holders of more than 10% in aggregate principal amount of the Notes at the
time outstanding.
41
Section 6.12. Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury or other law
wherever enacted, now or at any time hereafter in force, which would prohibit or
forgive the Company from paying all or any portion of the principal amount,
Fundamental Change Purchase Price, or any accrued cash interest (including
Liquidated Damages, if any) in respect of Notes, or any interest on such
amounts, as contemplated herein, or which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not 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.
ARTICLE VII
TRUSTEE
Section 7.01. Duties and Responsibilities of the Trustee; During
Default; Prior to Default. The Trustee, prior to the occurrence of an Event of
Default hereunder and after the curing or waiving of all such 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
hereunder 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 that person's 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 hereunder and
after the curing or waiving of all such Events of Default which may have
occurred:
(i) the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Indenture, and the Trustee shall
not be liable except for the performance of such duties and obligations as
are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any statements,
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such statements,
certificates or opinions which by any provision 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;
42
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Responsible Officers of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(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
direction of the Holders pursuant to Section 6.05 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.
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.
Section 7.02. Certain Rights of the Trustee. Subject to Section 7.01:
(a) the Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution, Officers'
Certificate or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, note, coupon, Note or other
paper or document (whether in its original or facsimile form) believed by it to
be genuine and to have been signed or presented by the proper party or parties;
(b) any request, 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 selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be taken 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 trusts or powers vested in it by this Indenture with 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 satisfactory to it against the costs, expenses and
liabilities which might be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all such Events of Default, 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, consent, order, approval, appraisal, bond, debenture, note, coupon,
security, or other paper or document unless requested in writing to do so by the
Holders
43
of not less than a majority in aggregate principal amount of the Notes then
outstanding; provided that, if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of this
Indenture, the Trustee may require reasonable indemnity against such expenses or
liabilities as a condition to proceeding; the reasonable expenses of every such
investigation shall be paid by the Company or, if paid by the Trustee or any
predecessor trustee, shall be repaid by the Company upon demand;
(g) 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 not regularly in its employ and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed with due care by it hereunder;
(h) the Trustee shall not be required to take notice or be deemed
to have notice of any Event of Default, except failure of the Company to cause
to be made any of the payments required to be made to the Trustee, unless the
Trustee shall be specifically notified by a writing of such default by the
Company or by the Holders of at least 25% aggregate principal amount of the
Notes then outstanding delivered to the Corporate Trust Office of the Trustee
and, in the absence of such notice so delivered the Trustee may conclusively
assume no default exists;
(i) the rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and each agent, custodian and other Person employed
to act hereunder;
(j) before taking any action or refraining from taking any action
under this Indenture, the Trustee may require that indemnity satisfactory to it
be furnished for the reimbursement of all expenses to which it may be put and to
protect it against all liability, including costs incurred in defending itself
against any and all charges, claims, complaints, allegations, assertions or
demands of any nature whatsoever, except liability which is adjudicated to be a
result of the Trustee's negligence or willful misconduct in connection with any
such action; and
(k) whether or not therein expressly so provided, every provision
of this Indenture relating to the conduct of, or affecting the liability of, or
affording protection to the Trustee shall be subject to the provisions of this
Section 7.02.
Section 7.03. Trustee Not Responsible for Recitals, Dispositions of
Notes or Application of Proceeds Thereof. The recitals contained herein and in
the Notes, except the Trustee's certificates 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 representation 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 of the Notes or
of the proceeds thereof.
44
Section 7.04. Trustee and Agents May Hold Notes; Collections, Etc. The
Trustee or any agent of the Company or the Trustee, 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 the Trustee or such agent and, subject to Sections
7.08 and 7.13, if operative, may otherwise deal with the Company and receive,
collect, hold and retain collections from the Company with the same rights it
would have if it were not the Trustee or such agent.
Section 7.05. Moneys Held by Trustee. Subject to the provisions of
Section 8.04 hereof, all moneys received by the Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated from other funds except to the extent
required by mandatory provisions of law. Neither the Trustee nor any agent of
the Company or the Trustee shall be under any liability for interest on any
moneys received by it hereunder. Under no circumstances shall the Trustee be
liable in its individual capacity for the obligations evidenced by the Notes. In
accepting the trust hereby created, the Trustee acts solely as Trustee for the
Holders of the Notes and not in its individual capacity and all persons,
including without limitation the Holders of Notes and the Company having any
claim against the Trustee arising from this Indenture shall look only to the
funds and accounts held by the Trustee hereunder for payment except as otherwise
provided herein.
Section 7.06. Compensation and Indemnification of Trustee and Its
Prior Claim. The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, such compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust) to be agreed to in writing by the Trustee and the Company, and
the Company covenants and agrees to pay or reimburse the Trustee and each
predecessor Trustee upon its request for all expenses, disbursements and
advances incurred or made by or on behalf of it in accordance with any of the
provisions of this Indenture (including (i) the reasonable compensation and the
expenses and disbursements of its counsel and of all agents and other persons
not regularly in its employ and (ii) interest at the prime rate on any
disbursements and advances made by the Trustee and not paid by the Company
within 5 days after receipt of an invoice for such disbursement or advance)
except any such expense, disbursement or advance as shall be determined by a
court of competent jurisdiction to have been caused by its own negligence or bad
faith. The Company also covenants to fully indemnify each of the Trustee, each
predecessor Trustee, any Authenticating Agent and any officer, director,
employee or agent of the Trustee, each such predecessor Trustee or any such
Authenticating Agent for, and to hold it harmless against, any and all loss,
liability, claim, damage or expense (including legal fees and expenses) incurred
without negligence or willful misconduct on its part, arising out of or in
connection with the acceptance or administration of this Indenture or the trusts
hereunder and its duties hereunder, including the costs and expenses of
defending itself against or investigating any claim of liability in the
premises. The obligations of the Company under this Section 7.06 to compensate
and indemnify the Trustee, each predecessor Trustee, any Authenticating Agent
and any officer, director, employee or agent of the Trustee, each such
predecessor Trustee or any such Authenticating Agent and to pay or reimburse the
Trustee and each predecessor Trustee for expenses, disbursements and advances
shall constitute additional indebtedness hereunder and shall survive the
satisfaction and discharge of this Indenture. Such additional indebtedness shall
be a senior claim 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, and the Notes are
45
hereby effectively subordinated to such senior claim to such extent. The
provisions of this Section 7.06 shall survive the termination of this Indenture
and the resignation or removal of the Trustee. The Trustee's fees and expenses
are intended to constitute an "Administrative Expense" under the Bankruptcy Law.
No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if repayment of such funds or adequate indemnity against such risk or
liability is not assured to its satisfaction.
Section 7.07. Right of Trustee to Rely on Officers' Certificate, Etc.
Subject to Sections 7.01 and 7.02, whenever in the administration of the trusts
of this Indenture the Trustee shall deem it necessary or desirable that a matter
be proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Indenture upon the faith thereof.
Section 7.08. Conflicting Interests. If the Trustee has or shall
acquire a conflicting interest within the meaning of the TIA, 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 TIA.
Section 7.09. Persons Eligible for Appointment as Trustee. The Trustee
shall at all times be a corporation or banking association having a combined
capital and surplus of at least $50,000,000. If such corporation or banking
association publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purposes of this Section 7.09, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 7.09, the Trustee shall resign immediately in the manner and with the
effect specified in Section 7.10.
Section 7.10. Resignation and Removal; Appointment of Successor
Trustee. (a) The Trustee, or any trustee or trustees hereafter appointed, may at
any time resign with respect to one or more or all series of Notes by giving
written notice of resignation to the Company and by mailing notice thereof by
first class mail to the Holders of Notes at their last addresses as they shall
appear on the Note Register. Upon receiving such notice of resignation, the
Company shall promptly appoint a successor trustee or trustees by written
instrument in duplicate, executed by authority of the Board of Directors, one
copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee or trustees. If no successor trustee shall have
been so appointed and have accepted appointment within 30 days after the mailing
of such notice of resignation, the resigning trustee 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 for at least six months may, subject to the provisions of Section 7.11, on
behalf of himself and all others similarly situated,
46
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:
(i) the Trustee shall fail to comply with the provisions of
Section 7.08 with respect to any Notes after written request therefor by
the Company or by any Noteholder who has been a bona fide Holder of a Note
for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with
the provisions of Section 7.09 and shall fail to resign after written
request therefor by the Company or by any Noteholder; or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver or liquidator of the
Trustee or of its property shall be appointed, or any public officer shall
take charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation; or
(iv) the Company shall determine that the Trustee has failed to
perform its obligations under this Indenture in any material respect and
shall have obtained the prior consent of a majority in aggregate principal
amount of the Notes at the time Outstanding; 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
7.11, any Noteholder who has been a bona fide Holder of a Note for at least
six months may on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor trustee. Such court may thereupon, after
such notice, if any, as it may deem proper and prescribe, remove the
Trustee and appoint a successor trustee. If no successor trustee shall have
been appointed and have accepted appointment within 30 days after a notice
of removal has been given, the removed trustee may petition a court of
competent jurisdiction for the appointment of 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 appoint
a successor trustee by delivering to the Trustee so removed, to the successor
trustee so appointed and to the Company the evidence provided for in Section
1.05 of the action in that regard taken by the Noteholders.
(d) Any resignation or removal of the Trustee and any appointment
of a successor trustee pursuant to any of the provisions of this Section 7.10
shall become effective upon acceptance of appointment by the successor trustee
as provided in Section 7.11.
Section 7.11. Acceptance of Appointment by Successor Trustee. Any
47
successor trustee appointed as provided in Section 7.10 shall execute and
deliver to the Company and to the 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 rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee hereunder; but, nevertheless, on the written
request of the Company or of the successor trustee, upon payment of its charges
then unpaid, the trustee ceasing to act shall pay over to the successor trustee
all moneys at the time held by it hereunder and shall execute and deliver an
instrument transferring to such successor trustee all such rights, powers,
duties and obligations. 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 prior claim upon all
property or funds held or collected by such trustee to secure any amounts then
due it pursuant to the provisions of Section 7.06.
No successor trustee shall accept appointment as provided in this
Section 7.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 7.08 and eligible under the
provisions of Section 7.09.
Upon acceptance of appointment by any successor trustee as provided in
this Section 7.11, the Company shall mail notice thereof by first class mail to
the Holders of Notes at their last addresses as they shall appear in the Note
Register. If the acceptance of appointment is substantially contemporaneous with
the resignation, then the notice called for by the preceding sentence may be
combined with the notice called for by Section 7.10. If the Company fails to
mail such notice within ten 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 7.12. Merger, Conversion, Consolidation or Succession to
Business of Trustee. Any corporation or banking association into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation or banking association resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or
banking association succeeding to all or substantially all of the corporate
trust business of the Trustee, shall be the successor of the Trustee hereunder;
provided that such corporation or banking association shall be qualified under
the provisions of Section 7.08 and eligible under the provisions of Section
7.09, without the execution or filing of any paper or any further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding. 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
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 either in the name of any predecessor hereunder or in the name of the
successor Trustee; and in all such cases such certificate shall have the full
force and effect that this Indenture provides for the certificate of
authentication of the Trustee; provided that the right to adopt the certificate
of authentication of any predecessor Trustee or to authenticate Notes in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or
48
consolidation.
Section 7.13. Preferential Collection of Claims Against the Company.
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 TIA regarding the collection of the claims against the Company (or any such
other obligor).
Section 7.14. Reports By The Trustee. (a) Within sixty (60) days after
May 15 of each year commencing with the year 2005, the Trustee shall transmit to
Holders and other persons such reports dated as of May 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 TIA.
(b) A copy of each such report shall, at the time of such
transmission to Noteholders, be furnished to the Company and be filed by the
Trustee with each stock exchange, if any, upon which the Notes are listed and
also with the SEC. The Company agrees to notify the Trustee when and as the
Notes become admitted to trading on any national securities exchange or become
delisted therefrom.
Section 7.15. Trustee to Give Notice of Default, But May Withhold in
Certain Circumstances. The Trustee shall transmit to the Noteholders, as the
names and addresses of such Holders appear on the Note Register, notice by mail
of all Events of Defaults as to which the Trustee has received notice pursuant
to Section 6.01, such notice to be transmitted within 30 days after the
occurrence thereof, unless such defaults shall have been cured before the giving
of such notice; provided that, except in the case of an Event of Default in the
payment of the principal of, premium, if any, or interest (including Liquidated
Damages, if any) on any of the Notes when due or in the payment of any
repurchase obligation, the Trustee shall be protected in withholding such notice
if and so long as the board of directors, the executive committee, or a trust
committee of directors or trustees and/or Responsible Officers of the Trustee in
good faith determines that the withholding of such notice is in the best
interests of the Noteholders.
ARTICLE VIII
DISCHARGE OF INDENTURE
Section 8.01. Discharge of Indenture. When the Company has deposited
with the Trustee cash sufficient to pay and discharge all outstanding Notes on
the date of their Stated Maturity together with any interest payable on such
Notes, then the Company may discharge its obligations under this Indenture while
Notes remain outstanding; provided that provisions of Section 2.04, Section
2.05, Section 2.06, Section 2.07, Section 2.08, Section 4.01, Section 4.05,
Section 7.06, Article 10 and this Article 8 shall survive until the Notes have
been paid in full. The Trustee shall join in the execution of a document
prepared by the Company acknowledging satisfaction and discharge of this
Indenture on demand of the Company accompanied by an Officers' Certificate and
Opinion of Counsel as required by Section 12.04 and at the cost and expense of
the Company; 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
49
connection with this Indenture or the Notes. The Company will remain obligated
to issue Common Shares upon conversion of the Notes until such maturity as
described under Article 10.
Section 8.02. [Intentionally Omitted.]
Section 8.03. Paying Agent to Repay Monies Held. Upon the 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 8.04. Return of Unclaimed Monies. Subject to the requirements
of applicable law, any monies deposited with or paid to the Trustee or the
Paying Agent 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 or the Paying Agent on written demand and
all liability of the Trustee or the Paying Agent 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.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Without Consent of Holders. The Company and the Trustee
may, from time to time and at any time, enter into an indenture or indentures
supplemental hereto without the consent of any Noteholder for one or more of the
following purposes:
(a) adding to the Company's covenants for the benefit of the
Holders;
(b) surrendering any right or power conferred upon the Company;
(c) providing for the continuation or assumption of the Company's
obligations to the Holders in the case of an amalgamation, merger,
consolidation, conveyance, transfer or lease in accordance with Article 5;
(d) increasing the Conversion Rate or reducing the Conversion
Price; provided that the increase or reduction will not adversely affect the
interests of Holders in any material respect;
(e) complying with the requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA;
(f) making any changes or modifications to this Indenture
necessary in connection with the registration of the Notes under the Securities
Act as contemplated by the Registration Rights Agreement; provided that this
action does not adversely affect the interests
50
of the Holders in any material respect;
(g) curing any ambiguity or correcting or supplementing any
defective provision contained in this Indenture; provided that such modification
or amendment does not adversely affect the interests of the Holders in any
material respect; provided, however, that any change to conform this Indenture
to the Description of the Notes contained in the Offering Memorandum shall be
deemed not to adversely affect the interests of the Holders of the Notes in any
material respect;
(h) establishing the forms or terms of the Notes;
(i) evidencing the acceptance of appointment by a successor
Trustee;
(j) adding or modifying any other provisions which the Company
and the Trustee may deem necessary or desirable and which will not adversely
affect the interests of the Holders in any material respect;
(k) complying with the requirements regarding amalgamation,
merger or transfer of assets; or
(l) providing for uncertificated Notes in addition to the
certificated Notes so long as such uncertificated Notes are in registered form
for purpose of the Internal Revenue Code of 1986, as amended.
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 9.02. With Consent of Holders. With the written consent of the
Holders of at least a majority in aggregate principal amount of the Notes at the
time outstanding, the Company 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 change 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. However, without the consent
of each Noteholder so affected, a supplemental indenture may not:
(a) change the payment date of the principal of or any
installment of interest on any Note (including any payment of Liquidated
Damages);
(b) reduce the principal amount of, or any premium or interest on
(including any payment of Liquidated Damages), any Note, or reduce the amount of
Additional Shares a Holder is entitled to receive pursuant to Section 3.05(a);
(c) change the currency of payment of such Note or interest
thereon;
(d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Note;
51
(e) modify the Company's obligations to maintain an office or
agency in New York City;
(f) except as otherwise permitted or contemplated by provisions
concerning corporate reorganizations, adversely affect the repurchase option of
Holders upon a Fundamental Change or the conversion rights of Holders; or
(g) reduce the percentage in aggregate principal amount of Notes
outstanding necessary to modify or amend this Indenture or to waive any past
Event of Default.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent approves the substance
thereof.
After a supplemental indenture under this Section 9.02 becomes
effective, the Company shall mail to each Holder a notice briefly describing the
supplemental indenture.
Section 9.03. Compliance with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall comply with the TIA; provided
that this Section 9.03 shall not require such supplemental indenture or the
Trustee to be qualified under the TIA prior to the time such qualification is in
fact required under the terms of the TIA or the Indenture has been qualified
under the TIA, 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
TIA or the Indenture has been qualified under the TIA.
Section 9.04. Revocation and Effect of Consents, Waivers and Actions.
Until a supplemental indenture, waiver or other action by Holders becomes
effective, a consent thereto by a Holder of a Note hereunder is a continuing
consent by the Holder and every subsequent Holder of that Note or portion of the
Note that evidences the same obligation as the consenting Holder's Note, even if
notation of the consent, waiver or action is not made on the Note. However, any
such Holder or subsequent Holder may revoke the consent, waiver or action as to
such Holder's Note or portion of the Note if the Trustee receives the written
notice of revocation before the date the supplemental indenture, waiver or
action becomes effective. After a supplemental indenture, waiver or action
becomes effective, it shall bind every Noteholder.
Section 9.05. Notation on or Exchange of Notes. Notes authenticated
and delivered after the execution of any supplemental indenture pursuant to this
Article may, and shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Notes so modified as to
conform, in the opinion of the Trustee and the Board of Directors, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee or an Authenticating Agent in
exchange for outstanding Notes.
Section 9.06. Trustee to Sign Supplemental Indentures. The Trustee
shall sign any supplemental indenture authorized pursuant to this Article 9 if
the amendment contained therein does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may, but need
not, sign such supplemental indenture. In signing such
52
supplemental indenture the Trustee shall be provided with, and (subject to the
provisions of Section 7.01) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that such amendment is
authorized or permitted by this Indenture.
Section 9.07. Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture under this Article, this Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Notes theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
ARTICLE X
CONVERSION
Section 10.01. Conversion Right and Conversion Rate. Subject to and
upon compliance with the provisions of this Article, at the option of the Holder
thereof, any Note or any portion of the principal amount thereof which is $1,000
or a whole multiple of $1,000 may be converted at the principal amount thereof,
or of such portion thereof, into duly authorized, fully paid and nonassessable
Common Shares, at the Conversion Rate (the "Conversion Obligation"), determined
as hereinafter provided, in effect at the time of conversion. Such conversion
right shall expire at the close of business on the final maturity date of the
Notes.
If the Company exercises its right to redeem the Notes, such
conversion right with respect to a Note or portion thereof shall expire at the
close of business on the second Business Day immediately preceding the
Redemption Date unless the Company fails to pay the Redemption Price. In the
case of a Fundamental Change for which the Holder exercises its repurchase right
with respect to a Note or portion thereof, such conversion right in respect of
the Note or portion thereof shall expire at the close of business on the
Business Day immediately preceding the Fundamental Change Purchase Date.
The rate at which Common Shares shall be delivered upon conversion per
$1,000 principal amount of Notes (the "Conversion Rate") shall be initially
equal to 71.7077, which is equal to an initial Conversion Price of approximately
$13.95 per share. The Conversion Rate shall be adjusted in certain instances as
provided in paragraphs (a), (b), (c), (d), (e), (f), (g)and (i) of Section 10.04
hereof.
Section 10.02. Exercise of Conversion Right. To exercise the
conversion right, the Holder of any Note to be converted shall surrender such
Note duly endorsed or assigned to the Company or in blank, at the office of any
Conversion Agent, accompanied by a duly signed conversion notice substantially
in the form attached to the Note to the Company stating that the Holder elects
to convert such Note or, if less than the entire principal amount thereof is to
be converted, the portion thereof to be converted.
Notes surrendered for conversion during the period from the close of
business on any Regular Record Date to the opening of business on the next
succeeding Interest Payment Date shall be accompanied by payment in New York
Clearing House funds or other funds
53
acceptable to the Company of an amount equal to the interest to be received on
such Interest Payment Date on the principal amount of Notes being surrendered
for conversion.
Notes shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of such Notes for conversion in
accordance with the foregoing provisions, and at such time the rights of the
Holders of such Notes as Holders shall cease, and the Person or Persons entitled
to receive the Common Shares issuable upon conversion shall be treated for all
purposes as the record holder or holders of such Common Shares at such time. As
promptly as practicable on or after the conversion date, the Company shall cause
to be issued and delivered to such Conversion Agent a certificate or
certificates for the number of full Common Shares issuable upon conversion,
together with payment in lieu of any fraction of a share as provided in Section
10.03 hereof.
In the case of any Note which is converted in part only, upon such
conversion the Company shall execute and the Trustee or an Authenticating Agent
shall authenticate and deliver to the Holder thereof, at the expense of the
Company, a new Note or Notes of authorized denominations in aggregate principal
amount equal to the unconverted portion of the principal amount of such Notes.
If Common Shares to be issued upon conversion of a Note that is a
Restricted Security (a "Restricted Note"), or securities to be issued upon
conversion of a Restricted Note in part only, are to be registered in a name
other than that of the Holder of such Restricted Note, such Holder must deliver
to the Conversion Agent a certificate in substantially the form of Exhibit B
hereto, dated the date of surrender of such Restricted Note and signed by such
Holder, as to compliance with the restrictions on transfer applicable to such
Restricted Note. Neither the Trustee nor any Conversion Agent, Note Registrar or
transfer agent shall be required to register in a name other than that of the
Holder of Notes or Common Shares issued upon conversion of any such Restricted
Note not so accompanied by a properly completed certificate.
By delivering the full number of Common Shares issuable upon
conversion, together with a cash payment in lieu of fractional shares to the
Conversion Agent or to the Holder or such Holder's nominee or nominees, the
Company will have satisfied in full its Conversion Obligation with respect to
such Note, and upon such delivery accrued and unpaid interest, if any, with
respect to such Note will be deemed to be paid in full rather than canceled,
extinguished or forfeited.
Section 10.03. Fractions of Shares. No fractional Common Shares shall
be issued upon conversion of any Note or Notes. If more than one Note shall be
surrendered for conversion at one time by the same Holder, the number of full
shares which shall be issued upon conversion thereof shall be computed on the
basis of the aggregate principal amount of the Notes (or specified portions
thereof) so surrendered. Instead of any fractional Common Share which would
otherwise be issued upon conversion of any Note or Notes (or specified portions
thereof), the Company shall pay a cash adjustment in respect of such fraction
(calculated to the nearest one-100th of a share) in an amount equal to the same
fraction of the Closing Price of the Common Shares as of the Trading Day
preceding the date of conversion.
Section 10.04. Adjustment of Conversion Rate. The Conversion Rate
shall be
54
adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend, make a
bonus issue or make any other distribution to all holders of the outstanding
Common Shares in Common Shares, the Conversion Rate shall be increased so that
the same shall equal the rate determined by multiplying the Conversion Rate in
effect at the opening of business on the date following the Record Date for such
dividend, bonus issue or other distribution by a fraction,
(i) the numerator of which shall be the sum of the number of
Common Shares outstanding at the close of business on such Record Date plus
the total number of Common Shares constituting such dividend, bonus issue
or other distribution; and
(ii) the denominator of which shall be the number of Common
Shares outstanding at the close of business on such Record Date, such
increase to become effective immediately after the opening of business on
the day following the date fixed for such determination. If any dividend,
bonus issue or other distribution of the type described in this Section
10.04(a) is declared but not so paid or made, the Conversion Rate shall
again be adjusted to the Conversion Rate that would then be in effect if
such dividend, bonus issue or other distribution had not been declared.
(b) In case the Company shall issue rights or warrants to all
holders of its outstanding Common Shares entitling them (for a period expiring
within forty-five (45) days after the Record Date for the issuance of such
rights and warrants) to subscribe for or purchase Common Shares at a price per
share less than the Closing Price on the Trading Day immediately preceding the
date such distribution is first publicly announced by the Company, the
Conversion Rate shall be increased so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior to
such Record Date by a fraction,
(i) the numerator of which shall be the number of Common Shares
outstanding on such Record Date plus the total number of additional Common
Shares offered for subscription or purchase, and
(ii) the denominator of which shall be the sum of the number of
Common Shares outstanding at the close of business on such Record Date plus
the number of shares that the aggregate offering price of the total number
of shares so offered would purchase at a price equal to the Closing Price
on the Trading Day immediately preceding the date such distribution is
first publicly announced by the Company.
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 Record Date for the issuance of such rights or
warrants. To the extent that Common Shares are not delivered after the
expiration of such rights or warrants, the Conversion Rate shall be readjusted
to the Conversion Rate 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
55
number of Common Shares actually delivered. If such rights or warrants are not
so issued, the Conversion Rate shall again be adjusted to be the Conversion Rate
that would then be in effect if such Record Date had not been fixed. In
determining whether any rights or warrants entitle the holders to subscribe for
or purchase Common Shares at a price less than the Closing Price for the Trading
Day immediately preceding the date such distribution is first publicly announced
by the Company, and in determining the aggregate offering price of such Common
Shares, 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 Common Shares shall be subdivided into a
greater number of Common Shares, the Conversion Rate in effect at the opening of
business on the day following the day upon which such subdivision becomes
effective shall be proportionately increased, and conversely, in case
outstanding Common Shares shall be consolidated into a smaller number of Common
Shares, the Conversion Rate in effect at the opening of business on the day
following the day upon which such consolidation becomes effective shall be
proportionately reduced, such increase or reduction, 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 consolidation becomes effective.
(d) In case the Company shall, by dividend, bonus issue or
otherwise, distribute to all holders of its Common Shares, shares of any class
of Capital Stock of the Company or evidences of its indebtedness or assets
(including cash or securities, but excluding (1) any rights or warrants referred
to in Section 10.04(b), (2) any dividend, bonus issue or other distribution paid
exclusively in cash, (3) any dividend, bonus issue, or other distribution in
connection with a reclassification, amalgamation, consolidation, statutory share
exchange, merger, combination, sale of conveyance to which Section 10.11 hereof
applies, (any of the foregoing hereinafter in this Section 10.04(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
Securities so that any such Holder converting Securities will receive upon such
conversion, in addition to the Common Shares 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 Securities into Common Shares immediately prior to
the Record Date for such distribution of the Securities) the Conversion Rate
shall be increased so that the same shall be equal to the rate determined by
multiplying the Conversion Rate in effect on the Record Date with respect to
such distribution by a fraction,
(i) the numerator of which shall be the Current Market Price on
such Record Date; and
(ii) the denominator of which shall be the Current Market Price
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) on such Record Date of the portion of
the Securities so distributed applicable to one Common Share, such
adjustment to become effective immediately prior to the opening of business
on the day following such Record Date; provided that if the then Fair
Market Value (as so determined) of the portion
56
of the Securities so distributed applicable to one Common Share is equal to
or greater than the Current Market Price on such 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 for such distribution. If such dividend, bonus
issue or other distribution is not so paid or made, the Conversion Rate
shall again be adjusted to be the Conversion Rate that would then be in
effect if such dividend, bonus issue or other distribution had not been
declared. If the Board of Directors determines the Fair Market Value of any
distribution for purposes of this Section 10.04(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 on the applicable Record Date for such
distribution. Notwithstanding the foregoing, if the Securities distributed
by the Company to all holders of its Common Shares consist of Capital Stock
of, or similar equity interests in, a Subsidiary or other business unit of
the Company or a Subsidiary, the Conversion Rate shall be increased so that
the same shall be equal to the rate determined by multiplying the
Conversion Rate in effect on the Record Date with respect to such
distribution by a fraction,
(iii) the numerator of which shall be the sum of (A) the average
of the Closing Prices of the Common Shares for the ten (10) Trading Days
commencing on and including the fifth Trading Day after the date on which
"ex-dividend trading" commences for such dividend or distribution on the
NASDAQ National Market or such other national or regional exchange or
market on which such securities are then listed or quoted (the "Ex-Dividend
Date") plus (B) the Fair Market Value of the securities distributed in
respect of each Common Share for which this Section 10.04(d) applies, which
shall equal the number of securities distributed in respect of each Common
Share multiplied by the average of the Closing Prices of those securities
distributed for the ten (10) Trading Days commencing on and including the
fifth Trading Day after the Ex-Dividend Date; and
(iv) the denominator of which shall be the average of the Closing
Prices of the Common Shares for the ten (10) Trading Days commencing on and
including the fifth Trading Day after the Ex-Dividend Date, such adjustment
to become effective immediately prior to the opening of business on the day
following such Record Date; provided that the Company may in lieu of the
foregoing adjustment make adequate provision 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 with respect to such distribution.
Rights or warrants distributed by the Company to all holders of Common
Shares 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
57
Common Shares; (ii) are not exercisable; and (iii) are also issued in respect of
future issuances of Common Shares, shall be deemed not to have been distributed
for purposes of this Section 10.04 (and no adjustment to the Conversion Rate
under this Section 10.04 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
Rate shall be made under this Section 10.04(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 Rate under this Section 10.04 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 Rate 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 Shares with respect to such rights or warrants (assuming such holder
had retained such rights or warrants), made to all holders of Common Shares 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 Rate shall be readjusted as if such rights and
warrants had not been issued.
No adjustment of the Conversion Rate shall be made pursuant to this
Section 10.04(d) in respect of rights or warrants distributed or deemed
distributed on any Trigger Event to the extent that such rights or warrants are
actually distributed, or reserved by the Company for distribution to holders of
Securities upon conversion by such holders of Securities to Common Shares.
For purposes of this Section 10.04(d) and Section 10.04(a) and (b),
any dividend, bonus issue or other distribution to which this Section 10.04(d)
is applicable that also includes Common Shares, or rights or warrants to
subscribe for or purchase Common Shares (or both), shall be deemed instead to be
(1) a dividend, bonus issue or other distribution of the evidences of
indebtedness, assets or shares of Capital Stock other than such Common Shares or
rights or warrants (and any Conversion Rate adjustment required by this Section
10.04(d) with respect to such dividend, bonus issue or other distribution shall
then be made) immediately followed by (2) a dividend, bonus issue or other
distribution of such Common Shares or such rights or warrants (and any further
Conversion Rate adjustment required by Sections 10.04(a) and 10.04(b) with
respect to such dividend, bonus issue or other distribution shall then be made),
except any Common Shares included in such dividend, bonus issue or other
distribution shall not be deemed "outstanding at the close of business on such
Record" within the meaning of Section 10.04(a).
(e) In case the Company shall, by dividend, bonus issue or
otherwise, distribute to all holders of its Common Shares cash (excluding any
dividend, bonus issue or other
58
distribution in connection with the liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary), then, in such case, the
Conversion Rate shall be increased so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior to the
close of business on the Record Date for such dividend, bonus issue or other
distribution by a fraction,
(i) the numerator of which shall be the Current Market Price on
such Record Date; and
(ii) the denominator of which shall be the Current Market Price
on such Record Date less the amount of cash so distributed applicable to
one Common Share, such adjustment to be effective immediately prior to the
opening of business on the day following such Record Date; provided that if
the portion of the cash so distributed applicable to one Common Share is
equal to or greater than the Current Market Price on such 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 such Record Date. However, the Conversion Rate will not be adjusted
pursuant to this provision to the extent that the adjustment would reduce
the conversion price below $0.01. If such dividend, bonus issue or other
distribution is not so paid or made, the Conversion Rate shall again be
adjusted to be the Conversion Rate that would then be in effect if such
dividend, bonus issue or other distribution had not been declared.
(f) In case a tender offer or exchange offer made by the Company
or any of its Subsidiaries for all or any portion of the Common Shares shall
expire and such tender offer or exchange offer (as amended upon the expiration
thereof) shall require the payment to shareholders (based on the acceptance (up
to any maximum specified in the terms of the tender offer) of Purchased Shares
(as defined below)) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and set forth in a Board Resolution) that combined together with the aggregate
of the cash plus the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and set forth in a Board Resolution), as
of the expiration of such tender offer or exchange offer, of other consideration
paid in respect of any other tender offers or exchange offers, by the Company or
any of its Subsidiaries for all or any portion of the Common Shares expiring
within the 12 months preceding the expiration of such tender offer or exchange
offer and in respect of which no adjustment pursuant to this Section 10.04(f)
has been made, exceeds the last reported sale price of the Common Shares on the
Trading Day next succeeding the last time (the "Expiration Time") tenders or
exchanges could have been made pursuant to such tender offer or exchange offer,
the Conversion Rate shall be increased so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior to the
Expiration Time by a fraction,
(i) the numerator of which shall be the sum of (x) the Fair
Market Value (determined as aforesaid) of the aggregate consideration
payable to shareholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares
validly tendered or exchanged and
59
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 Common Shares outstanding (less any Purchased
Shares) at the Expiration Time and the Closing Price of a Common Share on
the Trading Day next succeeding the Expiration Time, and
(ii) the denominator of which shall be the number of Common
Shares outstanding (including any Purchased Shares) at the Expiration Time
multiplied by the Closing Price of a Common Share on the Trading Day next
succeeding the Expiration Time such adjustment to become effective
immediately prior to the opening of business on the day following the
Expiration Time. If 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 Rate shall again be adjusted to be the
Conversion Rate that would then be in effect if such tender or exchange
offer had not been made.
(iii) 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 Shares to more than twenty-five percent (25%)
of the Common Shares outstanding and shall involve the payment by such
Person of consideration per Common Share 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 Closing Price of a Common Share 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 Rate shall be increased so that the same shall
equal the rate determined by multiplying the Conversion Rate in effect
immediately prior to the Offer Expiration Time by a fraction
(iv) the numerator of which shall be the sum of (x) the Fair
Market Value (determined as aforesaid) of the aggregate consideration
payable to shareholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares
validly tendered or exchanged and not withdrawn as of the 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
Common Shares outstanding (less any Accepted Purchased Shares) at the Offer
Expiration Time and the Closing Price of a Common Share on the Trading Day
next succeeding the Offer Expiration Time, and
(v) the denominator of which shall be the number of Common Shares
outstanding (including any tendered or exchanged shares) at the Offer
Expiration Time multiplied by the Closing Price of a Common Share on the
Trading Day next succeeding the Offer Expiration Time, such adjustment to
60
become effective immediately prior to the opening of business on the day
following the Offer Expiration Time. If 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 Rate shall
again be adjusted to be the Conversion Rate 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 10.04(f) 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 Section 10.11.
(g) For purposes of this Section 10.04, the following terms shall
have the meaning indicated:
(i) "Current Market Price" shall mean the average of the daily
Closing Prices per Common Share for the ten consecutive Trading Days ending
on the earlier of the date of determination and the day before the "ex"
date with respect to the issuance, distribution, subdivision or
consolidation requiring such computation immediately prior to the date in
question. For purposes of this paragraph, the term "ex" date, (1) when used
with respect to any issuance or distribution, means the first date on which
the Common Shares 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, and (2) when used with respect to
any subdivision or consolidation of Common Shares, means the first date on
which the Common Shares trades, regular way, on such exchange or in such
market after the time at which such subdivision or consolidation becomes
effective.
(h) If another issuance, distribution, subdivision or
consolidation to which Section 10.04 applies occurs during the period applicable
for calculating "Current Market Price" pursuant to the definition in the
preceding paragraph, "Current Market Price" shall be calculated for such period
in a manner determined by the Board of Directors to reflect the impact of such
issuance, distribution, subdivision or consolidation on the Closing Price during
such period.
(i) "Fair Market Value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's-length transaction.
(ii) "Record Date" shall mean, with respect to any dividend,
bonus issue or other distribution or other transaction or event in which
the holders of Common Shares have the right to receive any cash, securities
or other property or in which the Common Shares (or other applicable
security) is exchanged for or converted into any combination of cash,
securities or other property, the date fixed for determination of
shareholders entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
61
(iii) The Company may make such increases in the Conversion Rate,
in addition to those required by Section 10.04(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 Shares or rights to purchase
Common Shares resulting from any dividend or distribution of shares (or
rights to acquire shares) 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 increase the Conversion Rate by any amount for any period of time of at
least 20 days if the Board of Directors shall have made a determination that
such increase would be in the best interests of the Company, which determination
shall be conclusive. Whenever the Conversion Rate is increased pursuant to the
preceding sentence, the Company shall mail to holders of record of the Notes a
notice of the increase at least fifteen (15) days prior to the date the
increased Conversion Rate takes effect, and such notice shall state the
increased Conversion Rate and the period during which it will be in effect.
(i) No adjustment to the Conversion Rate shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
rate; provided, however, that any adjustments which by reason of this Section
10.04(i) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Article 10
shall be made by the Company and shall be made to the nearest one hundredth of a
cent or to the nearest one hundredth of a share, as the case may be. No
adjustment need be made for a change in the par value or no par value of the
Common Shares.
(j) In any case in which this Section 10.04 provides that an
adjustment shall become effective immediately after (1) a Record Date for an
event, (2) the Record Date for a dividend or distribution as described in
Section 10.04(a), (3) the Record Date for the issuance of rights or warrants as
described in Section 10.04(b), or (4) the Expiration Time for any tender or
exchange offer pursuant to Section 10.04(f) or Section 10.04(g) (each a
"Determination Date"), the Company may elect to defer until the occurrence of
the applicable 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 Common Shares or other
securities issuable upon such conversion by reason of the adjustment required by
such Adjustment Event over and above the Common Shares 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 10.03. For
purposes of this Section 10.04(j), the term "Adjustment Event" shall mean:
(i) in any case referred to in clause (1) hereof, the occurrence
of such event,
(ii) in any case referred to in clause (2) hereof, the date any
such dividend or distribution is paid or made,
(iii) in any case referred to in clause (3) hereof, the date of
expiration of such rights or warrants, and
62
(iv) in any case referred to in clause (4) hereof, the date a
sale or exchange of Common Shares pursuant to such tender or exchange offer
is consummated and becomes irrevocable.
(k) For purposes of this Section 10.04, the number of Common
Shares at any time outstanding shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of Common Shares.
Section 10.05. Notice of Adjustments of Conversion Rate. Whenever the
Conversion Rate is adjusted as herein provided (other than in the case of an
adjustment pursuant to the second paragraph of Section 10.04 for which the
notice required by such paragraph has been provided), the Company shall promptly
file with the Trustee and any Conversion Agent other than the Trustee an
Officers' Certificate setting forth the adjusted Conversion Rate and showing in
reasonable detail the facts upon which such adjustment is based. Promptly after
delivery of such Officers' Certificate, the Company shall prepare a notice
stating that the Conversion Rate has been adjusted and setting forth the
adjusted Conversion Rate and the date on which each adjustment becomes
effective, and shall mail such notice to each Holder at the address of such
Holder as it appears in the Note Register within 20 days of the effective date
of such adjustment. Failure to deliver such notice shall not effect the legality
or validity of any such adjustment.
Section 10.06. Notice Prior to Certain Actions. In case at any time
after the date hereof:
(1) the Company shall declare a dividend (or any other
distribution) on its Common Shares payable otherwise than in cash out
of its capital surplus or its consolidated retained earnings;
(2) the Company shall authorize the granting to the holders of
its Common Share of Capital Stock of any class (or of securities
convertible into shares of Capital Stock of any class) or of any other
rights;
(3) there shall occur any reclassification of the Common Shares
of the Company (other than a subdivision or consolidation of its
outstanding Common Shares, a change in par value, a change from par
value to no par value or a change from no par value to par value), or
any amalgamation, merger, consolidation, statutory share exchange or
combination to which the Company is a party and for which approval of
any shareholders of the Company is required, or the sale, transfer or
conveyance of all or substantially all of the assets of the Company;
or
(4) there shall occur the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
the Company shall cause to be filed at each office or agency maintained for the
purpose of conversion of Notes pursuant to Section 4.03 hereof, and shall cause
to be provided to the Trustee and all Holders in accordance with Section 12.02
hereof, at least 20 days (or 10 days in
63
any case specified in clause (1) or (2) above) prior to the applicable record or
effective date hereinafter specified, a notice stating:
(A) the date on which a record is to be taken for the
purpose of such dividend, distribution, rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common
Shares of record to be entitled to such dividend, distribution, rights
or warrants are to be determined, or
(B) the date on which such reclassification, amalgamation,
merger, consolidation, statutory share exchange, combination, sale,
transfer, conveyance, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected
that holders of Common Shares of record shall be entitled to exchange
their Common Shares for securities, cash or other property deliverable
upon such reclassification, amalgamation, merger, consolidation,
statutory share exchange, sale, transfer, dissolution, liquidation or
winding up.
Neither the failure to give such notice nor any defect therein shall
affect the legality or validity of the proceedings or actions described in
clauses (1) through (4) of this Section 10.06.
Section 10.07. Company to Reserve Common Shares. The Company shall at
all times reserve and keep available, free from preemptive rights, out of its
authorized but unissued Common Shares, for the purpose of effecting the
conversion of Notes, the full number of fully paid and nonassessable Common
Shares then issuable upon the conversion of all Notes outstanding.
Section 10.08. Taxes on Conversions. Except as provided in the next
sentence, the Company will pay any and all taxes (other than taxes on income)
and duties that may be payable in respect of the issue or delivery of Common
Shares on conversion of Notes pursuant hereto. A Holder delivering a Note for
conversion shall be liable for and will be required to pay any tax or duty which
may be payable in respect of any transfer involved in the issue and delivery of
Common Shares in a name other than that of the Holder of the Note or Notes to be
converted, and no such issue or delivery shall be made unless the Person
requesting such issue has paid to the Company the amount of any such tax or
duty, or has established to the satisfaction of the Company that such tax or
duty has been paid.
Section 10.09. Covenant as to Common Shares. The Company covenants
that all Common Shares which may be issued upon conversion of Notes will upon
issue be fully paid and nonassessable and, except as provided in Section 10.08,
the Company will pay all taxes, liens and charges with respect to the issue
thereof.
Section 10.10. Cancellation of Converted Notes. All Notes delivered
for conversion shall be delivered to the Trustee to be canceled by or at the
direction of the Trustee, which shall dispose of the same as provided in Section
2.11.
64
Section 10.11. Effect of Reclassification, Consolidation, Merger or
Sale. If any of following events occur, namely:
(1) any reclassification or change of the outstanding Common
Shares (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a
subdivision or consolidation),
(2) any amalgamation, merger, consolidation, statutory share
exchange or combination of the Company with another corporation as a
result of which holders of Common Shares shall be entitled to receive
stock, securities or other property or assets (including cash) with
respect to or in exchange for such Common Shares or
(3) any sale or conveyance of all or substantially all the
properties and assets of the Company to any other corporation as a
result of which holders of Common Shares shall be entitled to receive
stock, securities or other property or assets (including cash) with
respect to or in exchange for such Common Shares, the Company or the
successor or purchasing corporation, as the case may be, shall execute
with the Trustee and the Company a supplemental indenture (which shall
comply with the TIA as in force at the date of execution of such
supplemental indenture if such supplemental indenture is then required
to so comply) providing that such Note shall be convertible into the
kind and amount of shares and other securities or property or assets
(including cash) which such Holder would have owned or been entitled
to receive upon such reclassification, amalgamation, merger,
consolidation, statutory share exchange, combination, sale or
conveyance had such Notes been converted into Common Shares
immediately prior to such reclassification, amalgamation, merger,
consolidation, statutory share exchange, combination, sale or
conveyance assuming such holder of Common Shares did not exercise its
rights of election, if any, as to the kind or amount of securities,
cash or other property receivable upon such reclassification,
amalgamation, merger, consolidation, statutory share exchange,
combination, sale or conveyance (provided that, if the kind or amount
of securities, cash or other property receivable upon such
reclassification, amalgamation, merger, consolidation, statutory share
exchange, combination, sale or conveyance is not the same for each
Common Share in respect of which such rights of election shall not
have been exercised ("Non-Electing Share"), then for the purposes of
this Section 10.11 the kind and amount of securities, cash or other
property receivable upon such reclassification, amalgamation, merger,
consolidation, statutory share exchange, 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 10. If, in the case of any
such reclassification, amalgamation, merger, consolidation, statutory
share exchange, combination, sale or conveyance, the stock or other
securities and assets receivable thereupon by a holder of Common
Shares includes shares or other securities and assets of a corporation
other than the successor or purchasing corporation, as the case may
65
be, in such reclassification, amalgamation, merger, consolidation,
statutory share exchange, combination, sale or conveyance, then such
supplemental indenture shall also be executed by such other
corporation and shall contain such additional provisions to protect
the interests of the Holders of the Notes as the Board of Directors
shall reasonably consider necessary by reason of the foregoing,
including to the extent practicable the provisions providing for the
repurchase rights set forth in Section 3.05 hereof.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each Holder, at the address of such Holder as it
appears on the Note Register, within 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 10.11 shall similarly apply to
successive reclassifications, amalgamations, mergers, consolidations, statutory
share exchanges, combinations, sales and conveyances.
If this Section 10.11 applies to any event or occurrence, Section
10.04 hereof shall not apply.
Section 10.12. Responsibility of Trustee for Conversion Provisions.
The Trustee, subject to the provisions of Section 7.01 hereof, and any
Conversion Agent shall not at any time be under any duty or responsibility to
any Holder of Notes to determine whether any facts exist which may require any
adjustment of the Conversion Rate, or with respect to the nature or intent of
any such adjustments when made, or with respect to the method employed, or
herein or in any supplemental indenture provided to be employed, in making the
same. Neither the Trustee, subject to the provisions of Section 7.01 hereof, nor
any Conversion Agent shall be accountable with respect to the validity or value
(of the kind or amount) of any Common Shares, or of any other securities or
property, which may at any time be issued or delivered upon the conversion of
any Note; and it or they do not make any representation with respect thereto.
Neither the Trustee, subject to the provisions of Section 7.01 hereof, nor any
Conversion Agent shall be responsible for any failure of the Company to make any
cash payment or to issue, transfer or deliver any shares or share certificates
or other securities or property upon the surrender of any Note for the purpose
of conversion; and the Trustee, subject to the provisions of Section 7.01
hereof, and any Conversion Agent shall not be responsible or liable for any
failure of the Company to comply with any of the covenants of the Company
contained in this Article.
Section 10.13. Shareholder Rights Plans. Each Common Share issued upon
conversion of Notes pursuant to this Article 10 shall be entitled to receive the
appropriate number of rights, if any, and the certificates representing the
Common Shares issued upon such conversion shall bear such legends, if any, in
each case as may be provided by the terms of any shareholder rights plan adopted
by the Company, as the same may be amended from time to time. If at the time of
conversion, however, the rights have separated from the Common Shares in
accordance with the provisions of the applicable shareholder rights agreement so
that the holders of the Notes would not be entitled to receive any rights in
respect of Common Shares issuable upon conversion of the Notes, the conversion
rate will be adjusted as if the Company distributed to all holders of Common
Shares, shares of the Company's share capital, evidences of
66
indebtedness or assets (including cash or securities, but excluding (1) any
rights or warrants referred to in Section 10.04(b), (2) any dividend or
distribution paid exclusively in cash, (3) any dividend, bonus issue, or other
distributions in connection with a reclassification, amalgamation,
consolidation, statutory share exchange, merger, combination, sale of conveyance
to which Section 10.11 applies), subject to readjustment in the event of the
expiration, termination or redemption of the rights.
ARTICLE XI
RESERVED
ARTICLE XII
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls. This Indenture is hereby
made subject to, and shall be governed by, the provisions of the TIA required to
be part of and to govern indentures qualified under the TIA; 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 TIA as now in
effect or as hereafter amended or modified; provided further that this Section
12.01 shall not require this Indenture or the Trustee to be qualified under the
TIA prior to the time such qualification is in fact required under the terms of
the TIA, 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 TIA. If any provision
of this Indenture limits, qualifies, or conflicts with another provision which
is required to be included in this Indenture by the TIA, the required provision
shall control.
Section 12.02. Notices. Any request, demand, authorization, notice,
waiver, consent or communication shall be in writing and delivered in person or
mailed by first-class mail, postage prepaid, addressed as follows or transmitted
by facsimile transmission (confirmed by guaranteed overnight courier) to the
following facsimile numbers:
if to the Company:
Encysive Pharmaceuticals Inc.
4848 Loop Central Drive
Suite 700
Houston, TX 77081
Attention: President
Facsimile: 713-796-8232
if to the Trustee:
The Bank of New York Trust Company, N.A.
600 North Pearl Street, Suite 420
Dallas, TX 75201
67
Attention: Corporate Trust Trustee Administration
Facsimilie: 214-880-8241
The Company or the Trustee by notice given to the other in the manner
provided above may designate additional or different addresses for subsequent
notices or communications.
Any notice or communication given to a Noteholder shall be mailed to
the Noteholder, by first-class mail, postage prepaid, at the Noteholder's
address as it appears on the registration books of the Note Registrar and shall
be sufficiently given 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 received by the addressee.
If the Company mails a notice or communication to the Noteholders, it
shall mail a copy to the Trustee and each Note Registrar, Paying Agent,
Conversion Agent or co-registrar.
Section 12.03. Communication by Holders with Other Holders.
Noteholders may communicate pursuant to Section 312(b) of the TIA with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Note Registrar, the Paying Agent, the Conversion Agent
and anyone else shall have the protection of Section 312(c) of the TIA.
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 12.05. Statements Required in Certificate or Opinion. Each
Officers' Certificate or Opinion of Counsel with respect to compliance with a
covenant or condition provided for in this Indenture shall include:
(1) a statement that each person making such Officers'
Certificate or Opinion of Counsel has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such Officers' Certificate or Opinion of Counsel are
based;
(3) a statement that, in the opinion of each such person, he has
made such examination or investigation as is necessary to enable such
person to express
68
an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement that, in the opinion of such person, such
covenant or condition has been complied with.
Section 12.06. Separability Clause. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 12.07. Rules by Trustee, Paying Agent, Conversion Agent and
Note Registrar. The Trustee may make reasonable rules for action by or a meeting
of Noteholders. The Note Registrar, Conversion Agent and the Paying Agent may
make reasonable rules for their functions.
Section 12.08. Legal Holidays. A "Legal Holiday" is any day other than
a Business Day. If any specified date (including a date for giving notice) is a
Legal Holiday, the action shall be taken on the next succeeding day that is not
a Legal Holiday, and, if the action to be taken on such date is a payment in
respect of the Notes, no interest, if any, shall accrue for the intervening
period.
Section 12.09. GOVERNING LAW. THIS INDENTURE AND THE NOTES WILL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
Section 12.10. No Recourse Against Others. A director, officer,
employee or shareholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Notes or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Note, each Noteholder shall waive and release all such
liability. The waiver and release shall be part of the consideration for the
issue of the Notes.
Section 12.11. Successors. All agreements of the Company in this
Indenture and the Notes shall bind its successor. All agreements of the Trustee
in this Indenture shall bind its successor.
Section 12.12. 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 and the holders of Notes, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 12.13. Table of Contents, Heading, 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 12.14. Authenticating Agent. The Trustee may appoint an
authenticating agent (the "Authenticating Agent") that shall be authorized to
act on its behalf,
69
and subject to its direction, in the authentication and delivery of Notes in
connection with the original issuance thereof and transfers and exchanges of
Notes hereunder, including under Sections 2.03, 2.07, 2.08, 3.08 and 10.02, 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
7.09.
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 all or substantially all 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 12.14, 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 2.12, 7.03, 7.04, 7.07 and this Section
12.14 shall be applicable to any Authenticating Agent.
Section 12.15. 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.
70
IN WITNESS WHEREOF, the undersigned, being duly authorized, have
executed this Indenture on behalf of the respective parties hereto as of the
date first above written.
ENCYSIVE PHARMACEUTICALS INC.
By: /s/ Stephen L. Mueller
------------------------------------
Name: Stephen L. Mueller
Title: Vice President, Finance and
Administration
THE BANK OF NEW YORK TRUST COMPANY,
N.A., as Trustee
By: /s/ Patrick T. Giordano
------------------------------------
Name: Patrick T. Giordano
Title: Vice President
EXHIBIT A
FOR GLOBAL NOTE ONLY: [UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.]
IF REQUIRED PURSUANT TO SECTION 2.07(d): [THIS SECURITY AND THE COMMON
SHARES ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY, THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, 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 "RESALE RESTRICTION PERIOD"),
ONLY (A) TO ENCYSIVE PHARMACEUTICALS INC. (THE "COMPANY"), OR ANY SUBSIDIARY
THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
A-1
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING UNDER RULE
144, IF AVAILABLE, SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF
LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH INVESTOR
ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL. EACH PURCHASER
ACKNOWLEDGES THAT PRIOR TO THE EXPIRATION OF THE RESALE RESTRICTION PERIOD, THE
COMPANY AND THE TRUSTEE RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER EXPIRATION OF THE RESALE RESTRICTION PERIOD.]
A-2
ENCYSIVE PHARMACEUTICALS INC.
2.50% Convertible Senior Notes due 2012
No. CUSIP:[ ]
Issue Date: ISIN: [ ]
ENCYSIVE PHARMACEUTICALS INC., a Delaware corporation promises to pay
to [Cede & Co.]* or registered assigns, [the principal amount of _______________
DOLLARS ($_____________)] [the principal amount as set forth on Schedule I
hereto]* on March 15, 2012.
This Note shall bear interest as specified on the other side of this
Note. This Note is convertible as specified on the other side of this Note.
Additional provisions of this Note are set forth on the other side of
this Note.
*Include only on Global Security
Dated: The common seal of ENCYSIVE
PHARMACEUTICALS INC. was affixed
hereto in the presence of:
By:
------------------------------------
Name:
Title:
A-3
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture
(as defined on the other side of this Note).
THE BANK OF NEW YORK TRUST COMPANY,
N.A., as Trustee
By:
------------------------------------
Authorized Signatory
By:
------------------------------------
As Authenticating Agent
(if different from Trustee)
Dated:
---------------------------------
A-4
[FORM OF REVERSE SIDE OF NOTE]
2.50% Convertible Senior Note due 2012
1. Cash Interest.
The Company promises to pay interest in cash on the principal amount
of this Note at the rate per annum of 2.50%. The Company will pay cash interest
semiannually in arrears on March 15 and September 15 of each year (each an
"Interest Payment Date"), beginning September 15, 2005, to Holders of record at
the close of business on March 1 and September 1, respectively, (whether or not
a business day) (each a "Regular Record Date"), as the case may be, immediately
preceding such Interest Payment Date, and the Company will pay interest in
arrears on the maturity date to the Holder to whom it pays the principal of this
Note. Cash interest on the Notes will accrue from the most recent date to which
interest has been paid or duly provided or, if no interest has been paid, from
the Issue Date. Cash interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Company shall pay cash interest on overdue principal
at 3.00% per annum, and it shall pay interest in cash on overdue installments of
cash interest (including Liquidated Damages, if any) at the same rate to the
extent lawful. All such overdue cash interest shall be payable on demand. The
Company further promises to pay Liquidated Damages that it may from time to time
be required to pay pursuant to Section 2(e) of the Registration Rights Agreement
at the same time and in the same manner as payments of interest as specified
herein.
2. Method of Payment.
Subject to the terms and conditions of the Indenture, the Company will
make payments in respect of the principal of, premium, if any, and cash interest
on this Note and in respect of Fundamental Change Purchase Price to Holders who
surrender Notes to a Paying Agent to collect such payments in respect of the
Notes. The Company will pay cash amounts in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may make such cash payments by check payable in such money.
A holder of Notes with an aggregate principal amount in excess of $5,000,000
will be paid by wire transfer in immediately available funds to an account in
the United States at the election of such holder. Any payment required to be
made on any day that is not a Business Day will be made on the next succeeding
Business Day.
3. Paying Agent, Conversion Agent and Note Registrar.
Initially, The Bank of New York Trust Company, N.A. (the "Trustee"),
will act as Paying Agent, Conversion Agent and Note Registrar. The Company may
appoint and change any Paying Agent, Conversion Agent, Note Registrar or
co-registrar without notice, other than notice to the Trustee except that the
Company will maintain at least one Paying Agent in the State of New York, City
of New York, Borough of Manhattan, which shall initially be an office or agency
of the Trustee. The Company or any of its Subsidiaries or any of their
Affiliates may act as Paying Agent, Conversion Agent, Note Registrar or
co-registrar.
A-5
4. Indenture.
The Company issued this Note under an Indenture dated as of March 16,
2005 (the "Indenture"), between the Company and the Trustee. The terms of this
Note include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as in effect from time to time
(the "TIA"). Capitalized terms used herein and not defined herein have the
meanings ascribed thereto in the Indenture. This Note is subject to all such
terms, and Noteholders are referred to the Indenture and the TIA for a statement
of those terms.
This Note is a general unsecured obligation of the Company limited to
$115,000,000 aggregate principal amount, plus such additional aggregate
principal amount issuable upon exercise of the Initial Purchasers' Option, not
to exceed $130,000,000 in aggregate principal amount (subject to Section 2.08 of
the Indenture). The Indenture does not limit other indebtedness of the Company,
secured or unsecured.
5. Redemption and Repurchase by the Company at the Option of the Holder.
Prior to March 20, 2010, the Notes shall not be redeemable at the
Company's option. At any time on or after March 20, 2010, and prior to Stated
Maturity, the Company, if the conditions in the Indenture are satisfied, at its
option, may redeem the Notes, in whole or in part, in accordance with the
Indenture on the Redemption Date for a Redemption Price in cash equal to 100% of
the principal amount of the Notes plus any accrued and unpaid interest and
Liquidated Damages, if any, on the Notes redeemed to but not including the
Redemption Date.
If there shall have occurred a Fundamental Change (subject to certain
conditions provided for in the Indenture), each Holder, at such Holder's option,
shall have the right, in accordance with the provisions of the Indenture, to
require the Company to purchase its Notes (or any portion of the principal
amount hereof that is at least $1,000 or any whole multiple thereof, provided
that the portion of the principal amount of this Note to be outstanding after
such purchase is at least equal to $1,000) at the Fundamental Change Purchase
Price in cash, plus any accrued and unpaid interest to but not including the
Fundamental Change Purchase Date.
A written notice of the Fundamental Change will be given to the
Holders as provided in the Indenture. To exercise a purchase right, a Holder
must deliver to the Trustee a Fundamental Change Purchase Notice as provided in
the Indenture.
Holders have the right to withdraw any Fundamental Change Purchase
Notice by delivering to the Paying Agent a written notice of withdrawal in
accordance with the provisions of the Indenture.
6. Conversion.
Subject to the next succeeding sentence, a Holder of a Note may
convert the Note into Common Shares at any time before the close of business on
the final maturity date of the Note. A Note in respect of which a Holder has
delivered a Fundamental Change Purchase Notice exercising the option of such
Holder to require the Company to purchase such Note may
A-6
be converted only if such notice of exercise is withdrawn in accordance with the
terms of the Indenture.
The initial Conversion Rate shall be initially equal to 71.7077 Common
Shares per $1,000 principal amount of the Notes, subject to adjustment in
certain events described in the Indenture, which is equal to an initial
Conversion Price of approximately $13.95 per Common Share. The Company shall pay
a cash adjustment as provided in the Indenture in lieu of any fractional Common
Share.
In addition, following certain corporate transactions that constitute
a Fundamental Change pursuant to clause (ii) of the Change of Control definition
as set forth in Section 3.05(a) of the Indenture, a Holder who elects to convert
its Notes in connection with such corporate transaction will be entitled to
receive Additional Shares upon conversion, subject to the Company's payment
elections set forth in the Indenture. Notwithstanding the previous sentence, in
the case of a Public Acquirer Change of Control, the Company may, in lieu of
increasing the Conversion Rate by Additional Shares, elect to adjust the
Conversion Rate and Conversion Obligation such that from and after the effective
date of such Public Acquirer Change of Control, Holders of the Notes will be
entitled to convert their Securities into a number of shares of Public Acquirer
Common Stock, as determined pursuant to Section 3.05(b) of the Indenture.
To convert a Note, a Holder must (1) complete and manually sign the
conversion notice below (or complete and manually sign a facsimile of such
notice) and deliver such notice to the Conversion Agent, (2) surrender the Note
to the Conversion Agent, (3) furnish appropriate endorsements and transfer
documents if required by the Conversion Agent, the Company or the Trustee and
(4) pay any transfer or similar tax, if required.
7. Denominations; Transfer; Exchange.
The Notes are in fully registered form, without coupons, in
denominations of $1,000 of principal amount and whole multiples of $1,000. A
Holder may transfer or exchange Notes in accordance with the Indenture. The Note
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Note Registrar need not transfer or
exchange any Notes in respect of which a Fundamental Change Purchase Notice has
been given and not withdrawn (except, in the case of a Note to be purchased in
part, the portion of the Note not to be purchased).
8. Persons Deemed Owners.
The registered Holder of this Note may be treated as the owner of this
Note for all purposes.
9. Unclaimed Money or Notes.
The Trustee and the Paying Agent shall return to the Company upon
written request any money or Notes held by them for the payment of any amount
with respect to the Notes that remains unclaimed for two years, subject to
applicable unclaimed property law. After return to the Company, Holders entitled
to the money or Notes must look to the Company for
A-7
payment as general creditors unless an applicable abandoned property law
designates another person.
10. Amendment; Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in aggregate principal amount of the Notes at the time
outstanding and (ii) certain Defaults or Events of Default may be waived with
the written consent of the Holders of a majority in aggregate principal amount
of the Notes at the time outstanding. Subject to certain exceptions set forth in
the Indenture, without the consent of any Noteholder, the Company and the
Trustee may amend the Indenture or the Notes, among other things, to cure any
ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the
Indenture, or to make any change that does not adversely affect the rights of
any Noteholder, or to comply with any requirement of the SEC in connection with
the qualification of the Indenture under the TIA.
11. Defaults and Remedies.
Under the Indenture, Events of Default include (1) the Company fails
to pay when due the principal of or premium, if any, on any of the Notes at
maturity, upon exercise of a repurchase right or otherwise; (2) the Company
fails to pay an installment of interest (including Liquidated Damages, if any)
on any of the Notes that continues for 30 days after the date when due; (3) the
Company fails to deliver Common Shares, together with cash in lieu of fractional
shares, when such Common Shares or cash in lieu of fractional shares is required
to be delivered upon conversion of a Note and such failure continues for 10 days
after such required delivery date; (4) the Company fails to give notice
regarding a Fundamental Change within the time period specified in the
Indenture; (5) the Company fails to perform or observe any other term, covenant
or agreement contained in the Notes or the Indenture for a period of 60 days
after written notice of such failure, requiring the Company to remedy the same,
shall have been given to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding; (6) (A) the Company or any Significant Subsidiary fails
to make any payment by the end of the applicable grace period, if any, after the
final scheduled payment date for such payment with respect to any indebtedness
for borrowed money in an aggregate amount in excess of $10 million or (B)
indebtedness for borrowed money of the Company or any Significant Subsidiary in
an aggregate amount in excess of $10 million shall have been accelerated or
otherwise declared due and payable, or required to be prepaid or repurchased
(other than by regularly scheduled required prepayment) prior to the scheduled
maturity thereof as a result of a default with respect to such indebtedness
referred to in subclause (A) or (B) hereof, in either case without such having
been discharged, cured, waived, rescinded or annulled, for a period of 30 days
after receipt by the Company of a Notice of Default; (7) the Company or any
Significant Subsidiary fails to make any payment on a final judgment in an
aggregate amount in excess of $10 million without such judgment having been
paid, discharged or stayed for a period of 60 days; and (8) certain events of
bankruptcy, insolvency or reorganization with respect to the Company or any
Significant Subsidiary or any Subsidiaries of the Company which in the aggregate
would constitute a Significant Subsidiary. If an Event of Default (other than an
Event of Default specified in clause (8) above) occurs and is continuing, the
Trustee, or the Holders of at least 25% in aggregate principal amount of the
A-8
Notes at the time outstanding, may declare all the Notes to be due and payable
immediately. Certain events of bankruptcy or insolvency are Events of Default
which will result in the Notes becoming due and payable immediately upon the
occurrence of such Events of Default.
Noteholders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in aggregate principal amount of the
Notes at the time outstanding may direct the Trustee in its exercise of any
trust or power. The Trustee shall, within 90 days of the occurrence of an Event
of Default, give notice of such Event of Default to the holders of the Notes,
provided that the Trustee may withhold from Noteholders notice of any continuing
Default (except a Default in payment of amounts specified in clause (1) or (2)
above) if it determines that withholding notice is in their interests.
12. Trustee Dealings with the Company.
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee.
13. No Recourse Against Others.
A director, officer, employee or shareholder, as such, of the Company
shall not have any liability for any obligations of the Company under the Notes
or the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Note, each Noteholder waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
14. Authentication.
This Note shall not be valid until an authorized signatory of the
Trustee or an Authenticating Agent manually signs the Trustee's Certificate of
Authentication on the other side of this Note.
15. Abbreviations.
Customary abbreviations may be used in the name of a Noteholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
16. GOVERNING LAW.
THE INDENTURE AND THIS NOTE WILL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
A-9
----------
The Company will furnish to any Noteholder upon written request and
without charge a copy of the Indenture which has in it the text of this Note in
larger type. Requests may be made to:
Encysive Pharmaceuticals Inc.
4848 Loop Central Drive
Suite 700
Houston, TX 77081
A-10
CONVERSION NOTICE
TO: ENCYSIVE PHARMACEUTICALS INC.
THE BANK OF NEW YORK TRUST COMPANY, N.A.
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 a whole multiple thereof) below designated, into Common Shares of
Encysive Pharmaceuticals Inc. 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
A-11
Fill in the registration of Common Shares 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)
- -------------------------------------
Please print name and address
Principal amount to be converted
(if less than all):
$
------------------------------------
Social Security or Other Taxpayer
Identification Number:
- -------------------------------------
A-12
FUNDAMENTAL CHANGE PURCHASE NOTICE
TO: ENCYSIVE PHARMACEUTICALS INC.
THE BANK OF NEW YORK TRUST COMPANY, N.A.
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Encysive Pharmaceuticals Inc. (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 (Certificate No.____), or the portion thereof (which is
$1,000 or a whole multiple thereof) below designated, in accordance with the
terms of the Indenture referred to in this Note 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-13
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 Encysive Pharmaceuticals Inc. 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
- 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").
A-14
- 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.
----------------------------------------
Signature Guarantee
NOTICE: The signature of the conversion notice, the Fundamental Change Purchase
Notice 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-15
SCHEDULE I to EXHIBIT A
ENCYSIVE PHARMACEUTICALS INC.
2.50% Convertible Senior Notes Due 2012
No:
Date Principal Amount Notation
- ---- ---------------- --------
A-16
EXHIBIT B
Transfer Certificate
In connection with any transfer of any of the Notes within the period
prior to the expiration of the holding period applicable to the sales thereof
under Rule 144(k) under the Securities Act of 1933, as amended (the "Securities
Act") (or any successor provision), the undersigned registered owner of this
Note hereby certifies with respect to $____________ principal amount of the
above-captioned Notes presented or surrendered on the date hereof (the
"Surrendered Notes") for registration of transfer, or for exchange or conversion
where the Notes issuable upon such exchange or conversion are to be registered
in a name other than that of the undersigned registered owner (each such
transaction being a "transfer"), that such transfer complies with the
restrictive legend set forth on the face of the Surrendered Notes for the reason
checked below:
- A transfer of the Surrendered Notes is made to the Company or any
subsidiaries; or
- The transfer of the Surrendered Notes complies with Rule 144A
under the U.S. Securities Act of 1933, as amended (the
"Securities Act"); or
- The transfer of the Surrendered Notes is pursuant to an effective
registration statement under the Securities Act, or
- The transfer of the Surrendered Notes is pursuant to another
available exemption from the registration requirement of the
Securities Act and unless the box below is checked, the
undersigned confirms that, to the undersigned's knowledge, such
Notes are not being transferred to an "affiliate" of the Company
as defined in Rule 144 under the Securities Act (an "Affiliate").
- The transferee is an Affiliate of the Company.
DATE:
-------------------- -------------------------------------
Signature(s)
(If the registered owner is a corporation, partnership or
fiduciary, the title of the Person signing on behalf of
such registered owner must be stated.)
B-1
SCHEDULE I
The following table sets forth the Share Prices and the number of
Additional Shares to be issuable per $1,000 principal amount of Notes.
$10.33 $12.50 $15.00 $17.50 $20.00 $22.50 $25.00 $27.50 $30.00
------ ------ ------ ------ ------ ------ ------ ------ ------
Effective Date
March 11,
2005 .... 25.10 18.61 13.70 10.49 8.28 6.68 5.50 4.59 3.88
March 15,
2006 .... 25.10 18.48 13.26 9.88 7.73 6.09 4.99 4.12 3.44
March 15,
2007 .... 25.10 18.09 12.51 9.14 7.05 5.37 4.36 3.45 2.84
March 15,
2008 .... 25.10 17.45 11.73 8.23 5.98 4.47 3.43 2.69 2.15
March 15,
2009 .... 25.10 16.48 10.26 6.60 4.38 2.99 2.10 1.53 1.14
March 20,
2010 .... 25.10 15.26 7.18 2.28 0.00 0.00 0.00 0.00 0.00
March 15,
2011 .... 25.10 14.33 6.70 2.09 0.00 0.00 0.00 0.00 0.00
March 15,
2012 .... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
$32.50 $35.00 $37.50 $40.00 $42.50 $45.00 $47.50 $50.00
------ ------ ------ ------ ------ ------ ------ ------
Effective Date
March 11,
2005 .... 3.32 2.86 2.49 2.17 1.91 1.69 1.50 1.33
March 15,
2006 .... 2.91 2.46 2.16 1.88 1.62 1.41 1.27 1.11
March 15,
2007 .... 2.36 1.99 1.73 1.49 1.26 1.09 0.98 0.84
March 15,
2008 .... 1.74 1.44 1.20 1.01 0.86 0.74 0.64 0.56
March 15,
2009 .... 0.88 0.69 0.56 0.46 0.39 0.33 0.29 0.25
March 20,
2010 .... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
March 15,
2011 .... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
March 15,
2012 .... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B-2