As filed with the Securities and Exchange Commission on September 18, 2003
Registration No. 333-
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
CELL THERAPEUTICS, INC.
(Exact name of Registrant as specified in its charter)
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Washington
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2834
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91-1533912
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(State or other jurisdiction of incorporation or organization)
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(Primary Standard Industrial Classification Code Number)
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(I.R.S. Employer
Identification Number)
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501 Elliott Avenue West, Suite 400
Seattle, Washington 98119
(206) 282-7100
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
James A. Bianco
President and Chief Executive Officer
Cell Therapeutics, Inc.
501 Elliott Avenue West, Suite 400
Seattle, Washington 98119
(206) 282-7100
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Michael J. Kennedy, Esq.
Karen A. Dempsey, Esq.
Wilson
Sonsini Goodrich & Rosati, Professional Corporation
One Market, Spear Street Tower, Suite 3300
San Francisco, California 94105
(415) 947-2000
Approximate date of commencement of proposed sale to the
public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form
are being offered pursuant to dividend or interest reinvestment plans, please check the following box.
¨
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 (hereinafter the “Securities Act”), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.
x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.
¨
CALCULATION
OF REGISTRATION FEE
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Title of Each Class of
Securities to be Registered
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Amount
to be
Registered
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Proposed
Maximum
Offering Price
Per Security(2)
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Aggregate
Offering
Price
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Amount of
Registration
Fee
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$75,000,000 4% Convertible Senior Subordinated Notes due July 1, 2010
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$75,000,000(1)
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100%
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$75,000,000
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$6,068
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Common Stock, no par value per share(3)
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5,555,558(4)
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(4)
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(4)
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—(5)
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(1)
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Represents the aggregate principal amount of the notes issued by the Registrant.
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(2)
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Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933 and exclusive of accrued interest and distributions, if
any.
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(3)
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Includes preferred share purchase rights which, prior to the occurrence of certain events, will not be exercisable or evidenced separately from the common stock.
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(4)
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Represents 5,555,558 shares of common stock issuable upon conversion of the notes at the conversion rate of 74.0741 shares per each $1,000 principal amount of notes, subject to
adjustment in certain circumstances, which is equivalent to an initial conversion price of approximately $13.50 per share of common stock. Pursuant to Rule 416 under the Securities Act, such number of shares of common stock registered hereby shall
include an indeterminate number of shares of common stock that may be issued in connection with a stock split, stock dividend, recapitalization or similar event.
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(5)
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Pursuant to Rule 457(i), no additional filing fee is payable with respect to the shares of common stock issuable upon conversion of the notes because no additional consideration
will be received in connection with the exercise of the conversion privilege.
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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. These securities may not be sold until
the registration statement relating to these securities that has been filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion,
Dated September 18, 2003
$75,000,000
4% Convertible Senior Subordinated Notes due July 1, 2010
and the common stock issuable upon conversion of the notes
We issued the notes offered by this prospectus in a private placement in June 2003. This prospectus will be used by selling
securityholders to resell their notes and the common stock issuable upon conversion of their notes. We will not receive any proceeds from this offering.
You may convert the notes into shares of our common stock at any time before their maturity unless we have previously redeemed or repurchased them. The
notes will be due on July 1, 2010. The conversion rate is 74.0741 shares per each $1,000 principal amount of notes, subject to adjustment in certain circumstances. This is equivalent to an initial conversion price of approximately $13.50 per share.
We will pay interest on the notes on January 1 and July 1 of
each year. The first interest payment will be made on January 1, 2004. The notes are senior in right of payment to our 5.75% Convertible Subordinated Notes due 2008 and rank equally in right of payment with our 5.75% Convertible Senior Subordinated
Notes due 2008. The notes are subordinated in right of payment to all of our other existing and future senior debt.
We may provisionally redeem, under the conditions described in this prospectus, some or all of the notes at any time prior to maturity at a redemption
price of $1,000 per $1,000 principal amount of notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. We will make an additional payment in cash with respect to the notes called for provisional redemption in an
amount equal to $280.00 per $1,000 principal amount of notes, less the amount of any interest actually paid on the notes before the date of redemption. In the event of a change in control, as described in this prospectus, you may require us to
repurchase any notes held by you.
The notes are not listed on
any securities exchange or included in any automated quotation system. The notes are eligible for trading in the PORTAL
SM
Market of the National Association of Securities Dealers, Inc. Our common stock is quoted on the Nasdaq National Market under the symbol “CTIC.” On September 17, 2003, the last reported sale price for our common stock on
the Nasdaq National Market was $11.07 per share.
Investing in the notes involves risk. See “
Risk Factors
” beginning on page 6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This prospectus is dated , 2003
TABLE OF CONTENTS
i
PROSPECTUS SUMMARY
The
following is a summary of this prospectus. You should read this entire prospectus carefully, including the documents that we have incorporated by reference, before making an investment decision.
Our Company
We develop, acquire and commercialize novel treatments for cancer. Our goal
is to build a leading, vertically-integrated biopharmaceutical company with a diversified portfolio of proprietary oncology drugs. Our research, clinical development and in-licensing activities are concentrated on identifying new, less toxic and
more effective ways to treat cancer. We market TRISENOX
®
for the treatment of acute promyelocytic leukemia, or APL, in the U.S. and in the European Union, or EU. XYOTAX
™
, our lead drug candidate, is currently in three pivotal phase III trials for the treatment of non-small cell lung cancer and we anticipate one pivotal
phase III trial for ovarian cancer to begin in late 2003.
We were incorporated in Washington in 1991. Our principal office is located at 501 Elliott Avenue West, Suite 400, Seattle, WA 98119. Our telephone number is (206) 282-7100. Our world wide web address is
http://www.cticseattle.com
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Information on our website does not constitute part of this prospectus. “CTI,” “TRISENOX” and “XYOTAX” (formerly referred to as PG-TXL) are our proprietary marks. All other product names, trademarks and trade names
referred to in this prospectus are the property of their respective owners.
Novuspharma S.p.A. Merger
On June 17, 2003 we announced a definitive agreement to merge with Novuspharma S.p.A., an Italian biopharmaceutical company focused on the treatment of cancer. Novuspharma began operations in 1999 following the spin-off of the oncology
research and development department of Boehringer Mannheim Italia S.p.A. from F. Hoffman-La Roche Ltd. In November 2000, Novuspharma ordinary shares were listed on the Nuovo Mercato stock exchange in Italy. Novuspharma’s pipeline includes
Pixantrone, an investigational medicinal product currently in Phase III and Phase II clinical trials and another two products in Phase II clinical trials.
Under the definitive merger agreement, which has been unanimously approved by the boards of directors of both companies, Novuspharma shareholders would
receive an aggregate of approximately 16 million shares of our common stock at an exchange ratio of 2.45 shares of our common stock for each Novuspharma ordinary share. The stock of the combined entity is expected to trade on both the Nasdaq
National Market and the Nuovo Mercato. The transaction is subject to approval by the shareholders of both companies and to the approval of our application to list our shares on the Nuovo Mercato, as well as other customary conditions.
Novuspharma’s chairman and its chief executive officer, as well as a third individual to be mutually agreed on by CTI and Novuspharma, will become directors of the combined company if the merger is completed.
Information regarding the Novuspharma transaction may be found in our
registration statement on Form S-4 filed with the SEC on July 9, 2003 and amended on August 21, 2003 and September 18, 2003. Information about Novuspharma is available on its world wide web site,
http://www.novuspharma.com
. Information
on Novuspharma’s web site does not constitute part of this prospectus.
1
The Offering
The following is a brief summary of some of the terms of the notes offered for resale in this prospectus. For a more
complete description of the terms of the notes, see the “Description of Notes” section in this prospectus.
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Securities Offered
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$75,000,000 aggregate principal amount of 4% Convertible Senior Subordinated Notes due July 1, 2010 and shares of common stock issuable upon
conversion of the notes.
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Issuer
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Cell Therapeutics, Inc.
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Interest
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Interest is payable on the notes at a rate of 4% per year, payable in cash semi-annually on January 1 and July 1 of each year, beginning January
1, 2004.
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Conversion
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You have the option to convert our notes into shares of our common stock at a conversion rate of 74.0741 shares of common stock per $1,000
principal amount of our notes, which is equivalent to a conversion price of approximately $13.50 per share. The conversion rate is subject to adjustment.
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You may convert the notes at any time before the close of business on the maturity date, unless we have previously redeemed or repurchased our
notes; provided, however, that if a note is called for redemption or repurchase, you will be entitled to convert the note at any time before the close of business on the date immediately preceding the date fixed for redemption or repurchase, as the
case may be. See “Description of Notes—Conversion Rights.”
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Ranking
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The notes are senior to our existing 5.75% Convertible Subordinated Notes due 2008 and rank equal in right of payment with our existing 5.75%
Convertible Senior Subordinated Notes due 2008. The notes are subordinated to our present and future senior debt. As of June 30, 2003, there was outstanding approximately $85.5 million of our 5.75% Convertible Senior Subordinated Notes due 2008 and
$29.6 million of our 5.75% Convertible Subordinated Notes due 2008. As of June 30, 2003 our other long-term obligations (excluding deferred revenue) aggregated $6.2 million and our subsidiaries had liabilities (excluding inter-company liabilities)
of $2.1 million, of which $1.4 million is included in our $6.2 million of long-term obligations. Our $6.2 million of long-term obligations constitutes all of our senior debt for purposes of the notes as of June 30, 2003. The notes are also
effectively subordinated in right of payment to the liabilities of our subsidiaries. The indenture governing the notes does not restrict our incurrence of indebtedness, including senior debt, or our subsidiaries’ incurrence of indebtedness. See
“Description of Notes—Subordination.”
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Provisional Redemption
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We may redeem the notes, in whole or in part, at any time prior to maturity at a redemption price equal to $1,000 per $1,000 principal amount of
the notes to be redeemed plus accrued and unpaid interest, if any, to, but excluding, the date of redemption if:
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the closing price of our common stock has exceeded 150% of the conversion price then in effect for at least 20 trading days within a period of 30 consecutive trading days ending on
the trading day before the date of mailing of the provisional redemption notice; and
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the registration statement of which this prospectus forms a part is effective and available for use and is expected to remain effective and available for use for the 30 days
following the provisional redemption date, unless registration is no longer required.
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We will make an additional payment in cash or, at our option, common stock, or in a combination of cash and common stock, with respect to any
notes called for provisional redemption in an amount equal to $280.00 per $1,000 principal amount of the notes, less the amount of any interest actually paid on the notes before the date of redemption. We are obligated to make this additional
payment on all notes called for provisional redemption, including any notes converted after the notice date and before the provisional redemption date. See “Description of Notes—Provisional Redemption.”
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Repurchase at Option of Holders
Upon a Change in Control
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Upon a change in control, as defined in the indenture, you will have the right, subject to various conditions and restrictions, to require us to
repurchase your notes, in whole or in part, at 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the repurchase date. The repurchase price is payable in cash or, at our option, in shares of common stock. However,
we, or the successor entity in the change in control transaction, may pay the repurchase price in common stock only if the conditions provided in the indenture governing the notes are satisfied. If the repurchase price is paid in common stock, the
common stock will be valued at 95% of the average of the high and low sales prices of the common stock for each of the five trading days ending with the third trading day prior to the repurchase date. A change in control could be an event of default
under our senior debt. In those circumstances, the subordination provisions of the indenture under which the notes were issued would likely prevent us from repurchasing the notes until the senior debt is paid in full. See “Description of
Notes—Repurchase at Option of Holders Upon a Change in Control.”
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Use of Proceeds
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We will not receive any proceeds from the sale by any selling securityholder of the notes or the shares offered by this prospectus.
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Events of Default
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The following are events of default under the indenture for the notes:
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we fail to pay the principal of or any premium on the notes when due, whether or not the payment is prohibited by the indenture’s subordination provisions;
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we fail to pay any interest on the notes when due and that default continues for 30 days, whether or not the payment is prohibited by the indenture’s subordination provisions;
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we fail to give the notice that we are required to give if there is a change in control, whether or not the notice is prohibited by the indenture’s subordination provisions;
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we fail to perform any other covenant in the indenture and that failure continues for 60 days after written notice to us by the trustee or the holders of at least 25% in aggregate
principal amount of outstanding notes;
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we fail to pay when due the principal of any indebtedness for money borrowed by us or any of our subsidiaries in excess of $10 million if the indebtedness is not discharged and such
failure continues for 30 days or more, or, if such indebtedness has been accelerated and such acceleration is not annulled, within 30 days after written notice to us by the trustee or the holders of at least 25% in aggregate principal amount of the
outstanding notes; and
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certain events of bankruptcy, insolvency or reorganization with respect to Cell Therapeutics, Inc. and its significant subsidiaries specified in the indenture.
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See “Description of Notes—Events of Default.”
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Nasdaq National Market Symbol for Our Common Stock
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CTIC
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4
Risk Factors
You should read the “Risk Factors” section, beginning on page 6 of this prospectus, so that you understand the
risks associated with an investment in the notes.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is as follows:
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Year Ended December 31,
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Six Months Ended
June 30,
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1998
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1999
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2000
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2001
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2002
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2002
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2003
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Ratio of earnings to fixed charges(1)
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—
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—
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—
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(1)
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For the purposes of computing ratio of earnings to fixed charges, earnings consist of income (loss) before provision for income taxes plus fixed charges. Fixed charges consist of
interest charges and that portion of rental payments under operating leases we believe to be representative of interest. Earnings for the years ended December 31, 1998, 1999, 2000, 2001, 2002, and for the six months ended June 30, 2002 and 2003,
were insufficient to cover fixed charges by $24,972, $36,280, $51,929, $80,273, $49,903, $50,048 and $61,245 (in thousands) respectively.
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5
RISK FACTORS
You should carefully
consider the risks described below and other information in this prospectus and in the documents incorporated by reference into this prospectus before deciding to invest in the notes or the common stock issuable upon conversion of the notes.
The risks and uncertainties described below are not the only
ones facing our company. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial may also impair our business, financial condition, operating results and prospects.
If any of the following risks actually occur, they could materially adversely
affect our business, financial condition, operating results or prospects. In that case, the trading price of our securities could decline.
Risks Related To CTI
We expect to continue to incur net losses, and we might never achieve profitability.
We were incorporated in 1991 and have incurred a net operating loss every year. As of June 30, 2003, we had an accumulated
deficit of approximately $401.7 million. We may never become profitable, even if we are able to commercialize additional products. We will need to conduct significant research, development, testing and regulatory compliance activities that, together
with projected general and administrative expenses, we expect will result in substantial increasing operating losses for at least the next several years. Even if we do achieve profitability, we may not be able to sustain or increase profitability on
a quarterly or annual basis.
If we do not successfully develop additional
products, we may be unable to generate significant revenue or become profitable.
We have only one product, TRISENOX, for relapsed or refractory acute promyelocytic leukemia, or APL, that has received marketing approval to date. Our leading drug candidates, TRISENOX for other indications, XYOTAX
and CT-2106, are currently in clinical trials. The clinical trials of TRISENOX, XYOTAX and CT-2106 or any of our future drug candidates may not be successful. Even if our drugs progress successfully through initial human testing, they may fail in
later stages of development. Many drugs in human clinical trials fail to demonstrate the desired safety and efficacy characteristics. Even if our drugs progress successfully through initial human testing, they may fail in later stages of
development. A number of companies in the pharmaceutical industry, including us, have suffered significant setbacks in advanced clinical trials, even after reporting promising results in earlier trials. For example, in our first phase III human
trial for lisofylline, completed in March 1998, we failed to meet our two primary endpoints, or goals, even though we met our endpoints in two earlier phase II trials for lisofylline. As a result, we are no longer developing lisofylline as a
potential product. Many of our drug candidates are still in research and pre-clinical development, which means that they have not yet been tested on humans. We will need to commit significant time and resources to develop these and additional
product candidates. Our product candidates will be successful only if:
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our product candidates are developed to a stage that will enable us to commercialize them or sell related marketing rights to pharmaceutical companies;
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we are able to commercialize product candidates in clinical development or sell the marketing rights to third parties; and
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our product candidates, if developed, are approved.
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We are dependent on the successful completion of these goals in order to generate revenues. The failure to generate such revenues may preclude us from
continuing our research and development of these and other product candidates.
6
We may need to raise additional funds in the future, and they may not be available on acceptable terms, or at all.
We expect that our existing capital resources and the
interest earned thereon will enable us to maintain our planned operations through 2004. Beyond that time, or if our plans or assumptions change or are inaccurate, we will have to raise additional funds to continue the development of our technologies
and complete the commercialization of products, if any, resulting from our technologies. We may raise such capital through public or private equity financings, partnerships, debt financings, bank borrowings, or other sources.
Additional funding may not be available on favorable terms or at all. If
adequate funds are not otherwise available, we may curtail operations significantly, including the delay, modification or cancellation of research and development programs aimed at bringing new products to market. To obtain additional funding, we
may need to enter into arrangements that require us to relinquish rights to certain technologies, drug candidates, products and/or potential markets. To the extent that additional capital is raised through the sale of equity, or securities
convertible into equity, you may experience dilution of your proportionate ownership of us.
We may take longer to complete our clinical trials than we project, or we may not be able to compete them at all.
Before regulatory approval for any potential product can be obtained, we must undertake extensive clinical testing on humans to demonstrate the
tolerability and efficacy of the product, both on its own terms, and as compared to the other principal drugs on the market that have the same therapeutic indication. These clinical trials of drug candidates involve the testing of potential
therapeutic agents, or effective treatments, in humans, to determine the safety or efficacy of the drug candidates necessary for an approved drug. Although for planning purposes we forecast the commencement and completion of clinical trials, the
actual timing of these events can vary dramatically due to a number of factors.
We may not obtain authorization to permit product candidates that are already in the pre-clinical development phase to enter the human clinical testing phase. Authorized pre-clinical or clinical testing may not be
completed successfully within any specified time period by us, or without significant additional resources or expertise to those originally expected to be necessary. Many drugs in human clinical trials fail to demonstrate the desired safety and
efficacy characteristics. Clinical testing may not show potential products to be safe and efficacious and potential products may not be approved for a specific indication. Further, the results from pre-clinical studies and early clinical trials may
not be indicative of the results that will be obtained in later-stage clinical trials. Data obtained from clinical trials are susceptible to varying interpretations. Government regulators and our collaborators may not agree with our interpretation
of our future clinical trial results. In addition, we or regulatory authorities may suspend clinical trials at any time on the basis that the participants are being exposed to unacceptable health risks. Completion of clinical trials depends on,
among other things, the number of patients available for enrollment in a particular trial, which is a function of many factors, including the number of patients with the relevant conditions, the nature of the clinical testing, the proximity of
patients to clinical testing centers, the eligibility criteria for tests as well as competition with other clinical testing programs involving the same patient profile but different treatments.
We have limited experience in conducting clinical trials. We expect to
continue to rely on third parties, such as contract research organizations, academic institutions and/or co-operative groups, to conduct, oversee and monitor clinical trials as well as to process the clinical results and manage test requests, which
may result in delays or failure to complete trials, if the third parties fail to perform or to meet the applicable standards.
If we fail to commence or complete, or experience delays in any of our present or planned clinical trials, including the Phase III clinical trials of
XYOTAX, our ability to conduct our business as planned could be harmed. Our development costs will increase if we experience any future delays in our clinical trials for XYOTAX or our other potential products or if we need to perform more or larger
clinical trials than planned. If delays or costs are significant, our financial results and our ability to commercialize our product candidates may be adversely affected.
7
Even if our drug candidates are successful in clinical trials, we may not be able to successfully commercialize them.
Since our inception in 1991, we have dedicated
substantially all of our resources to the research and development of our technologies and related compounds. With the exception of TRISENOX for patients with APL who have relapsed or failed standard therapies, all of our compounds currently are in
research or development, and none has been submitted for marketing approval. Our other compounds may not enter human clinical trials on a timely basis, if at all, and we may not develop any product candidates suitable for commercialization.
Prior to commercialization, each product candidate will
require significant additional research, development and pre-clinical testing and extensive clinical investigation before submission of any regulatory application for marketing approval. The development of anti-cancer drugs, including those we are
currently developing, is unpredictable and subject to numerous risks. Potential products that appear to be promising at early stages of development may not reach the market for a number of reasons including that they may:
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be found ineffective or cause harmful side effects during pre-clinical testing or clinical trials;
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fail to receive necessary regulatory approvals;
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be difficult to manufacture on a large scale;
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be uneconomical to produce;
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fail to achieve market acceptance; or
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be precluded from commercialization by proprietary rights of third parties.
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The occurrence of any of these events could adversely affect the commercialization of our products. Any products, if introduced, may not be successfully
marketed and/or may not achieve customer acceptance. If we fail to commercialize products or if our future products do not achieve significant market acceptance, we will not likely generate significant revenues or become profitable.
If we fail to establish and maintain collaborations or if our partners do not perform, we
may unable to develop and commercialize our product candidates.
We have entered into collaborative arrangements with third parties to develop and/or commercialize product candidates and are currently seeking additional collaborations. For example, we have entered into an agreement with Chugai
Pharmaceutical Co., Ltd. to develop and commercialize XYOTAX in several Asian markets. Additional collaborations might be necessary in order for us to fund our research and development activities and third-party manufacturing arrangements, seek and
obtain regulatory approvals and successfully commercialize our existing and future product candidates. If we fail to enter into additional collaborative arrangements or fail to maintain our existing collaborative arrangements, the number of product
candidates from which we could receive future revenues would decline.
Our dependence on collaborative arrangements with third parties will subject us to a number of risks that could harm our ability to develop and commercialize products, including that:
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collaborative arrangements may not be on terms favorable to us;
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disagreements with partners may result in delays in the development and marketing of products, termination of our collaboration agreements or time consuming and expensive legal
action;
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we cannot control the amount and timing of resources partners devote to product candidates or their prioritization of product candidates and partners may not allocate sufficient
funds or resources to the development, promotion or marketing of our products, or may not perform their obligations as expected;
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partners may choose to develop, independently or with other companies, alternative products or treatments, including products or treatments which compete with ours;
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agreements with partners may expire or be terminated without renewal, or partners may breach collaboration agreements with us;
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business combinations or significant changes in a partner’s business strategy might adversely affect that partner’s willingness or ability to complete its obligations to
us; and
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the terms and conditions of the relevant agreements may no longer be suitable.
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The occurrence of any of these events could adversely affect the development or commercialization of our products.
Because we base several of our drug candidates on unproven novel technologies, we may
never develop them into commercial products.
We base many
of our product candidates upon novel delivery technologies that we are using to discover and develop drugs for the treatment of cancer. These technologies have not been proven. Furthermore, pre-clinical results in animal studies may not predict
outcomes in human clinical trials. Our product candidates may not be proven safe or effective. If these technologies do not work, our drug candidates may not develop into commercial products.
We may face difficulties in achieving acceptance of our products in the market if we do
not continue to expand our sales and marketing infrastructure.
We currently are marketing TRISENOX with our direct sales force. Competition for these individuals is intense, and in the event we need additional sales personnel, we may not be able to hire individuals with the experience required or
number of sales personnel we need. In addition, if we market and sell products other than TRISENOX, we may need to further expand our marketing and sales force with sufficient technical expertise and distribution capacity. If we are unable to expand
our direct sales operations and train new sales personnel as rapidly as necessary, we may not be able to increase market awareness and sales of our products, which may prevent us from growing our revenues and achieving and maintaining profitability.
If any of our license agreements for intellectual property underlying
TRISENOX, XYOTAX or any other products are terminated, we may lose our rights to develop or market that product.
We have licensed intellectual property, including patent applications from The Memorial Sloan-Kettering Cancer Center, Samuel Waxman Cancer Research
Foundation, Beijing Medical University and others, including the intellectual property directed to arsenic drugs and TRISENOX. We have also in-licensed the intellectual property relating to our drug delivery technology that uses polymers that are
linked to drugs, known as polymer-drug conjugates, including XYOTAX. Some of our product development programs depend on our ability to maintain rights under these licenses. Each licensor has the power to terminate its agreement with us if we fail to
meet our obligations under these licenses. We may not be able to meet our obligations under these licenses. If we default under any license agreements, we may lose our right to market and sell any products based on the licensed technology.
If we fail to protect adequately our intellectual property, our competitive
position could be harmed.
Development and protection of
our intellectual property are critical to our business. If we do not adequately protect our intellectual property, competitors may be able to practice our technologies. Our success depends in part on our ability to:
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obtain patent protection for our products or processes both in the United States and other countries;
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protect trade secrets; and
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prevent others from infringing on our proprietary rights.
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In particular we believe that linking our polyglutamate polymer, which is an amino acid-based polymer, to existing drugs may yield patentable subject
matter. When polymers are linked, or conjugated, to drugs, the results are referred to as polymer-drug conjugates. We are developing drug delivery technology that links chemotherapy drugs to biodegradable polymers. For example, XYOTAX is paclitaxel,
the active ingredient in TAXOL
®
, one of the
world’s best selling cancer drugs, linked to polyglutamate. We do not believe that our polymer-drug conjugates will infringe any valid third-party patents covering the underlying drug. However, we may not receive a patent for our polymer-drug
conjugates and we may be challenged by the holder of a patent covering the underlying drug.
The patent position of biopharmaceutical firms generally is highly uncertain and involves complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy regarding the
breadth of claims that it will allow in biotechnology patents. If it allows broad claims, the number and cost of patent interference proceedings in the U.S., and the risk of infringement litigation may increase. If it allows narrow claims, the risk
of infringement may decrease, but the value of our rights under our patents, licenses and patent applications may also decrease. Patent applications in which we have rights may never issue as patents and the claims of any issued patents may not
afford meaningful protection for our technologies or products. In addition, patents issued to us or our licensors may be challenged and subsequently narrowed, invalidated or circumvented. Litigation, interference proceedings or other governmental
proceedings that we may become involved in with respect to our proprietary technologies or the proprietary technology of others could result in substantial cost to us. Patent litigation is widespread in the biotechnology industry, and any patent
litigation could harm our business. Costly litigation might be necessary to protect our orphan drug designations, which are designations for products meeting criteria based on the size of the potential U.S. patient population for a drug and which
entitle that drug to seven years of exclusive rights in the U.S. market, or to protect a patent position or to determine the scope and validity of third party proprietary rights, and we may not have the required resources to pursue any such
litigation or to protect our patent rights. An adverse outcome in litigation with respect to the validity of any of our patents could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties
or require us to cease using a product or technology.
We also
rely upon trade secrets, proprietary know-how and continuing technological innovation to remain competitive. Third parties may independently develop such know-how or otherwise obtain access to our technology. While we require our employees,
consultants and corporate partners with access to proprietary information to enter into confidentiality agreements, these agreements may not be honored.
Our products could infringe on the intellectual property rights of others, which may cause us to engage in costly litigation and, if we are not successful, could cause
us to pay substantial damages and prohibit us from selling our products.
Although we attempt to monitor the patent filings of our competitors in an effort to guide the design and development of our products to avoid infringement, third parties may challenge the patents that have been
issued or licensed to us. We may not be able to successfully challenge the validity of these patents and could have to pay substantial damages, possibly including treble damages, for past infringement if it is ultimately determined that our products
infringe a third party’s patents. Further, we may be prohibited from selling our products before we obtain a license, which, if available at all, may require us to pay substantial royalties. Even if infringement claims against us are without
merit, or if we challenge the validity of issued patents, lawsuits take significant time, may be expensive and may divert management attention from other business concerns.
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If we cannot enter into new licensing arrangements, our future product portfolio and potential profitability could be
harmed.
One component of our business strategy is
in-licensing drug compounds developed by other pharmaceutical and biotechnology companies or academic research laboratories. Substantially all of our product candidates in clinical development are in-licensed from a third party, including TRISENOX
and XYOTAX. Competition for new promising compounds and commercial products can be intense. If we are not able to identify future in-licensing opportunities and enter into future licensing arrangements on acceptable terms, our future product
portfolio and potential profitability could be harmed.
We may be unable to
obtain the raw materials necessary to produce our XYOTAX product candidate in sufficient quantity to meet demand when and if such product is approved.
Paclitaxel is derived from certain varieties of yew trees. Supply of paclitaxel is controlled by a limited number of companies. We may not be able to
continue to purchase the materials necessary to produce XYOTAX, including paclitaxel, in adequate volume and quality. We purchase the majority of the paclitaxel we need from a single vendor. We also purchase the raw material polyglutamic acid from a
single source on a purchase order basis. Should the paclitaxel or polyglutamic acid purchased from our sources prove to be insufficient in quantity or quality, or should these relationships terminate, we may not be able to obtain a sufficient supply
from alternate sources.
Our dependence on third party manufacturers means
that we may not have sufficient control over the manufacture of our products.
We do not currently have internal facilities for the manufacture of any of our products or product candidates for clinical evaluation or commercial production. In addition, TRISENOX, our first commercial product, is
currently manufactured by a single vendor. In 2002, we began the process of qualifying an additional supplier for our finished product manufacturing for TRISENOX. This additional supplier received FDA approval to manufacture TRISENOX in June 2003,
however, our suppliers may not be able to provide us with finished product if and when we need it. We will need to develop additional manufacturing resources, enter into collaborative arrangements with other parties that have established
manufacturing capabilities or elect to have other third parties manufacture our products on a contract basis. We will be dependent upon these third parties to supply us in a timely manner with products manufactured in compliance with current good
manufacturing practices, or cGMPs, or similar manufacturing standards imposed by foreign regulatory authorities where our products will be tested and/or marketed. Contract manufacturers may violate cGMPs and the FDA is continuing to maintain its
oversight of drug manufacturers. The FDA may take action against a contract manufacturer who violates cGMPs. Such actions may include requiring the contract manufacturer to cease its manufacturing activities. Another of our products under
development, XYOTAX, is complex to manufacture, which may prevent us from obtaining a sufficient supply for the increased clinical trials that are currently planned or underway.
We are subject to extensive government regulation, including the requirement of approval before our products may be marketed.
Regulatory agencies have approved only one of our
products, TRISENOX, for sale in the United States and the European Union, to treat patients with a type of blood cancer called acute promyelocytic leukemia, or APL, who have relapsed or failed standard therapies. Before we can market TRISENOX for
other indications in the U.S. or EU, we must obtain additional FDA approval and/or approval of the European Agency for the Evaluation of Medical Products, or the EMEA. Our other products are in development, and will have to be approved by the FDA
before they can be marketed in the United States and by the EMEA before they can be marketed in the EU. Obtaining FDA or other national regulatory approval requires substantial time, effort and financial resources, and we may not obtain approval on
a timely basis, if at all. If the FDA or the EMEA do not approve our products and
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any additional indications for marketed products in a timely fashion, or does not approve them at all, our business and financial condition may be adversely
affected.
In addition, we and our currently marketed products
and product candidates are subject to comprehensive regulation by the FDA and the EMEA. Regulation by the FDA and EMEA begins before approval for marketing is granted and continues during the life of each product. For example, TRISENOX was approved
by the FDA under its accelerated approval process and by the EMEA “under exceptional circumstances” and we committed to completing several post-approval requirements to both the FDA and the EMEA, including the conduct of additional
clinical studies. If we fail to fulfill these obligations, the FDA or EMEA may withdraw approval of TRISENOX. In addition, the FDA and other regulatory authorities regulate, for example, research and development, including pre-clinical and clinical
testing, safety, effectiveness, manufacturing, labeling, advertising, promotion, export, and marketing of our products. Manufacturing processes must conform to cGMPs. The FDA and other regulatory authorities periodically inspect manufacturing
facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort to maintain compliance. Also, a drug may not be promoted for other than its approved indication, and the FDA, EMEA and other
regulatory authorities may institute enforcement actions against companies that do so. Our failure to comply with this or other FDA or other regulatory requirements may result in various adverse consequences, including possible delay in approval or
refusal to approve a product, recalls, seizures, withdrawal of an approved product from the market, and/or the imposition of civil or criminal sanctions.
Additionally, we are subject to numerous regulations and statutes regulating the manner of selling and obtaining reimbursement for our products that
receive marketing approval. For example, federal statutes generally prohibit providing certain discounts and payments to physicians to encourage them to prescribe our product. Violations of such regulations or statutes may result in treble damages,
criminal or civil penalties, fines or exclusion of CTI or its employees from participation in federal and state health care programs. Although we have policies prohibiting violations of relevant regulations and statutes, unauthorized actions of our
employees or consultants, or unfavorable interpretations of such regulations or statutes may result in third parties or regulatory agencies bringing legal proceedings or enforcement actions against us.
Uncertainty regarding third party reimbursement and health care cost containment
initiatives may limit our returns.
The ongoing efforts of
governmental and third party payors to contain or reduce the cost of health care will affect our ability to commercialize our products successfully. Governmental and other third party payors are increasingly attempting to contain health care costs
by:
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challenging the prices charged for health care products and services;
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limiting both coverage and the amount of reimbursement for new therapeutic products;
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denying or limiting coverage for products that are approved by the FDA but are considered experimental or investigational by third-party payors;
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refusing in some cases to provide coverage when an approved product is used for disease indications in a way that has not received FDA marketing approval; and
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denying coverage altogether.
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The trend toward managed health care in the United States, the growth of organizations such as health maintenance organizations, and legislative proposals
to reform healthcare and government insurance programs could significantly influence the purchase of healthcare services and products, resulting in lower prices and reducing demand for our products. In addition, in almost all European markets,
pricing and choice of prescription pharmaceuticals are subject to governmental control. Therefore, the price of our products and their reimbursement in Europe will be determined by national regulatory authorities.
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Even if we succeed in bringing any of our proposed products to the market, they may not be considered
cost-effective and third party reimbursement might not be available or sufficient. If adequate third party coverage is not available, we may not be able to maintain price levels sufficient to realize an appropriate return on our investment in
research and product development. In addition, legislation and regulations affecting the pricing of pharmaceuticals may change in ways adverse to us before or after any of our proposed products are approved for marketing. While we cannot predict
whether any such legislative or regulatory proposals will be adopted, the adoption of such proposals could make it difficult or impossible to sell our products. TRISENOX has been reimbursed by third party payors, but there is no guarantee this
reimbursement will continue.
We face direct and intense competition from
our competitors in the biotechnology and pharmaceutical industries and we may not compete successfully against them.
Competition in the oncology industry is intense and is accentuated by the rapid pace of technological development. We anticipate that we will face
increased competition in the future as new companies enter our markets. Our competitors in the United States and elsewhere are numerous and include, among others, major multinational pharmaceutical companies, specialized biotechnology companies and
universities and other research institutions. Specifically:
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If we are successful in bringing XYOTAX to market, we will face direct competition from oncology-focused multinational corporations. XYOTAX will compete with other taxanes, which
are drugs that inhibit cell growth by stopping cell division and are widely used as treatments for cancer. Many oncology-focused multinational corporations currently market or are developing taxanes, epothilones, which inhibit cancer cells by a
mechanism similar to taxanes, or similar products (including, among others, Bristol-Myers Squibb Co., which markets Taxol
®
, one of the best-selling cancer drugs and Aventis, which markets Taxotere
®
, Novartis AG and Roche).
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In the hematology market, we hope to receive approval to market TRISENOX to larger indications than currently authorized. We will face competition from a number of biopharmaceutical
companies, including:
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Celgene Corporation, which currently markets thalidomide in multiple myeloma and is developing ImiDs
™
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Millennium Pharmaceutical, which recently launched Velcade
™
for treatment of multiple myeloma, a cancer of the bone marrow;
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Pharmion Corporation, which has signed an agreement with Celgene to expand internationally the marketing of thalidomide and is developing 5-Azacytidine for myelodyplastic syndromes,
or MDS, also known as ‘smoldering’ or preleukemia, which are a group of diseases in which the bone marrow does not function normally, and insufficient numbers of mature blood cells are in circulation; and
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SuperGen Corporation, which is developing decitabine, which is in phase III studies in MDS.
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Many of our competitors, either alone or together with their collaborators and in particular, the multinational
pharmaceutical companies, have substantially greater financial resources and development and marketing teams than us. In addition, many of our competitors, either alone or together with their collaborators, have significantly greater experience than
we do in developing, manufacturing and marketing products. As a result, these companies’ products might come to market sooner or might prove to be more effective, to be less expensive, to have fewer side effects or to be easier to administer
than ours. In any such case, sales of our eventual products would likely suffer and we might never recoup the significant investments we are making to develop these product candidates.
If we lose our key personnel or we are unable to attract and retain additional personnel, we may be unable to pursue collaborations or
develop our own products.
We are highly dependent on Dr.
James A. Bianco, our chief executive officer, and Dr. Jack W. Singer, our executive vice president, research program chairman. The loss of any one of these principal members of our
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scientific or management staff, or failure to attract or retain other key scientific employees, could prevent us from pursuing collaborations or developing
our products and core technologies. Recruiting and retaining qualified scientific personnel to perform research and development work are critical to our success. There is intense competition for qualified scientists and managerial personnel from
numerous pharmaceutical and biotechnology companies, as well as from academic and government organizations, research institutions and other entities. In addition, we will rely on consultants and advisors, including scientific and clinical advisors,
to assist us in formulating our research and development strategy. All of our consultants and advisors will be employed by other employers or are self-employed, and will have commitments to or consulting or advisory contracts with other entities
that may limit their availability to us.
Our limited operating experience
may cause us difficulty in managing our growth and could seriously harm our business.
As a result of additional trials for TRISENOX for indications other than relapsed or refractory APL and clinical trials currently underway for XYOTAX and our other products in development, we have expanded our
operations in various areas, including our management, regulatory, clinical, financial and information systems and other elements of our business process infrastructure. We may need to add additional key personnel in these areas. In addition, as
growth occurs, it may strain our operational, managerial and financial resources. We will not be able to increase revenues or control costs unless we continue to improve our operational, financial, regulatory and managerial systems and processes,
and expand, train and manage our work force.
Because there is a risk of
product liability associated with our products, we face potential difficulties in obtaining insurance.
Our business exposes us to potential product liability risks inherent in the testing, manufacturing and marketing of human pharmaceutical products, and we
may not be able to avoid significant product liability exposure. While we have insurance covering product use in our clinical trials, and currently have product liability insurance for TRISENOX, it is possible that we will not be able to maintain
such insurance on acceptable terms or that any insurance obtained will provide adequate coverage against potential liabilities. Our inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential
product liability claims could prevent or limit the commercialization of any products we develop. A successful product liability claim in excess of our insurance coverage could exceed our net worth.
Since we use hazardous materials in our business, we may be subject to claims relating to
improper handling, storage or disposal of these materials.
Our research and development activities involve the controlled use of hazardous materials, chemicals and various radioactive compounds. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage,
handling and disposal of such materials and certain waste products. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be eliminated completely. In the event of such an accident, we could be held liable for any damages that result and any such liability not covered by insurance could exceed our
resources. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development or production efforts.
We may not be able to conduct animal testing in the future, which could harm our research and development activities.
Certain of our research and development activities involve animal testing.
Such activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas. To
the extent
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the activities of these groups are successful, our business could be materially harmed by delaying or interrupting our research and development activities.
Risks Related to the Securities Markets
Our stock price is extremely volatile, which may affect our ability to raise capital in
the future.
The market price for securities of
biopharmaceutical and biotechnology companies, including ours, historically has been highly volatile, and the market from time to time has experienced significant price and volume fluctuations that are unrelated to the operating performance of such
companies. For example, during the twelve months ended June 30, 2003, our stock price ranged from a low of $2.68 to a high of $15.70. Fluctuations in the trading price or liquidity of our common stock may adversely affect our ability to raise
capital through future equity financings.
Factors that may
have a significant impact on the market price and marketability of our common stock include:
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announcements of technological innovations or new commercial therapeutic products by us, our collaborative partners or our present or potential competitors;
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our quarterly operating results;
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announcements by us or others of results of preclinical testing and clinical trials;
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developments or disputes concerning patent or other proprietary rights;
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developments in our relationships with collaborative partners;
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litigation and government proceedings;
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adverse legislation, including changes in governmental regulation and the status of our regulatory approvals or applications;
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third-party reimbursement policies;
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changes in securities analysts’ recommendations;
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changes in health care policies and practices;
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economic and other external factors; and
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general market conditions.
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In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been
instituted. If a securities class action suit is filed against us, we would incur substantial legal fees and our management’s attention and resources would be diverted from operating our business in order to respond to the litigation.
Our charter documents contain provisions that may prevent or delay removal
of incumbent management or a change of control.
Provisions of our articles of incorporation and bylaws may have the effect of deterring or delaying attempts by our shareholders to remove or replace management, proxy contests and changes in control. These provisions include:
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a classified board so that only one third of the board of directors is elected each year;
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elimination of cumulative voting in the election of directors;
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procedures for advance notification of shareholder nominations and proposals;
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the ability of our board of directors to amend our bylaws without shareholder approval;
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the ability of our board of directors to issue up to 10,000,000 shares of preferred stock without shareholder approval upon the terms and conditions and with the rights, privileges
and preferences as the board of directors may determine; and
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a shareholder rights plan.
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In addition, as a Washington corporation, we are subject to Washington law, including Chapter 23 of the Washington Business Corporations Act, which
prohibits public companies from engaging in some business combinations without the approval of a majority of the votes within each voting group entitled to vote separately on the transaction.
These provisions, alone or together, could have the effect of deterring or
delaying changes in incumbent management, proxy contests or changes in control.
Risks Related to Proposed Acquisition of Novuspharma S.p.A.
The integration of CTI and Novuspharma will be a challenging, complex, time-consuming and expensive process and may disrupt both companies’ businesses if not completed in a timely and efficient manner.
The challenges involved in the integration of CTI and
Novuspharma include the following:
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effectively pursuing the clinical development and regulatory approvals of our and Novuspharma’s product candidates while effectively marketing our current approved product
(TRISENOX);
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successfully commercializing products under development and increasing revenues from TRISENOX;
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retaining existing strategic partners;
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retaining and integrating management and other key employees of both CTI and Novuspharma;
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coordinating research and development activities to enhance introduction of new products and technologies;
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integrating purchasing and procurement operations in multiple locations;
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maintaining an adequate level of liquidity to fund our continuing operations and expansion;
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integrating the business cultures of CTI and Novuspharma and maintaining employee morale, particularly in light of an anticipated reduction in workforce;
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transitioning all facilities to a common information technology system;
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developing and maintaining uniform standards, controls, procedures and policies that comply with both U.S. and Italian laws and regulations;
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maintaining adequate focus on the core business of the combined company while integrating operations;
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maintaining relationships with employees, strategic partners, manufacturers and suppliers while integrating management and other key personnel; and
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coping with unanticipated expenses related to integration of the two companies.
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We may not succeed in addressing these challenges or any other problems encountered in connection with the merger, which may
be exacerbated by the geographic separation of CTI and Novuspharma. Our company’s
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U.S. officers will be located in Seattle, Washington, in the United States, while our Italian officers will be located in Bresso (Milan), Italy. In addition,
our European headquarters will be moved from the United Kingdom to Novuspharma’s offices in Bresso (Milan), Italy following the merger. If management is not able to address these challenges, we may not achieve the anticipated benefits of the
merger, which may have a material adverse effect on our business and could result in the loss of key personnel.
We face numerous additional risks in connection with the proposed merger with Novuspharma, which may adversely affect our results of operations whether or not the
merger is completed, and the merger may not be completed on a timely basis or at all.
Uncertainty surrounding the proposed transaction also may have an adverse effect on employee morale and retention, and result in the diversion of management attention and resources. In addition, the market values of
CTI common stock and Novuspharma ordinary shares will continue to vary prior to completion of the merger transaction due to changes in the business, operations or prospects of CTI or Novuspharma, market assessments of the merger, regulatory
considerations, market and economic considerations, or other factors. However, there will be no adjustment to the exchange ratio between CTI and Novuspharma shares in connection with the merger, and the parties do not have a right to terminate the
merger agreement based upon changes in the market price of either CTI common stock or Novuspharma ordinary shares.
Completion of the merger also is subject to numerous risks and uncertainties. CTI and Novuspharma may be unable to obtain regulatory or shareholder
approvals required to complete the merger in a timely manner or at all. In order to obtain regulatory approval, we may be required to comply with material restrictions or conditions. CTI and Novuspharma also are required to obtain separate
shareholder approvals in connection with the merger. In the case of Novuspharma shareholders, Italian law provides them with certain rescission rights that may entitle them to receive cash payment for their Novuspharma ordinary shares, the payment
of which may substantially reduce our cash reserves. If the merger is not completed, the price of CTI common stock may decline to the extent that the current market price of CTI common stock reflects a market assumption that the merger will be
completed. Moreover, CTI would not derive the strategic benefits expected to result from the merger, such as adding to our product pipeline and achieving time and cost savings. We also will be required to pay significant costs incurred in connection
with the merger, including legal, accounting and a portion of the financial advisory fees, whether or not the merger is completed. Moreover, under specified circumstances, CTI may be required to pay Novuspharma a termination fee of $4.75 million in
connection with the termination of the merger agreement.
If
the merger is completed, the issuance of CTI common stock to Novuspharma shareholders will substantially reduce the percentage interest of CTI shareholders. Additionally, we will face risks associated with the expansion of CTI to incorporate
Novuspharma operations. Also, as described above, we will continue to face risks associated with the integration of the businesses and operations of CTI and Novuspharma, and we may not realize the anticipated benefits or synergies of the merger to
the extent, or in the timeframe, anticipated. Also, because Novuspharma is based in Italy, we will be subject to risks relating to international expansion, including fluctuations in the exchange rate of the dollar relative to the euro, which could
cause costs to be greater than we expect and introduce additional volatility in our reported quarterly results. Moreover, charges to earnings resulting from the application of the purchase method of accounting may affect our results of operation
adversely following the merger, as CTI will incur additional depreciation and amortization expense over the useful lives of certain of the net tangible and intangible assets acquired in connection with the merger, and, to the extent the value of
goodwill or intangible assets with indefinite lives acquired in connection with the merger becomes impaired, CTI may be required to incur material charges relating to the impairment of those assets. The foregoing risks are described in more detail
in the section entitled “Risk Factors” of the Registration Statement on Form S-4 filed by CTI with the Securities and Exchange Commission on July 9, 2003, as amended on August 21, 2003 and September 18, 2003.
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Risks Related To Our Notes
The notes are subordinated to our existing and future senior debt and liabilities of our subsidiaries.
The notes are senior in right of payment to our 5.75% Convertible
Subordinated Notes due 2008 and are equal in right of payment with our 5.75% Convertible Senior Subordinated Notes due 2008. The notes are unsecured and subordinated in right of payment to all of our other existing and future senior debt. As of June
30, 2003 we had $6.2 million of senior debt outstanding, in addition to $85.5 million principal amount of 5.75% Convertible Senior Subordinated Notes and $29.6 million principal amount 5.75% Convertible Subordinated Notes outstanding. As a result of
such subordination, in the event of our bankruptcy, liquidation or reorganization, or upon acceleration of the notes due to an event of default and in specific other events, our assets will be available to pay obligations on the notes only after all
senior debt has been paid in full. There may not be sufficient assets remaining to pay amounts due on any of the notes that are then outstanding. The notes are also effectively subordinated to all liabilities, including trade payables and lease
obligations, of our subsidiaries. As of June 30, 2003, our subsidiaries had liabilities of approximately $2.1 million (excluding intercompany liabilities) to which the notes would have been effectively subordinated if they had been outstanding at
that time, approximately $1.4 million of which is included in the $6.2 million of senior debt described above. The indenture governing the notes does not prohibit or limit the incurrence of senior debt or the incurrence of other debt and other
liabilities by us or our subsidiaries. The incurrence of additional senior debt and other liabilities by us or our subsidiaries could impede our ability to pay obligations on the notes.
We anticipate that from time to time we will incur additional debt, including senior indebtedness. See “Description of
Notes—Subordination.”
We may be unable to repurchase the notes.
At maturity, the entire outstanding principal amount of
the notes will become due and payable. In addition, if we experience a change in control, each holder of the notes may require us to repurchase all or a portion of that holder’s notes. At maturity or if we experience a change in control, we may
not have sufficient funds or may be unable to arrange for additional financing to pay the principal amount or repurchase price due on the notes then outstanding. Our borrowing arrangements or agreements relating to senior debt to which we become a
party may contain restrictions on, or prohibitions against, our repurchases of the notes. If the maturity date or change in control occurs at a time when our other arrangements prohibit us from repurchasing the notes, we could try to obtain the
consent of the lenders under those arrangements to purchase the notes, or we could attempt to refinance the borrowings that contain the restrictions. If we do not obtain the necessary consents or refinance these borrowings, we will be unable to
repurchase the notes. In that case, our failure to repurchase any tendered notes or notes due upon maturity would constitute an event of default under the indenture governing the notes. Any such default, in turn, may cause a default under the terms
of our senior debt. As a result, in those circumstances, the subordination provisions of the indenture governing the notes would, absent a waiver, prohibit any repurchase of the notes until we pay the senior debt in full.
We may be unable to generate sufficient cash flow from which to make payments on the
notes.
We expect to incur substantial net operating
losses for the foreseeable future. We may not become profitable or sustain profitability in the future. Accordingly, we may not have sufficient funds to make payments on the notes. Therefore, we may not have sufficient assets remaining to pay
amounts due on any or all of the notes.
Sale of a large number of shares by
Cell Therapeutics or by shareholders could depress our stock price.
The market price of our common stock could drop as a result of sales or expected sales of a large number of our shares in the public market. Any sales by existing shareholders or holders of options or warrants may
have an adverse effect on our ability to raise capital and may adversely affect the market price of the common stock. In
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connection with our sale of the notes to CIBC World Markets Corp. and U.S. Bancorp Piper Jaffray, which we refer to in this prospectus as the Initial
Purchasers, we became subject to a 90-day lockup period following June 23, 2003, the date of such sale. During this lockup period, we are not allowed to issue additional common stock or securities convertible into common stock except in certain
circumstances or unless the Initial Purchasers consent to such issuance.
There is no public market for the notes being offered, which may significantly impair the liquidity of the notes.
There is no established public trading market for the notes. As a result, there may not develop liquidity of any such trading market that may develop,
there may not be an ability of holders to sell their notes, and there is no guarantee at which price holders will be able to sell their notes. If such a market were to exist, the notes could trade at prices that may be higher or lower than the
principal amount or purchase price, depending on many factors, including prevailing interest rates, the market for similar notes, and our financial performance. We do not presently intend to apply for the listing of the notes on any securities
exchange or for inclusion of the notes in the automated quotation system of the NASD.
At the time of the original issuance of the notes in a private placement in June 2003, the Initial Purchasers of the notes advised us that they intended to make a market in the notes. The Initial Purchasers are not
obligated, however, to make a market in the notes, and any such market-making may be discontinued at any time at the sole discretion of the Initial Purchasers. In addition, such market-making activity will be subject to the limits imposed by the
Securities Act and the Exchange Act. Accordingly, no assurance can be given as to the development or liquidity of any market for the notes.
The notes are not rated and if rated in the future may receive a lower rating than anticipated by investors.
The notes are not currently rated and we believe it is unlikely that the
notes will be rated. However, if one or more rating agencies rate the notes and assign the notes a rating lower than the rating expected by investors, or reduce the rating of the notes in the future, the market price of the notes and our common
stock may be adversely affected.
If you convert any notes, the value of the
common stock you receive may fluctuate significantly.
Since our common stock has been publicly traded, its market price has fluctuated significantly and may continue to do so in the future. Factors that may have a significant impact on the market price and marketability of our common stock
include:
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announcements of technological innovations or new commercial therapeutic products by us, our collaborative partners or our present or potential competitors;
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our quarterly operating results;
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announcements by us or others of results of preclinical testing and clinical trials;
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developments or disputes concerning patent or other proprietary rights;
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developments in our relationships with collaborative partners;
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litigation and government proceedings;
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adverse legislation, including changes in governmental regulation and the status of our regulatory approvals or applications;
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third-party reimbursement policies;
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changes in securities analysts’ recommendations;
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changes in health care policies and practices;
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economic and other external factors; and
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general market conditions.
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In addition, stock markets have experienced extreme price volatility in recent years. In the past, our common stock has experienced volatility not
necessarily related to announcements of our financial performance. Broad market fluctuations may also adversely affect the market price of the underlying common stock.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
In addition to the other information contained or incorporated by reference in this prospectus, you should carefully consider the risk factors disclosed in this prospectus when evaluating an investment in the notes or
the common stock issuable upon conversion of the notes. This prospectus includes “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. All statements other than
statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues or other financial items, any statements of the plans and objectives of management for future
operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, and any statement of assumptions underlying any of the foregoing. In some cases, forward-looking statements
can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential,” or “continue” or the negative thereof or
other comparable terminology. There can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from these projected or assumed in the forward-looking
statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including but not limited to the risk factors set forth above and those described
elsewhere in this prospectus. All forward-looking statements and reasons why results may differ included in this prospectus are made as of the date hereof, and we assume no obligation to update any such forward-looking statement or reason why actual
results might differ.
USE OF PROCEEDS
We will not
receive any proceeds from the sale by any selling securityholder of the notes or the shares of common stock issuable upon conversion of the notes.
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DESCRIPTION OF NOTES
The 4%
Convertible Senior Subordinated Notes due July 1, 2010 are issued under, and are governed by, an indenture, between us and U.S. Bank National Association, as trustee. Because this section is a summary, it does not describe every aspect of the notes,
the indenture or the registration rights agreement. This summary is subject to, and qualified in its entirety by, reference to all the provisions of the indenture and registration rights agreement, including definitions of certain terms used in the
indenture or the registration rights agreement. The indenture and the registration rights agreement have been filed as exhibits to this registration statement of which this prospectus forms a part. We urge you to read these documents because they
define your rights as holders of the notes.
General
The notes are our general, unsecured obligations. The notes are subordinated
in right of payment, which means that they rank in right of payment behind certain of our indebtedness as described below, but are senior in right of payment to our 5.75% Convertible Subordinated Notes due 2008 and rank equally in right of payment
with our 5.75% Convertible Senior Subordinated Notes due 2008. The notes are limited to $75,000,000 aggregate principal amount. We are required to repay the full principal amount of the notes on July 1, 2010, unless they are previously redeemed or
repurchased.
The notes bear interest at the annual rate of 4%
from the date of issuance of the notes. We will pay interest twice a year, on each January l and July 1, beginning January 1, 2004, until the principal is paid or made available for payment or the notes have been converted. We will pay interest to
the persons in whose name the note is registered at the close of business on the immediately preceding December 15 or June 15, as the case may be, which we refer to as a regular record date. Interest is calculated on the basis of a 360-day year
consisting of twelve 30-day months.
You may convert the notes
into shares of our common stock at any time before the close of business on July l, 2010, unless the notes have been previously redeemed or repurchased. The initial conversion rate for the notes is 74.0741 shares of common stock per $1,000 principal
amount of notes. This conversion rate is equivalent to a conversion price of approximately $13.50 per share. The conversion rate may be adjusted as described below. Holders of notes called for redemption or submitted for repurchase are entitled to
convert the notes up to and including the business day immediately preceding the date fixed for redemption or repurchase.
We may redeem some or all of the notes at any time prior to maturity at a redemption price of $1,000 per $1,000 principal amount of notes, plus accrued
and unpaid interest, if any, to, but excluding, the redemption date, if (a) the closing price of our common stock has exceeded 150% of the conversion price then in effect for at least 20 trading days within a period of 30 consecutive trading days
ending on the trading day before the date of mailing of the provisional redemption notice and (b) the shelf registration statement covering resales of the notes and the common stock issuable upon conversion of the notes is effective and available
for use and is expected to remain effective and available for use for the 30 days following the provisional redemption date, unless registration is no longer required. In the event that we redeem the notes, we will make an additional payment in cash
with respect to the notes called for provisional redemption in an amount equal to $280.00 per $1,000 principal amount of notes, less the amount of any interest actually paid on the notes before the date of redemption. See the subsection entitled
“Provisional Redemption” below for more information.
If we experience a change in control, as described below, you have the right to require us to repurchase your notes as described in the section of this prospectus entitled “Repurchase at Option of Holders Upon a Change in
Control.”
No “sinking fund” is provided for the
notes, which means that the indenture does not require us to redeem or retire the notes periodically.
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Form, Denomination, Transfer, Exchange and Book-Entry Procedures
The notes are issued:
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only in fully registered form;
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without interest coupons; and
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in denominations of $1,000 and integral multiples thereof.
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Principal of, premium, if any, and interest (and liquidated damages, as defined below, if any) on the notes is payable, and the notes may be presented for
registration or exchange, at the office or agency we maintain for such purpose in the Borough of Manhattan, The City of New York. Until we designate otherwise, our office or agency is the trustee’s corporate trust office presently located in
the Borough of Manhattan, The City of New York.
The notes are
currently evidenced by one or more global notes that are deposited with the trustee as custodian for DTC and registered in the name of Cede & Co., as nominee of DTC. Except as set forth below, record ownership of the global note may be
transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee.
The global note is not registered in the name of any person, nor can it be exchanged for notes that are registered in the name of any person, other than
DTC or its nominee, unless either of the following occurs:
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DTC has notified us that it is unwilling or unable to continue as depository for the global note or has ceased to be a clearing agency registered as such under the Exchange Act or
announces an intention permanently to cease business or does in fact do so; or
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an event of default with respect to the notes represented by the global note has occurred and is continuing.
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In those circumstances, DTC will determine in whose names any notes issued in
exchange for the global note will be registered.
So long as
the notes are registered in the name of Cede & Co. as nominee for DTC, DTC or its nominee are considered the sole owner and holder of the global note for all purposes, and as a result:
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you cannot receive notes registered in such holder’s name if they are represented by the global notes;
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you cannot receive certificated (physical) notes in exchange for your beneficial interest in the global notes;
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you are not considered to be the owner or holder of the global note or any note it represents for any purpose; and
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all payments on the global note will be made to DTC or its nominee.
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The laws of some jurisdictions require that certain kinds of purchasers can only own securities in physical, certificated form. These laws may limit your
ability to acquire interest in the notes and to transfer or encumber your beneficial interests in the global note to these types of purchasers.
Only institutions, such as a securities broker or dealer, that have accounts with DTC or its nominee, called participants, and persons that may hold
beneficial interests through participants can own a beneficial interest in the global note. The only place where the ownership of beneficial interests in the global note appears and the only way the transfer of those interests can be made is on the
records kept by DTC (for its participants’ interests) and the records kept by those participants (for interests participants hold on behalf of other persons).
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Secondary trading in bonds and notes of corporate issuers is generally settled in clearinghouse (that is,
next day) funds. In contrast, beneficial interests in a global note usually trade in DTC’s same day funds settlement system, and settle in immediately available funds. We make no representation as to the effect that settlement in immediately
available funds will have on trading activity in those beneficial interests.
So long as DTC through Cede & Co. is the sole registered holder of the notes, we will make cash payments of interest on, and the redemption or repurchase price of, the global note, as well as any payment of
liquidated damages, only to Cede & Co., the nominee for DTC, as the registered owner of the global notes. We will make these payments by wire transfer of immediately available funds on each payment date.
We have been informed that, with respect to any cash payment of interest on,
principal of, or the redemption or repurchase price of, the global note, as well as any payment of liquidated damages, DTC’s practice is to credit participants’ accounts on the payment date with payments in amounts proportionate to their
respective beneficial interests in the notes represented by the global note as shown on DTC’s records, unless DTC has reason to believe that it will not receive payment on that payment date. Payments by participants to owners of beneficial
interests in notes represented by the global notes held through participants is the responsibility of those participants, as is now the case with securities held for the accounts of customers registered in “street name.”
We will send any redemption notices to the trustee. If fewer than all of the
notes are being redeemed, the particular ratio to be redeemed is selected by the trustee by a method that the trustee deems to be fair and appropriate. We understand that if fewer than all of the global notes are to be redeemed, DTC’s current
practice is to determine by lot the amount of the holdings of each participant in the global notes to be redeemed.
We also understand that neither DTC nor Cede & Co. will consent or vote with respect to the notes. We have been advised that under its usual
procedures, DTC will mail an “omnibus proxy” to us as soon as possible after the record date. The omnibus proxy assigns Cede & Co.’s consenting or voting rights to those participants to whose accounts the notes are credited on the
record date identified in a listing attached to the omnibus proxy.
Because DTC can only act on behalf of participants, who in turn act on behalf of indirect participants, the ability of a person having a beneficial interest in the principal amount represented by the global note to pledge or otherwise
encumber their interest in the note to persons or entities that do not participate in the DTC book entry system, or otherwise take actions in respect of that interest, may be adversely affected by the lack of a physical certificate evidencing its
interest.
DTC has advised us that it will take any action
permitted to be taken by a holder of notes (including the presentation of notes for exchange) only at the direction of one or more participants to whose account with DTC interests in the global note are credited and only in respect of such portion
of the principal amount of the notes represented by the global note as to which such participant has, or participants have, given such direction.
DTC has also advised us that it is:
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a limited purpose trust company organized under the laws of the State of New York;
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a member of the Federal Reserve System;
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a “clearing corporation” within the meaning of the Uniform Commercial Code, as amended; and
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a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934.
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DTC was created to hold securities for its participants and to facilitate the
clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and
may include certain other organizations. Certain of such participants (or their representatives), together with other
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entities, own DTC. Indirect access to the DTC system is available to other entities such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or indirectly.
DTC’s policies and procedures, which may change periodically, apply to payments, transfers, exchanges and other matters relating to beneficial interests in the global note. The trustee and we have no
responsibility or liability for any aspect of DTC’s or any participant’s records relating to beneficial interests in the global note, including for payments made on the global note, and we and the trustee are not responsible for
maintaining, supervising or reviewing any of those records.
Conversion
Rights
You may, at your option, convert the principal
amount of any note that is an integral multiple of $1,000 into shares of our common stock at any time prior to the close of business on the maturity date, unless the note has been previously redeemed or repurchased. If the notes are called for
redemption or are subject to repurchase, you may convert your notes at any time before the close of business on the business day immediately preceding the date fixed for redemption or repurchase, as the case may be, unless we default in making the
payment due upon redemption or repurchase. In each case, the initial conversion rate is equal to 74.0741 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $13.50 per share. The conversion rate is
subject to adjustment as described below.
You can convert the
note by delivering the note to the trustee’s corporate trust office, accompanied by a duly signed and completed notice of conversion, a copy of which may be obtained from the trustee. In the case of a global note, we have been informed that DTC
will effect the conversion upon notice from the holder of a beneficial interest in the global note in accordance with DTC’s rules and procedures. The conversion date is the date on which the note and the duly signed and completed notice of
conversion are so delivered to the trustee. As promptly as practicable on or after the conversion date, we will issue and deliver to the trustee a certificate or certificates for the number of full shares of common stock issuable upon conversion,
together with payment in fractional shares, and the trustee shall deliver the certificate(s) to the conversion agent for delivery to the holder of the note being converted. The shares of our common stock issuable upon conversion of the notes will be
fully paid and nonassessable.
If you surrender a note for
conversion on a date that is not an interest payment date, you are not entitled to receive any interest for the period from the preceding interest payment date to the date of conversion, except as described below. However, if you are a holder of a
note on a regular record date, including a note that is subsequently surrendered for conversion after the regular record date, you receive the interest payable on such note on the next interest payment date. To correct for this resulting overpayment
of interest, we require that any note surrendered for conversion during the period from the close of business on a regular record date to the opening of business on the next interest payment date be accompanied by payment of an amount equal to the
interest payable on such interest payment date on the principal amount of notes being surrendered for conversion. However, you are not required to make that payment if you are converting a note, or a portion of a note, that we have called for
redemption, or that you are entitled to require us to repurchase from you, if your conversion right would terminate because of the redemption or repurchase between the regular record date and the close of business on the next interest payment date.
If we distribute rights or warrants (other than those referred
to in paragraph (2) below) pro rata to holders of common stock, so long as any such rights or warrants have not expired or been redeemed by us, the holder of any note surrendered for conversion is entitled to receive upon such conversion, in
addition to the shares of common stock issuable upon such conversion (which we refer to in this prospectus as the “conversion shares”), a number of rights or warrants to be determined as follows:
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if such conversion occurs on or prior to the date for the distribution to the holders of rights or warrants of separate certificates evidencing such rights or
warrants (which we refer to in this prospectus as the
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“distribution date”), the same number of rights or warrants to which a holder of a number of shares of common stock equal to the number of
conversion shares is entitled at the time of such conversion in accordance with the terms and provisions of, and applicable to, the rights or warrants; and
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if such conversion occurs after such distribution date, the same number of rights or warrants to which a holder of the number of shares of common stock into which such note was
convertible immediately prior to such distribution date would have been entitled on such distribution date in accordance with the terms and provisions of, and applicable to, the rights or warrants.
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No other payment or adjustment for interest, or for any dividends on our
common stock, will be made upon conversion. If you receive common stock upon conversion of a note, you will not be entitled to receive any dividends payable to holders of common stock as of any record date before the close of business on the
conversion date. We will not issue fractional shares upon conversion of notes. Instead, we will pay an amount in cash based on the closing sales price of our common stock on the conversion date.
If you deliver a note for conversion, you are not required to pay any taxes
or duties in respect of the issuance or delivery of common stock on conversion. However, you are required to pay any tax or duty that may be payable in respect of any transfer involved in the issuance or delivery of our common stock in a name other
than yours. We will not issue or deliver certificates representing shares of common stock unless the person requesting the issuance or delivery has paid to us the amount of any such tax or duty or has established to our satisfaction that no such tax
or duty is payable.
The conversion rate is subject to
adjustment if, among other things:
(1) there is a dividend or other distribution payable in common stock on shares of our common stock;
(2) we issue to all holders of common stock rights, options or warrants entitling them to subscribe for or purchase common
stock at less than the then current market price, calculated as described in the indenture, of our common stock; however, if those rights, options or warrants are only exercisable upon the occurrence of specified triggering events, then the
conversion rate will not be adjusted until the triggering events occur;
(3) we subdivide, reclassify or combine our common stock;
(4) we distribute to all holders of our common stock evidences of our indebtedness, shares of capital stock, cash or assets,
including securities, but excluding:
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those dividends, rights, options, warrants and distributions referred to in paragraphs (1) and (2) above;
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dividends and distributions paid in cash (except as set forth in paragraphs (5) and (6) below); and
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distributions upon a merger or consolidation as discussed below;
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(5) we make a distribution consisting exclusively of cash (excluding portions of distributions referred to in clause (4) above
and cash distributed upon a merger or consolidation as discussed below) to all holders of our common stock if the aggregate amount of the distribution combined together with (A) all other such cash distributions made within the preceding 365-day
period in respect of which no adjustment has been made and (B) any cash and the fair market value of other consideration payable in respect of any tender offer by us or any of our subsidiaries for our common stock concluded within the preceding
365-day period in respect of which no adjustment has been made, exceeds 10% of our market capitalization, being the product of the current market price per share of our common stock on the record date for such distribution and the number of shares
of common stock then outstanding; or
(6) the successful completion of a tender offer made by us or any of our subsidiaries for our common stock that involves aggregate consideration that, together with (A) any cash and the fair market value of
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other consideration payable in a tender offer by us or any of our subsidiaries for our common stock concluded within the 365-day period preceding the
completion of such tender offer in respect of which no adjustment has been made and (B) the aggregate amount of any such all cash distributions referred to in paragraph (5) above to all holders of common stock within the 365-day period preceding the
expiration of such tender offer in respect of which no adjustments have been made, exceeds 10% of our market capitalization on the expiration of such tender offer.
To the extent that our rights plan is still in effect, upon conversion of the notes into common stock, the holders will
receive, in addition to the common stock, the rights described in our rights plan, whether or not the rights have separated from the common stock at the time of conversion, subject to certain limited exceptions. See the section entitled
“Description of Capital Stock” below for more information. If we implement a new rights plan, we are required under the indenture to provide that the holder of notes receives the rights upon conversion of the notes, whether or not these
rights were separated from the common stock prior to conversion, subject to certain limited exceptions.
We reserve the right to make such increases in the conversion rate in addition to those required by the provisions described above as we may consider to
be advisable so that any event treated for United States federal income tax purposes as a dividend of stock or stock rights is not taxable to the recipients. We are not required to make any adjustment to the conversion rate until the cumulative
required adjustments amount to 1.0% or more of the conversion rate. We will compute any adjustments to the conversion rate and give notice to the holders of any such adjustments.
If we merge into or consolidate with another person or sell or transfer all or substantially all of our assets, each note
then outstanding, without the consent of the holder of any note, becomes convertible only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, sale or transfer by a holder of the number of
shares of common stock into which the note was convertible immediately prior to the merger, consolidation or sale. This calculation is made based on the assumption that the holder of common stock failed to exercise any rights of election that the
holder may have had to select a particular type of consideration. The adjustment is not made for a merger that does not result in any reclassification, conversion, exchange or cancellation of our common stock.
We may, from time to time, increase the conversion rate by any amount for any
period of at least 20 days if our board of directors has determined that such increase would be in our best interests. Any such determination will be conclusive. We will give holders of notes at least 15 days’ notice of this increase in the
conversion rate. No such increase will be taken into account for purposes of determining whether the closing price of the common stock exceeds the conversion price by 105% in connection with an event which otherwise would be a change in control as
discussed below.
If at any time we make a distribution of
property to our shareholders that would be taxable to them as a dividend for United States federal income tax purposes (for example, distributions of evidences of indebtedness or assets by us, but generally not stock dividends on common stock or
rights to subscribe for common stock) and, pursuant to the anti-dilution provisions of the indenture, the number of shares into which notes are convertible is increased, that increase may be deemed for United States federal income tax purposes to be
the payment of a taxable dividend to holders of notes. For more details, see the section of this prospectus entitled “Certain Federal Income Tax Considerations.”
Subordination
The payment of the principal of, and premium, if any, and interest on the notes, including any liquidated damages, and any amounts payable upon the
redemption or repurchase of the notes, is subordinated in right of payment to the extent set forth in the indenture to the prior payment in full of all of our senior debt, as defined in the indenture. On June 30, 2003, we had $6.2 million of senior
debt outstanding.
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The notes rank equally in right of payment with our 5.75% Convertible Senior Subordinated Notes due 2008.
The notes are senior in right of payment to our 5.75% Convertible Subordinated Notes due 2008. As of June 30, 2003, we had $85.5 million principal amount of 5.75% Convertible Senior Subordinated Notes and $29.6 million principal amount of 5.75%
Convertible Subordinated Notes outstanding.
With respect to
the notes, “senior debt” means the principal of, and premium, if any, and interest, including all interest accruing subsequent to the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest
is allowable as a claim in any such proceeding, on, and rent payable on or in connection with and all fees, costs, claims, expenses and other amounts payable in connection with, the following, whether absolute or contingent, secured or unsecured,
due or to become due, outstanding on the date of the indenture or thereafter created, incurred or assumed:
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all our indebtedness evidenced by a credit or loan agreement, note, bond, debenture or other similar instrument whether or not the recourse of the lender is to all of our assets or
to only a portion;
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all of our indebtedness, obligations and other liabilities, contingent or otherwise, for borrowed money, including, without limitation, overdrafts, foreign exchange contracts,
currency exchange agreements, interest rate protection agreements and any loans or advances from banks, whether or not evidenced by notes or similar instruments;
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bonds, debentures, notes or similar instruments, whether or not the recourse of the lender is to all of our assets or to only a portion thereof;
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all our obligations as lessee under leases required to be capitalized on the balance sheet of the lessee under generally accepted accounting principles;
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all our obligations and other liabilities, contingent or otherwise, under any lease or related document, including a purchase agreement, in connection with the lease of real
property or improvements, or any personal property included as part of any such lease, which provides that we are contractually obligated to purchase or cause a third party to purchase the leased property and thereby guarantee a residual value of
leased property to the lessor and all of our obligations under such lease or related document to purchase or to cause a third party to purchase the leased property, whether or not such lease transaction is characterized as an operating lease or
capitalized lease in accordance with generally accepted accounting principles;
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all our obligations under interest rate and currency swaps, caps, floors, collars, hedge agreements, forward contracts or similar agreements or arrangements;
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all our obligations with respect to letters of credit, bank guarantees, bankers’ acceptances and similar facilities, including related reimbursement obligations;
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all our obligations issued or assumed as the deferred purchase price of property or services, but excluding trade accounts payable and accrued liabilities arising in the ordinary
course of business;
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all our obligations of the type referred to above of another person and all dividends of another person, the payment of which, in either case, we have assumed or guaranteed, or for
which we are responsible or liable, directly or indirectly, jointly or severally, as obligor, guarantor or otherwise, or which are secured by a lien on our property; and
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renewals, extensions, modifications, replacements, restatements and refundings of, or any indebtedness or obligation issued in exchange for any indebtedness or obligation described
in the bullets above.
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Senior debt does not
include:
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our 5.75% Convertible Subordinated Notes due 2008;
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our 5.75% Convertible Senior Subordinated Notes due 2008;
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any indebtedness or obligation if the terms of the indebtedness or obligation, or the terms of the instrument under which the indebtedness or obligation is issued, expressly provide
that the indebtedness or obligation is not superior in right of payment to the notes;
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accounts payable or other accrued liability or obligation incurred in the ordinary course of business in connection with the obtaining of materials or services; or
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any indebtedness or obligation that we may owe to any of our direct or indirect subsidiaries.
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We will not make any payment on account of the notes if any of the following occurs:
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we default in our obligations to pay principal, premium, interest or other amounts on or in connection with our senior debt, including a default under any redemption or repurchase
obligation (a “payment default”), and the default continues beyond any grace period that we may have to make those payments; or
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a default (other than a payment default) occurs and is continuing on any designated senior debt that permits the holders of the designated senior debt to accelerate its maturity and
the trustee has received a payment blockage notice from us, the holder of such debt or such other person permitted to give such notice under the indenture.
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If payments on the notes have been blocked by a payment default, payments on the notes may resume (including missed
payments, if any) when the payment default has been cured or waived. If payments on the notes have been blocked by a non-payment default, payments on the notes may resume (including missed payments, if any) on the earlier of (1) the date on which
such default is cured or waived and (2) 179 days after the date on which the trustee receives the payment blockage notice if the maturity of the designated senior debt has not been accelerated such that such debt is then presently payable, unless
the indenture otherwise prohibits payment at that time.
No
non-payment default that existed on the day a payment blockage notice was delivered to the trustee can be used as the basis for any subsequent payment blockage notice unless that existing non-payment default has been cured for a period of at least
90 days. In addition, once a holder of designated senior debt has blocked payment on the notes by giving a payment blockage notice, no new period of payment blockage can be commenced until both of the following are satisfied:
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365 days have elapsed since the effectiveness of the immediately prior payment blockage notice; and
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all scheduled payments of principal, any premium and interest (and liquidated damages, if any) on the notes that have come due have been paid in full in cash.
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“Designated senior debt” means our
obligations under any particular senior debt in which the instrument creating or evidencing the debt, or the assumption or guarantee of the debt, or related agreements or documents to which we are a party, expressly provides that the indebtedness is
designated senior debt for purposes of the indenture. That instrument, agreement or other document may place limitations and conditions on the right of that senior debt to exercise the rights of designated senior debt.
In addition, upon any acceleration of the principal due on the notes as a
result of an event of default or payment or distribution of our assets to creditors upon any dissolution, winding up, liquidation or reorganization, whether voluntary or involuntary, marshaling of assets, assignment for the benefit of creditors, or
in bankruptcy, insolvency, receivership or other similar proceedings, all principal, premium, interest and other amounts due on or in connection with all senior debt must be paid in full in cash or cash equivalents before you are entitled to receive
any payment with respect to the notes. Due to the subordination provisions of the notes and the indenture, in the event of insolvency, our creditors who are holders of senior debt may recover more, ratably, than you would, and this subordination may
reduce or eliminate payments to you.
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The notes are effectively subordinated to all liabilities, including trade payables and lease
obligations, and preferred stock of any of our subsidiaries. This occurs because any right we have to receive any assets of our subsidiaries upon their liquidation or reorganization, and the consequent right of the holders of the notes to
participate in those assets, are effectively subordinated to the claims of that subsidiary’s creditors, including trade creditors, and preferred shareholders, except to the extent that we are recognized as a creditor of the subsidiary, in which
case our claims would still be subordinate to any security interest in the subsidiary’s assets and any indebtedness of the subsidiary senior to that which we hold, at least to the extent of the collateral for such indebtedness. As of June 30,
2003, our subsidiaries had approximately $2.1 million of liabilities (excluding inter-company liabilities) to which the notes would have been effectively subordinated if they had been outstanding at that time, approximately $1.4 million of which is
included in the $6.2 million of senior debt described above.
The indenture does not limit our ability to incur indebtedness, including senior debt, or the ability of any of our subsidiaries to incur indebtedness.
Provisional Redemption
We may redeem the notes, in whole or in part, at any time prior to maturity at a redemption price equal to $1,000 per $1,000 principal amount of the notes
to be redeemed plus accrued and unpaid interest, if any, to, but excluding, the date of redemption if (a) the closing price of our common stock has exceeded 150% of the conversion price then in effect for at least 20 trading days within a period of
30 consecutive trading days ending on the trading day before the date of mailing of the provisional redemption notice and (b) the shelf registration statement covering resales of the notes and the common stock issuable upon conversion of the notes
is effective and available for use and is expected to remain effective and available for use for the 30 days following the provisional redemption date, unless registration is no longer required.
Upon any provisional redemption, we will make an additional payment in cash
or, at our option, common stock, or in a combination of cash and common stock, with respect to the notes called for redemption in an amount equal to $280.00 per $1,000 principal amount of the notes, less the amount of any interest actually paid on
the notes before the date of redemption. For purposes of any such payment in common stock, the value of such common stock will be based upon the highest closing price of our common stock for the 20 trading days referred to in the above paragraph. We
are obligated to make this additional payment on all notes called for provisional redemption, including any notes converted after the notice date and before the provisional redemption date. Because the number of shares of common stock to be
delivered to holders of notes in payment of the redemption price (should we elect such payment option) is determined on the basis of the market price of our common stock after we have given notice of the provisional redemption and prior to the
redemption date, the value of the shares of common stock on the date of delivery thereof to such holders may be more or less than the redemption price had we elected to pay such price in cash.
Repurchase at Option of Holders Upon a Change in Control
If a change in control occurs, you have the right, at your option, to
require us to repurchase all of your notes not called for redemption, or any portion of the principal amount of your notes that is equal to $1,000 or any greater integral multiple of $1,000. The price we are required to pay is 100% of the principal
amount of the notes to be repurchased, together with interest accrued to the repurchase date.
At our option, instead of paying the repurchase price in cash, we, or the successor entity in the change in control transaction, may pay the repurchase price in common stock, or in a combination of cash and common
stock, such common stock to be valued at 95% of the average of the closing sales prices of the shares of common stock for each of the five trading days ending with the third trading day prior to the repurchase date. We may only pay the repurchase
price in common stock if the conditions provided in the indenture are satisfied. Because the number of shares of common stock to be delivered to holders of notes in payment of the repurchase price (should we elect such payment option) is determined
on the basis of the market price of our common stock after
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we have given notice of the occurrence of the change in control and prior to the repurchase date, the value of the shares of common stock on the date of
delivery thereof to such holders may be more or less than the repurchase price had we elected to pay such price in cash.
Within 30 days after the occurrence of a change in control, we will mail you notice of the change in control and of your repurchase right arising as a
result of the change in control. We will also deliver a copy of this notice to the trustee. To exercise the repurchase right, you must deliver, on or before the 30th day (or such greater period as may be required by applicable law) after the date of
our notice, irrevocable written notice to the trustee of your exercise of your repurchase right, together with the notes with respect to which that right is being exercised. We are required to make the repurchase on a date that is no later than 45
days after your notice to the trustee.
A change in control is
deemed to have occurred at such time, after the original issuance of the notes, any of the following occurs:
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any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, (1) acquires beneficial ownership,
directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of Cell Therapeutics, Inc.’s capital stock entitling that person to exercise more than 50% of the total voting power of all
shares of Cell Therapeutics, Inc.’s capital stock entitled to vote generally in elections of directors; however, any acquisition by Cell Therapeutics, Inc., any of its subsidiaries or any of our employee benefit plans will not trigger this
provision or (2) succeeds in having sufficient of its nominees (who are not supported by a majority of the then current board of directors) elected to the board of directors of Cell Therapeutics, Inc. such that such nominees, when added to any
existing directors remaining on the board of directors after such election who are affiliates of or acting in concert with such person, shall constitute a majority of the board of directors;
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Cell Therapeutics, Inc. consolidates with or merges with or into any other person or another person merges into Cell Therapeutics, Inc., except if the transaction satisfies any of
the following:
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the transaction is a merger (A) that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Cell Therapeutics, Inc.’s capital
stock and (B) pursuant to which holders of Cell Therapeutics, Inc.’s common stock immediately prior to the transaction have, directly or indirectly, 50% or more of the total voting power of all shares of capital stock or other ownership
interest of the continuing or surviving person entitled to vote generally in elections of directors of the continuing or surviving person immediately after the transaction; or
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the transaction is a merger effected only to change Cell Therapeutics, Inc.’s jurisdiction of incorporation and it results in a reclassification, conversion or exchange of
outstanding shares of Cell Therapeutics, Inc.’s common stock only into shares of common stock of Cell Therapeutics, Inc. or another corporation; or
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Cell Therapeutics, Inc. conveys, transfers, sells, leases or otherwise disposes of all or substantially all of its assets to another person.
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However, a change in control will not be deemed to have occurred if the
average of the high and low sales price per share of Cell Therapeutics, Inc.’s common stock for any five trading days within (1) the period of ten consecutive trading days ending immediately after the later of the change in control and the
public announcement of the change in control, in the case of a change in control relating to an acquisition of capital stock not involving a merger or consolidation covered by clause (2) below, or (2) the period of ten consecutive trading days
ending immediately before the change in control, in the case of change in control relating to a merger, consolidation or asset sale, in each case, equals or exceeds 105% of the conversion price of the notes in effect on each of those trading days.
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For purposes of these provisions:
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the conversion price is equal to $1,000 divided by the conversion rate; and
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whether a person is a beneficial owner is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934.
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Any repurchase of notes arising as a result of the change in control will be
made in compliance with all applicable laws, rules and regulations, including, if applicable Regulation 14E under the Securities Exchange Act of 1934 and the rules thereunder and all other applicable federal and state securities laws. To the extent
the provisions of any, securities laws or regulations conflict with the provisions of this covenant, our compliance with such laws and regulations shall not be deemed to cause a breach of our obligations under the indenture.
We may, to the extent permitted by applicable law, at any time purchase notes
in the open market or by tender or by private agreement. Any note that we so purchase may, to the extent permitted by applicable law, be reissued or resold or may, at our option, be surrendered to the trustee for cancellation. Any notes surrendered
may not be reissued or resold and will be canceled promptly.
The definition of change in control includes a phrase relating to the conveyance, transfer, sale, lease or disposition of all or substantially all of Cell Therapeutics, Inc.’s assets. There is no precise, established definition of the
phrase “substantially all” under applicable law. Accordingly, your ability to require us to repurchase your notes as a result of conveyance, transfer, sale, lease or other disposition of less than all of Cell Therapeutics, Inc.’s
assets may be uncertain.
The foregoing provisions may not
necessarily provide you with protection if we are involved in a highly leveraged or other transaction that may adversely affect you.
Our ability to repurchase notes upon the occurrence of a change in control is subject to important limitations. Some of the events constituting a change
in control could cause an event of default or be prohibited or limited by the terms of senior debt. As a result, any repurchase of the notes in cash are, absent a waiver, prohibited under the indenture’s subordination provisions until the
senior debt is paid in full. Further, we may not have the financial resources, or would be unable to arrange financing, to pay the repurchase price for all the notes that holders seeking to exercise their repurchase right deliver to us. If we were
to fail to repurchase the notes when required following a change in control, an event of default would occur, whether or not such repurchase is permitted by the indenture’s subordination provisions. Any such default may, in turn, cause a
default under our senior debt. For more details, see the section of this prospectus entitled “Description of Notes—Subordination.”
Mergers and Sales of Assets
Without the consent of the holders of the notes, Cell Therapeutics, Inc. may not consolidate with or merge into any other person, or convey, transfer,
sell or lease its properties and assets substantially as an entirety to any person, and Cell Therapeutics, Inc. may not permit any person to consolidate with or merge into Cell Therapeutics, Inc. or convey, transfer, sell or lease such person’s
properties and assets substantially as an entirety to Cell Therapeutics, Inc., unless each of the following requirements is met:
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Cell Therapeutics, Inc. is the surviving person or the person formed by the consolidation or into which Cell Therapeutics, Inc. is merged or the person to which its properties and
assets are conveyed, transferred, sold or leased, is (1) a corporation, limited liability company, partnership or trust organized and existing under the laws of the United States, any State or the District of Columbia or (2) organized under the laws
of a jurisdiction outside the U.S. and has common stock or American Depositary Shares representing such common stock traded on a national securities exchange in the U.S., including The Nasdaq Stock Market, Inc. and, in each case, if other than Cell
Therapeutics, Inc., expressly assumes the due and punctual payment of the principal of, any premium, and interest (and liquidated damages, if any) on the notes and the performance of our other covenants under the indenture; and
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immediately after giving effect to that transaction, no event of default, and no event that, after notice or lapse of time or both, would become an event of default, shall have
occurred and be continuing; and
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other conditions described in the indenture are met.
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Upon any consolidation or merger or any transfer of all or substantially all of Cell Therapeutics, Inc.’s assets, the successor corporation formed by
such consolidation or into which Cell Therapeutics, Inc. is merged or to which such transfer is made, shall succeed to, and be substituted for, and may exercise every right and power of, Cell Therapeutics, Inc. under the indenture with the same
effect as if such successor corporation had been named in the indenture as Cell Therapeutics, Inc., and Cell Therapeutics, Inc. shall be released from the obligations under the notes and the indenture except with respect to any obligations that
arise from, or are related to, such transaction.
Events of Default
The following are “events of default” under the
indenture:
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we fail to pay principal of or any premium on any note when due, whether or not the payment is prohibited by the indenture’s subordination provisions;
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we fail to pay any interest on any note when due and that default continues for 30 days, whether or not the payment is prohibited by the indenture’s subordination provisions;
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we fail to give the notice that we are required to give if there is a change in control, whether or not the notice is prohibited by the indenture’s subordination provisions;
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we fail to perform any other covenant in the indenture and that failure continues for 60 days after written notice to us by the trustee or the holders of at least 25% in aggregate
principal amount of outstanding notes;
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we fail to pay when due the principal of any indebtedness for money borrowed by us or any of our significant subsidiaries, if any, in excess of $10 million if the indebtedness is
not discharged and such failure continues for 30 days or more, or, if such indebtedness has been accelerated, such acceleration is not annulled, within 30 days after written notice to us by the trustee or the holders of at least 25% in aggregate
principal amount of the outstanding notes; and
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certain events of bankruptcy, insolvency or reorganization with respect to Cell Therapeutics, Inc. and its significant subsidiaries specified in the indenture.
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Subject to the provisions of the indenture
relating to the trustee’s duties, if an event of default exists, the trustee is not obligated to exercise any of its rights or powers under the indenture at the request or direction of any of the holders, unless they have offered to the trustee
reasonable indemnity. Subject to such trustee indemnification provisions, the holders of a majority in aggregate principal amount of the outstanding notes have the right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred on the trustee, provided that such direction does not conflict with any rule of law or with the indenture, and the trustee may take any other action the trustee deems proper
which is not inconsistent with such direction.
If an event of
default, other than an event of default arising from events of bankruptcy, insolvency or reorganization with respect to Cell Therapeutics, Inc., occurs and is continuing, either the trustee or the holders of at least 25% in principal amount of the
outstanding notes may accelerate the maturity of all notes. After acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of outstanding notes may, under circumstances set forth in
the indenture, rescind the acceleration if all events of default, other than the non-payment of principal of the notes which have become due solely because of the acceleration, have been cured or waived as provided in the indenture. If an event of
default arising from events of bankruptcy, insolvency or reorganization with respect to Cell Therapeutics, Inc. occurs
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and is continuing, then the principal of, and accrued interest (and liquidated damages, if any) on, all of the notes will automatically become immediately
due and payable without any declaration or other act on the part of the holders of the notes or the trustee.
You do not have any right to institute any proceeding relating to the indenture, or to appoint a receiver or a trustee, or for any other remedy under the
indenture, unless:
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you have given the trustee written notice of a continuing event of default;
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the registered holders of at least 25% of the aggregate principal amount of all outstanding notes have made a written request of the trustee to take action because of the default
and have furnished reasonable indemnification to the trustee against the cost, liabilities and expenses of taking such action;
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the trustee shall not have taken action for 60 days after receiving such notice and offer of indemnification; or
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the trustee has not received any direction inconsistent with such written request from the holders of a majority of the aggregate principal amount of all outstanding notes during
such 60-day period.
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These limitations do not
apply to a suit for the enforcement of payment of the principal of, or any premium or interest (and liquidated damages, if any) on, a note, or the repurchase price payable for a note on or after the due dates for such payments, or of the right to
convert the note in accordance with the indenture.
We will
furnish to the trustee annually a statement as to our performance of our obligations under the indenture and as to any default in performance.
Modification and Waiver
The indenture contains provisions permitting us and the trustee to enter into a supplemental indenture for certain limited purposes without the consent of
the holders of the notes. With the consent of the holders of not less than a majority in aggregate principal amount of the notes at the time outstanding, we and the trustee are permitted to amend or supplement the indenture or any supplemental
indenture or modify the rights of the holders, provided, that no such modification may, without the consent of each holder affected thereby:
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change the stated maturity of the principal or interest of any note;
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reduce the principal amount, any premium or interest on any note;
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reduce the amount payable on any note upon a redemption at our option;
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amend or modify our obligation to make or consummate a repurchase offer upon a change in control after our obligation to make a change in control repurchase offer arises;
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change the place or currency of payment on any note;
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impair the right to institute suit for the enforcement of any payment on any note;
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modify the subordination provisions in a manner that is adverse to the holder of any notes;
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adversely affect the right of any holder of notes to convert its notes;
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reduce the percentage of holders whose consent is needed to modify, amend or waive any provision in the indenture; or
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modify the provisions dealing with modification and waiver of the indenture, except to increase any required percentage or to provide that certain other provisions of the indenture
cannot be modified or waived without the consent of the holder of each outstanding note affected thereby.
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The holders of a majority in principal amount of the outstanding notes may waive our compliance with
certain restrictive provisions of the indenture. The holders of a majority in principal amount of the outstanding notes may waive any past default, except a default in the payment of principal, any premium, interest (or liquidated damages, if any)
or the repurchase price.
Notes are not considered outstanding
if money for their payment or redemption has been deposited or set aside in trust for the holders.
Registration Rights
In
connection with the initial private placement of the notes, we entered into a registration rights agreement with the Initial Purchasers. In the registration rights agreement we agreed, for the benefit of the holders of the notes and the shares of
common stock issuable upon conversion of the notes, commonly referred to as the registrable securities, but excluding securities that are eligible for disposition under Rule 144 of the Securities Act, that we would, at our expense:
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file with the SEC, on or prior to 90 days following the date the notes were originally issued, this shelf registration statement covering resales of the registrable securities;
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use our reasonable efforts to cause this shelf registration statement to be declared effective under the Securities Act on or prior to the later of (x) 180 days following the date
the notes were originally issued and (y) 45 days after the termination of the Agreement and Plan of Merger, dated as of June 16, 2003, between us and Novuspharma S.p.A. or the completion of the merger of us and Novuspharma, subject to our right to
postpone having the shelf registration statement declared effective for an additional 60 days in limited circumstances; and
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use our reasonable efforts to keep effective the shelf registration statement until:
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(1)
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the expiration of the holding period applicable to such securities held by persons who are not affiliates of us under Rule 144(k) under the Securities Act or any successor
previously subject to specific permitted exceptions (the Effectiveness Period), or
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(2)
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if earlier, there are no outstanding registrable securities.
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We will provide to each holder of registrable securities copies of the prospectus that is a part of the shelf registration statement, notify each holder
when the shelf registration statement has become effective and take certain other actions required to permit public resales of the registrable securities.
Upon written notice to all the holders of notes, we are permitted to suspend the use of the prospectus that is part of the shelf registration statement in
connection with sales of registrable securities during prescribed periods of time if we possess material non-public information the disclosure of which would have a material adverse effect on us. The periods during which we can suspend the use of
the prospectus may not exceed a total of 60 consecutive days. Upon receipt of such notice, the holders of notes are required to cease disposing of securities under the prospectus and to keep the notice confidential.
Liquidated damages accrue on the notes that are transfer restricted
securities under the registration rights agreement if any of the following events, which we refer to as registration defaults, occurs:
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on or prior to 90 days following the date the notes were originally issued, a shelf registration statement has not been filed with the SEC;
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on or prior to the later of (x) 180 days following the date the notes were originally issued and (y) 45 days after the termination of the Agreement and Plan of Merger, dated as of
June 16, 2003, between us and Novuspharma or the completion of the merger of us and Novuspharma, the SEC does not declare the shelf registration statement effective, or
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the shelf registration statement ceases to be effective, or we otherwise prevent or restrict holders of registrable securities from making sales under the shelf registration
statement, for more than 60 consecutive days.
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In
any case, liquidated damages accrue on the notes that are transfer restricted securities at a rate of 0.5% of the principal amount per annum from and including the day following the registration default to, but excluding, the day on which the
registration default is cured. Liquidated damages are paid semi-annually in arrears, with the first semi-annual payment due on the first interest payment date following the date on which the liquidated damages begin to accrue. Under no circumstances
are we required to accrue liquidated damages in excess of 0.5% per annum at any time.
A holder who elects to sell any registrable securities pursuant to the shelf registration statement is required to be named as a selling security holder in the related prospectus, may be required to deliver a
prospectus to purchasers, may be subject to certain civil liability provisions under the Securities Act in connection with those sales and will be bound by the provisions of the registration rights agreement that apply to a holder making such an
election, including certain indemnification provisions.
We
have filed this registration statement to meet our obligations under the registration rights agreement. We will mail a notice and questionnaire to the holders of registrable securities to obtain certain information regarding the holders for
inclusion in this prospectus.
No holder of registrable
securities is entitled to be named as a selling security holder in the shelf registration statement as of the effective time, and no holder of registrable securities is entitled to use the prospectus forming a part of the shelf registration
statement for offers and resales of registrable securities at any time, unless such holder has returned a completed and signed notice and questionnaire to us by the deadline for response set forth in the notice and questionnaire.
We agree in the registration rights agreement to use our reasonable efforts
to cause the shares of common stock issuable upon conversion of the notes to be quoted on the Nasdaq National Market. However, if the common stock is not then quoted on the Nasdaq National Market, we will use our reasonable efforts to cause the
shares of common stock issuable upon conversion of the notes to be quoted or listed on whichever market or exchange the common stock is then quoted or listed, if any, on or prior to the effectiveness of the shelf registration statement.
This summary of certain provisions of the registration rights agreement is
not complete and is subject to, and qualified in its entirety by reference to, all the provisions of the registration rights agreement.
We will give notice to holders of the notes by mail to the addresses of the holders as they appear in the security register. Notices will be deemed to
have been given on the date of mailing.
Replacement of Notes
We will replace, at the holders’ expense, notes that
become mutilated, destroyed, stolen or lost upon delivery to the trustee of the mutilated notes or evidence of the loss, theft or destruction thereof satisfactory to us and the trustee. In the case of a lost, stolen or destroyed note, indemnity
satisfactory to the trustee and us may be required at the expense of the holder of the note before a replacement note will be issued.
No Personal Liability of Shareholders, Officers, Directors and Employees
No direct or indirect shareholder, officer, director or employee, as such, past, present or future of CTI, or any successor entity, shall have any
personal liability in respect of our obligations under the indenture or the notes solely by reason of his or its status as such shareholder, officer, director or employee.
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Governing Law
The indenture, the notes and the registration rights agreement are governed by and construed in accordance with the laws of the State of New York, United
States of America.
The Trustee
The trustee for the holders of notes issued under the indenture is U.S. Bank
National Association. If an event of default occurs, and is continuing, the trustee is required to use the degree of care of a prudent person in the conduct of his own affairs in the exercise of its powers. Subject to these provisions, the trustee
is under no obligation to exercise any of its rights or powers under the indenture at the request of any holders of notes, unless they have offered the trustee reasonable security or indemnity.
Absence of Public Market
There is no existing market for the notes and there can be no assurance as
to the liquidity of any markets that may develop for the notes, the ability of holders to sell their notes or at what price holders of the notes will be able to sell their notes. Future trading prices of the notes will depend upon many factors
including, among other things, prevailing interest rates, our operating results, the price of our common stock and the market for similar securities. At the time of the original issuance of the notes in a private placement in June 2003, the initial
purchasers advised us that they intended to make a market in the notes. However, the initial purchasers are not obligated to do so and any such market making activity may be terminated at any time at the sole discretion of the initial purchasers
without notice to the holders of the notes. There is no established public trading market for the notes. We do not intend to apply for listing of the notes on any securities exchange. See the section entitled “Plan of Distribution” for
more information.
36
DESCRIPTION OF CAPITAL STOCK
This summary does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of our restated articles of incorporation, as amended, our bylaws, as amended, and all applicable provisions of Washington
law.
General
We are authorized to issue 100,000,000 shares of common stock, no par value,
and 10,000,000 shares of preferred stock, no par value. As of the close of business on September 17, 2003, there were 33,928,085 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding. The number of
shares outstanding does not include approximately 16 million shares issuable pursuant to the Agreement and Plan of Merger, dated as of June 16, 2003, between us and Novuspharma S.p.A.
Common Stock
Each holder of common stock is entitled to one vote for each share held on all matters to be voted upon by the shareholders and there are no cumulative
voting rights. Subject to preferences that may be applicable to any outstanding preferred stock, holders of common stock are entitled to receive ratably the dividends, if any, that are declared from time to time by the board of directors out of
funds legally available for that purpose. In the event of a liquidation, dissolution or winding up of the company, the holders of common stock are entitled to share in our assets remaining after the payment of liabilities and the satisfaction of any
liquidation preference granted to the holders of any outstanding shares of preferred stock. Holders of common stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable
to the common stock. All outstanding shares of common stock are fully paid and nonassessable. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares
of any series of preferred stock that we may designate in the future.
Preferred Stock
The board of directors has
the authority, without action by the shareholders, to designate and issue preferred stock in one or more series and to designate the rights, preferences and privileges of each series, which may be greater than the rights of the common stock. It is
not possible to state the actual effect of the issuance of any shares of preferred stock upon the rights of holders of the common stock until the board of directors determines the specific rights of the holders of this preferred stock. However, the
effects might include, among other things:
|
|
•
|
|
restricting dividends on the common stock;
|
|
|
•
|
|
diluting the voting power of the common stock;
|
|
|
•
|
|
impairing the liquidation rights of the common stock; or
|
|
|
•
|
|
delaying or preventing a change in control of the company without further action by the shareholders.
|
We designated 100,000 shares of our preferred stock as Series C preferred stock in November 1996 in connection with the
adoption of a shareholder rights plan as described below. In November 1999, we designated 10,000 shares of our preferred stock as 5% Series D preferred stock in connection with a private placement of those shares.
No shares of preferred stock are outstanding, and we have no present plans to
issue any shares of preferred stock.
37
Warrants and Other Obligations to Issue Capital Stock
As of September 17, 2003, we had outstanding warrants to purchase an
aggregate of 599,125 shares of our common stock. These warrants have a weighted average exercise price of $15.92 per share. These warrants expire between 2003 and 2008. One additional payout tied to a sales threshold of $20 million in any four
consecutive quarters may be payable in cash or common stock in tranches of $5 million at the then fair market value of our stock, at the time such threshold is achieved. We are also obligated to make additional payouts based on annualized sales of
TRISENOX, which payouts can be made in common stock or cash, at our election.
Anti-takeover Effects of Provisions of Washington Law and our Charter and Bylaws
Washington law contains certain provisions that may have the effect of delaying, deterring or preventing a change in control of the company. Chapter
23B.17 of the Washington Business Corporation Act (the “WBCA”) prohibits, subject to certain exceptions, a merger, sale of assets or liquidation of the company involving an “interested shareholder” (defined as a person or group
of affiliated persons who own beneficially 20% or more of the company’s voting securities) unless the transaction is determined to be at a “fair price” or otherwise approved by a majority of the company’s disinterested directors
or is approved by holders of two-thirds of the company’s outstanding voting securities, other than those held by the interested shareholder. A Washington corporation may, in its articles of incorporation, exempt itself from coverage of this
provision, but the company has not done so. In addition, Chapter 23B.19 of the WBCA prohibits the company, with certain exceptions, from engaging in certain significant business transactions with an “acquiring person” (defined as a person
or group of persons who acquire 10% or more of the company’s voting securities without the prior approval of the company’s board of directors) for a period of five years following the acquiring person’s share acquisition date. The
prohibited transactions include, among others, a merger or consolidation with, disposition of assets to, or issuance or redemption of stock to or from, the acquiring person, or otherwise allowing the acquiring person to receive any disproportionate
benefit as a shareholder. The company may not exempt itself from coverage of this statute. These statutory provisions may have the effect of delaying, deterring or preventing a change in control of the company.
Our board of directors is divided into three approximately equal classes of
directors serving staggered three-year terms. In addition, our restated articles of incorporation provide that directors may be removed from office only at a meeting of shareholders called expressly for that purpose and only for cause. Our restated
articles of incorporation limit “cause” to willful misfeasance having a material adverse effect on the company or conviction of a felony, provided that any action by a director shall not constitute “cause” if, in good faith, the
director believed the action to be in or not opposed to the best interests of the company or if the director is entitled to be indemnified with respect to such action under applicable law, our restated articles of incorporation or bylaws, or a
contract with the company. Further, our bylaws require a shareholder to provide notice to the company of such shareholder’s intent to nominate a person or persons for election as directors not later than 90 days prior to the first anniversary
of the previous year’s annual meeting of shareholders or, in the case of an election to be held at a special meeting of shareholders for the election of directors, the close of business on the tenth day following the date on which notice of
such meeting is first given to shareholders. A shareholder must also provide us with notice of such shareholder’s intent to make any proposal at an annual meeting of shareholders not later than 90 days prior to the first anniversary of the
previous year’s annual meeting of shareholders. These provisions may have the effect of deterring hostile takeovers or delaying change in control or management of our company.
Shareholder Rights Plan
On November 11, 1996, our board of directors adopted a shareholder rights plan and declared a distribution of one preferred stock purchase right (a right)
for each outstanding share of common stock to shareholders of record as of the close of business November 21, 1996 and for each share of common stock issued thereafter pursuant to a rights agreement entered into on November 11, 1996 and amended
November 20, 2002, between the company and Computershare Investor Services, LLC as Rights Agent (the rights agreement). One right will be issued for each share of common stock issued upon the conversion of the notes. In connection with the
38
adoption of the rights agreement, we reserved for issuance 100,000 shares of series C preferred stock. The series C preferred stock will only be issued in
the event rights issued pursuant to the rights agreement are exercised.
Transfer Agent and Registrar
The transfer
agent and registrar for our common stock is Computershare Investor Services, LLC.
39
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income tax considerations relevant to holders of the notes and common stock into which the notes may be converted. This discussion is based upon the Internal Revenue Code of
1986, as amended (the “Code”), Treasury Regulations, Internal Revenue Service (“IRS”) rulings and judicial decisions now in effect, all of which are subject to change (possibly, with retroactive effect) or different
interpretations. There can be no assurance that the IRS will not challenge one or more of the tax consequences described herein, and we have not obtained, nor do we intend to obtain, a ruling from the IRS with respect to the U.S. federal income tax
consequences of acquiring or holding notes or common stock. This discussion does not purport to deal with all aspects of U.S. federal income taxation that may be relevant to a particular holder in light of the holder’s circumstances (for
example, persons subject to the alternative minimum tax provisions of the Code or a holder whose “functional currency” is not the U.S. dollar). Also, it is not intended to be wholly applicable to all categories of investors, some of which
(such as dealers in securities or currencies, traders in securities that elect to use a mark-to-market method of accounting, banks, thrifts, regulated investment companies, insurance companies, tax-exempt organizations, and persons holding notes or
common stock as part of a hedging or conversion transaction or straddle or persons deemed to sell notes or common stock under the constructive sale provisions of the Code) may be subject to special rules. The discussion also does not discuss any
aspect of state, local or foreign law, or U.S. federal estate and gift tax law as applicable to the holders of the notes and common stock into which the notes may be converted. In addition, this discussion is limited to purchasers of notes who
acquire the notes at their original issue price within the meaning of Section 1273 of the Code, and who hold the notes and common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, for investment). This
summary also assumes that the IRS will respect the classification of the notes as indebtedness for federal income tax purposes.
All purchasers of the notes are advised to consult their own tax advisors regarding the federal, state, local and foreign tax consequences of the
purchase, ownership and disposition of the notes and the common stock in their particular situations.
U.S. Holders
As used
herein, the term “U.S. Holder” means a beneficial holder of a note or common stock that for United States federal income tax purposes is (i) a citizen or resident (as defined in Section 7701 (b) of the Code) of the United States (unless
such person is not treated as a resident of the U.S. under an applicable income tax treaty), (ii) a corporation created or organized under the laws of the United States or any political subdivision thereof, (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of its source and (iv) in general, a trust subject to the primary supervision of a court within the United States and the control of a United States person as described in Section 7701(a)(30) of the
Code. A “Non-U.S. Holder” is any holder of a note or common stock other than a U.S. Holder or a foreign or domestic partnership.
If a partnership (including for this purpose any entity, domestic or foreign, treated as a partnership for U.S. tax purposes) is a beneficial owner of the
notes or common stock into which the notes may be converted, the U.S. tax treatment of a partner in the partnership generally will depend on the status of the partner and the activities of the partnership. As a general matter, income earned through
a foreign or domestic partnership is attributed to its owners. A holder of the notes or common stock into which the notes may be converted that is a partnership, and partners in such partnership, should consult their individual tax advisors about
the U.S. federal income tax consequences of holding and disposing of the notes and the common stock into which the notes may be converted.
Interest
U.S. Holders are required to recognize as ordinary income any interest paid or accrued on the notes in accordance with their regular method of accounting.
In addition, if we do not comply with our obligations under
40
the registration rights agreement, such non-compliance may result in the payment of predetermined additional amounts referred to as liquidated damages in the
manner described under the caption “Description of Notes—Registration Rights.” If the amount or timing of any liquidated damages on a note is contingent, the note could be subject to special rules that apply to debt instruments that
provide for contingent payments (“contingent debt instruments”). These rules generally require a holder to accrue interest income at a rate higher than the stated interest rate on the note and to treat as ordinary income, rather than
capital gain, any gain recognized on a sale, exchange or retirement of a note before the resolution of the contingencies. We believe that the possibility of liquidated damages is remote and, accordingly, the notes should not be treated as contingent
debt instruments. Therefore, for purposes of filing tax or information returns with the IRS, we do not treat the notes as contingent debt instruments or as having original issue discount. Our position in this regard is binding on each U.S. Holder
(but not the IRS) unless such U.S. Holder explicitly discloses a contrary position on a statement attached to its timely filed U.S. federal income tax return for the year in which the note is acquired. If the notes were treated as contingent debt
instruments, the consequences described above would apply. In the event that we pay liquidated damages, the holders would be required to recognize liquidated damages income, which would be taxable as ordinary income.
Conversion of Notes Into Common Stock
A U.S. Holder generally will not recognize any income, gain or loss upon
conversion of a note into common stock except with respect to cash received in lieu of a fractional share of common stock. To the extent we elect to deliver cash instead of shares of common stock, the tax consequences of the exchange will be as
described below under “Certain United States Federal Income Tax Considerations—U.S. Holders—Sale, Exchange, Redemption or Retirement of the Notes.” Cash received in lieu of a fractional share of common stock should generally be
treated as a payment in exchange for such fractional share rather than as a dividend. Gain or loss recognized on the receipt of cash paid in lieu of such fractional share generally will equal the difference between the amount of cash received and
the amount of tax basis allocable to the fractional share. The adjusted basis of shares of common stock received on conversion will equal the adjusted basis of the note converted (reduced by the portion of adjusted basis allocated to any fractional
share of common stock exchanged for cash). The holding period of such common stock received on conversion will generally include the period during which the converted notes were held prior to conversion.
The conversion rate of the notes is subject to adjustment under certain
circumstances. Section 305 of the Code and the Treasury Regulations issued thereunder may treat the holders of the notes as having received a constructive distribution, resulting in a taxable dividend (subject to a possible dividends received
deduction in the case of corporate holders) to the extent of our current and/or accumulated earnings and profits, if, and to the extent that certain adjustments in the conversion rate, which may occur in limited circumstances (particularly an
adjustment to reflect a taxable dividend to holders of common stock), increase the proportionate interest of a holder of notes in the fully diluted common stock, whether or not such holder ever exercises its conversion privilege. Therefore, U.S.
Holders may recognize dividend income in the event of a deemed distribution even though they may not receive any cash or property. Moreover, if there is not a full adjustment to the conversion ratio of the notes to reflect a stock dividend or other
event increasing the proportionate interest of the holders of outstanding common stock in our assets or earnings and profits, then such increase in the proportionate interest of the holders of the common stock generally will be treated as a
distribution to such holders, taxable as a dividend (subject to a possible dividends received deduction in the case of corporate holders) to the extent of our current and/or accumulated earnings and profits. Adjustments to the conversion rate made
pursuant to a bona fide reasonable adjustment formula which has the effect of preventing dilution in the interest of the holders of the debt instruments, however, will generally not be considered to result in a constructive dividend distribution.
Sale, Exchange, Redemption or Retirement of the Notes
Each U.S. Holder generally will recognize gain or loss
upon the sale, exchange (other than by exercise of the conversion privilege), redemption, retirement or other disposition of notes measured by the difference (if any) between (i) the amount of cash and the fair market value of any property received
and (ii) such holder’s adjusted
41
tax basis in the notes. A U.S. Holder’s adjusted tax basis in a note generally will equal the cost of the note to such holder less any principal
payments received by such holder. Any such gain or loss recognized on the sale, exchange, redemption, retirement or other disposition of a note should be capital gain or loss and will generally be long-term capital gain or loss if the note has been
held for more than 12 months at the time of the sale or exchange. Generally, long term capital gain for individuals is eligible for a reduced rate of taxation. Capital gain that is not long term capital gain is taxed at ordinary income rates. The
deductibility of capital losses is subject to certain limitations.
If upon a change of control, a U.S. Holder requires us to repurchase some or all of such holder’s notes and we elect to pay the repurchase price with shares of our common stock, and if the notes are “securities” for U.S.
federal income tax purposes, the holder would generally not recognize any gain or loss on the exchange. If the U.S. Holder receives cash in lieu of a fractional share of common stock, however, the holder would be treated as if he received the
fractional share and then had the fractional share redeemed for cash. The U.S. Holder would recognize gain or loss equal to the difference between the cash received and that portion of his basis in the stock attributable to the fractional share. The
U.S. Holder’s aggregate basis in the common stock received in exchange for the notes (including any fractional share for which cash is paid) would equal his adjusted basis in the note. The U.S. Holder’s holding period for the common stock
so received would include the period during which the holder held the note. If the notes are not “securities” for U.S. federal income tax purposes, then the exchange would be subject to the general rules for exchanges described in the
preceding paragraph.
The Common Stock
Distributions (including constructive distributions), if any, paid on the
common stock that a U.S. Holder receives upon conversion of a note generally will constitute a taxable dividend, to the extent made from our current and/or accumulated earnings and profits, as determined under U.S. federal income tax principles. Any
distribution in excess of our current and accumulated earnings and profits will be treated first as a tax-free return of capital, which will reduce the U.S. Holder’s adjusted tax basis in the shares (but not below zero). To the extent such a
distribution exceeds the U.S. Holder’s adjusted tax basis in the shares, the distribution will be taxable as capital gain. Dividends received by a corporate U.S. Holder may be eligible for a dividends received deduction. For taxable years
beginning after December 31, 2002 and before January 1, 2009, subject to certain exceptions, dividends received by non-corporate shareholders (including individuals) from domestic corporations generally are taxed at the same preferential rates that
apply to long-term capital gain.
Gain or loss realized on the
sale or exchange of common stock will equal the difference between the amount realized on such sale or exchange and the U.S. Holder’s adjusted tax basis in such common stock. Such gain or loss will generally be long-term capital gain or loss if
the holder has held or is deemed to have held the common stock for more than twelve months. Generally, long-term capital gain of non-corporate shareholders is eligible for a reduced rate of taxation. The deductibility of capital losses is subject to
certain limitations.
Non-U.S. Holders
The following discussion is limited to the U.S. federal income tax
consequences relevant to a Non-U.S. Holder (as defined above).
For purposes of withholding tax on dividends discussed below, a Non-U.S. Holder includes a nonresident fiduciary of an estate or trust. For purposes of the following discussion, dividends and gain on the sale, exchange or other disposition
of a note or common stock will be considered to be “U.S. trade or business income” if such income or gain is (i) effectively connected with the conduct of a U.S. trade or business and (ii) in the case of a Non-U.S. Holder eligible for the
benefits of an applicable U.S. bilateral income tax treaty, attributable to a permanent establishment (or, in the case of an individual, a fixed base) in the United States.
42
Dividends
In general, dividends paid to a Non-U.S. Holder of common stock will be subject to withholding of U.S. federal income tax at
a 30 percent rate unless such rate is reduced by an applicable income tax treaty. Dividends that are U.S. trade or business income are generally subject to U.S. federal income tax at regular income tax rates, but are not generally subject to the 30
percent withholding tax or treaty-reduced rate if the Non-U.S. Holder files a properly executed Form W-8ECI (or appropriate substitute form), as applicable with the payor. Any U.S. trade or business income received by a Non-U.S. Holder that is a
corporation may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30 percent rate or such lower rate as may be applicable under an income tax treaty. A non-U.S. Holder of common stock who wishes to
claim the benefit of an applicable treaty rate must provide a properly executed IRS Form W-8BEN (or appropriate substitute form), as applicable. In addition, a Non-U.S. Holder may under certain circumstances be required to obtain a U.S. taxpayer
identification number and make certain certifications to us. Special procedures are provided for payments through qualified intermediaries. A Non-U.S. Holder of common stock that is eligible for a reduced rate of U.S. withholding tax pursuant to an
income treaty may obtain a refund of amounts withheld at a higher rate by filing an appropriate claim for a refund with the IRS.
Conversion
A Non-U.S. Holder generally will not be subject to U.S. federal income tax on the conversion of notes into common stock. However, cash received in lieu of
a fractional share will be subject to U.S. federal income tax in the manner described below under “Certain United States Federal Income Tax Considerations—Non-U. S. Holders—Sale, Exchange, Retirement or Redemption of Notes or Common
Stock.”
Sale, Exchange, Retirement or Redemption of
Notes or Common Stock
Except as described below and
subject to the discussion concerning backup withholding, any gain realized by a Non-U.S. Holder on the sale, exchange, retirement or redemption of a note or common stock generally will not be subject to U.S. federal income tax, unless (i) such gain
is U.S. trade or business income, (ii) subject to certain exceptions, the Non-U.S. Holder is an individual who holds the note or common stock as a capital asset and is present in the United States for 183 days or more in the taxable year of the
disposition, (iii) the Non-U.S. Holder is subject to tax pursuant to the provisions of U.S. tax law applicable to certain U.S. expatriates (including certain former citizens or residents of the United States), or (iv) we are a United States real
property holding corporation within the meaning of Section 897 of the Code. We do not believe that we are currently a “United States real property holding corporation” within the meaning of Section 897 of the Code, or that we will become
one in the future.
Backup Withholding and Information
Reporting
The Code and the Treasury Regulations require
those who make specified payments to report the payments to the IRS. Among the specified payments are dividends and proceeds paid by brokers to their customers. The required information returns enable the IRS to determine whether the recipient
properly included the payments in income. This reporting regime is reinforced by “backup withholding” rules. These rules require the payors to withhold tax from payments subject to information reporting if the recipient fails to cooperate
with the reporting regime by failing to provide his taxpayer identification number to the payor, furnishing an incorrect identification number, or repeatedly failing to report interest or dividends on his returns. The backup withholding rate is
currently 28 percent. The information reporting and backup withholding rules do not apply to payments to corporations, whether domestic or foreign.
Payments of dividends to individual U.S. Holders of notes or common stock will generally be subject to information reporting, and will be subject to
backup withholding unless the holder provides us or our paying agent with a correct taxpayer identification number and complies with certain certification procedures.
43
The information reporting and backup withholding rules do not apply to payments that are subject to the
30 percent withholding tax on dividends paid to nonresidents, or to payments that are exempt from that tax by application of a tax treaty or special exception. Therefore, payments to Non-U.S. Holders of dividends on common stock will generally
not be subject to information reporting or backup withholding. To avoid backup withholding, a Non-U.S. Holder will have to certify its nonresident status. Some of the common means of doing so are described under “Certain United States Federal
Income Tax Considerations—Non-U.S. Holders—Dividends.”
Payments made to U.S. Holders by a broker upon a sale of notes or common stock will generally be subject to information reporting and backup withholding. If the sale is made through a foreign office of a foreign broker, the sale will
generally not be subject to either information reporting or backup withholding. This exception may not apply, however, if the foreign broker is owned or controlled by U.S. persons, or is engaged in a U.S. trade or business.
Payments made to Non-U.S. Holders by a broker upon a sale of notes or common
stock will not be subject to information reporting or backup withholding as long as the Non-U.S. Holder certifies its foreign status.
Any amounts withheld from a payment to a holder of notes or common stock under the backup withholding rules can be credited against any U.S. federal
income tax liability of the holder and may entitle the holder to a refund, provided that the required information is furnished to the Internal Revenue Service.
The preceding discussion of certain United States federal income tax consequences is for general information only and is not tax advice.
Accordingly, each investor should consult its own tax adviser as to particular tax consequences to it of purchasing, holding and disposing of the notes and the common stock issuable upon conversion of the notes, including the applicability and
effect of any state, local or foreign tax laws, and of any proposed changes in applicable laws.
44
SELLING SECURITYHOLDERS
We
originally issued the notes in a private placement in June 2003. The notes were resold by the Initial Purchasers to qualified institutional buyers under Rule 144A under the Securities Act in transactions exempt from registration under the Securities
Act. Selling securityholders may offer and sell the notes and the underlying common stock pursuant to this prospectus.
The following table contains information as of September 17, 2003, with respect to the selling securityholders and the principal amount of notes and the
underlying common stock beneficially owned by each selling securityholder that may be offered using this prospectus.
|
Name
|
|
Principal Amount
at Maturity of
Notes Beneficially
Owned That May
be Sold
|
|
Percentage
of Notes
Outstanding
|
|
Number of
Shares of
Common
Stock That
May be
Sold(1)
|
|
Total
Shares
Beneficially
Owned
Prior to this
Offering
|
|
Shares to be
Beneficially
Owned
After
Completion
of this
Offering(1)
|
|
Percentage of
Common Stock
Outstanding
After
Completion
of this
Offering(2)
|
|
AM Investment D Fund (QP) Ltd.
|
|
$
|
275,000
|
|
*
|
|
20,371
|
|
20,371
|
|
0
|
|
0
|
|
AM Investment E Fund Ltd.
|
|
$
|
1,575,000
|
|
2.1%
|
|
116,667
|
|
116,667
|
|
0
|
|
0
|
|
Lyxor/AM Investment Fund Ltd.
|
|
$
|
425,000
|
|
*
|
|
31,482
|
|
31,482
|
|
0
|
|
0
|
|
R
2
Investments, LDC
|
|
$
|
225,000
|
|
*
|
|
16,667
|
|
16,667
|
|
0
|
|
0
|
|
Sunrise Partners Limited Partnership
|
|
$
|
4,250,000
|
|
5.7%
|
|
314,815
|
|
352,915
|
|
38,100
|
|
*
|
|
Any other holder of notes or future transferee, pledgee, donee or successor of any holder(3)(4)
|
|
$
|
68,250,000
|
|
91.0%
|
|
5,055,556
|
|
5,055,556
|
|
0
|
|
0
|
|
(1)
|
|
Assumes conversion of all of the holder’s notes at a conversion price of approximately $13.50 per share of common stock. However, this conversion price will be subject to
adjustment as described under “Description of Notes—Conversion Rights.” As a result, the amount of common stock issuable upon conversion of the notes may increase or decrease in the future.
|
|
(2)
|
|
Calculated based on Rule 13d-3(d)(1)(i) of the Exchange Act using 33,928,085 shares of common stock outstanding as of September 17, 2003. In calculating this amount, shares owned by
a holder prior to this offering are included with the number of shares of common stock issuable upon conversion of that holder’s notes. In addition, we treated as outstanding the number of shares of common stock issuable upon conversion of all
of that particular holder’s notes. However, we did not assume the conversion of any other holder’s notes.
|
|
(3)
|
|
Information about other selling security holders will be set forth in prospectus supplements, if required.
|
|
(4)
|
|
Assumes that any other holders of notes, or any future transferees, pledgees, donees or successors of or from any such other holders of notes, do not beneficially own any common
stock other than the common stock issuable upon conversion of the notes at the initial conversion rate.
|
We prepared this table based on the information supplied to us by the selling securityholders named in the table.
The selling securityholders listed in the above table may have sold or
transferred, in transactions exempt from the registration requirements of the Securities Act, some or all of their notes since the date on which the information in the above table is presented. Information about the selling securityholders may
change from over time. Any changed information provided to us will be set forth in prospectus supplements.
Because the selling securityholders may offer all or some of their notes or the underlying common stock from time to time, we cannot estimate the amount
of the notes or underlying common stock that will be held by the selling securityholders upon the termination of any particular offering. For information on the procedures for sales by selling securityholders, see the section entitled “Plan of
Distribution” below.
45
PLAN OF DISTRIBUTION
We will not
receive any of the proceeds from the sale of the notes and the underlying common stock offered by this prospectus. The notes and the underlying common stock may be sold from time to time to purchasers:
|
|
•
|
|
directly by the selling securityholders; or
|
|
|
•
|
|
through underwriters, broker-dealers or agents who may receive compensation in the form of discounts, concessions or commissions from the selling securityholders or the purchasers
of the notes and the underlying common stock.
|
The selling securityholders and any such broker-dealers or agents who participate in the distribution of the notes and the underlying common stock may be deemed to be “underwriters.” As a result, any profits on the sale of the
notes and underlying common stock by selling securityholders and any discounts, commissions or concessions received by any such broker-dealers or agents might be deemed to be underwriting discounts and commissions under the Securities Act. If the
selling securityholders were to be deemed underwriters, the selling securityholders may be subject to certain statutory liabilities of, including, but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange
Act.
If the notes and underlying common stock are sold through
underwriters or broker-dealers, the selling securityholders will be responsible for underwriting discounts or commissions or agent’s commissions.
The notes and underlying common stock may be sold in one or more transactions at:
|
|
•
|
|
prevailing market prices at the time of sale;
|
|
|
•
|
|
varying prices determined at the time of sale; or
|
These sales may be effected in transactions:
|
|
•
|
|
on any national securities exchange or quotation service on which the notes and underlying common stock may be listed or quoted at the time of the sale, including the Nasdaq
National Market System in the case of the common stock;
|
|
|
•
|
|
in the over-the-counter market;
|
|
|
•
|
|
in transactions otherwise than on such exchanges or services or in the over-the-counter market; or
|
|
|
•
|
|
through the writing of options.
|
These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the notes and underlying
common stock or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers. These broker-dealers may in turn engage in short sales of the notes and underlying common stock in the course of hedging their positions.
The selling securityholders may also sell the notes and underlying common stock short and deliver notes and underlying common stock to close out short positions, or loan or pledge notes and underlying common stock to broker-dealers that in turn may
sell the notes and underlying common stock.
To our knowledge,
there are currently no plans, arrangement or understandings between any selling securityholders and any underwriter, broker-dealer or agent regarding the sale of the notes and the underlying common stock by the selling securityholders.
46
Our common stock trades on the Nasdaq National Market under the symbol “CTIC.” We cannot assure
you as to the development of liquidity or any trading market for the notes. See “Risk Factors—Risks Related to Our Notes—There is no public market for the notes being offered, which may significantly impair the liquidity of the
notes.”
There can be no assurance that any selling
securityholder will sell any or all of the notes or underlying common stock pursuant to this prospectus. In addition, we cannot assure you that any such selling securityholder will not transfer, devise or gift the notes and the underlying common
stock by other means not described in this prospectus. Any notes or underlying common stock covered by this prospectus that qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather than
pursuant to this prospectus.
The selling securityholders and
any other person participating in such distribution will be subject to the Exchange Act. The Exchange Act rules include, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the notes and the underlying
common stock by the selling securityholders and any other such person. In addition, Regulation M of the Exchange Act may restrict the ability of any person engaged in the distribution of the notes and the underlying common stock to engage in
market-making activities with respect to the particular notes and the underlying common stock being distributed for a period of up to five business days prior to the commencement of such distribution. This may affect the marketability of the notes
and the underlying common stock and the ability of any person or entity to engage in market-making activities with respect to the notes and the underlying common stock.
Pursuant to the registration rights agreement filed as an exhibit to this registration statement, we and the selling
securityholders will be indemnified by the other against certain liabilities, including certain liabilities under the Securities Act or will be entitled to contribution in connection with these liabilities.
We have agreed to pay substantially all of the expenses incidental to the
registration of the notes and underlying common stock. We will not pay any commissions, fees or discounts of underwriters, brokers, dealers and agents in connection with any sales by any selling securityholders.
LEGAL MATTERS
The validity of
the issuance of the Cell Therapeutics, Inc. securities offered by this prospectus will be passed upon for Cell Therapeutics, Inc. by Wilson Sonsini Goodrich & Rosati, Professional Corporation, San Francisco, California.
EXPERTS
Ernst & Young LLP,
independent auditors, have audited our consolidated financial statements and schedule included in our Annual Report on Form 10-K/A for the year ended December 31, 2002, as set forth in their report, which is incorporated by reference in this
prospectus and elsewhere in the registration statement. Our financial statements and schedule are incorporated by reference in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.
47
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information requirements of the Securities Exchange Act of 1934 (hereinafter the “Exchange Act”). In accordance with the Exchange Act, we file reports, proxy statements and other information with the SEC.
Such reports, proxy statements and other information filed by us are available free of charge on our web site,
http://www.cticseattle.com,
and may be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549. Copies of such material also may be obtained at prescribed rates from the Public Reference Branch of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the public reference facilities by calling the SEC at (800) SEC-0330. Our common stock is listed on the Nasdaq National Market and such reports, proxy statements and other information concerning us may be inspected at the offices of The
Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006. The SEC maintains a web site at
http://www.sec.gov
that contains reports, proxy and information statements and other information regarding registrants that file electronically
with the SEC.
The Commission allows us to “incorporate by
reference” into this prospectus the information we filed with the Commission. This means that we can disclose important information by referring you to those documents. The information incorporated by reference is considered to be a part of
this prospectus. Information that we file later with the Commission will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made by us with the Commission under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act until our offering is complete:
|
|
•
|
|
our annual report on Form 10-K for the fiscal year ended December 31, 2002 filed March 27, 2003 and amended April 30, 2003;
|
|
|
•
|
|
our quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2003 filed May 12, 2003;
|
|
|
•
|
|
our quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2003 filed August 6, 2003;
|
|
|
•
|
|
our current report on Form 8-K filed on June 17, 2003;
|
|
|
•
|
|
our current report on Form 8-K filed on June 19, 2003; and
|
|
|
•
|
|
the proxy statement constituting part of our registration statement on Form S-4, filed July 9, 2003 and amended August 21, 2003 and September 18, 2003.
|
We will provide without charge to each person, including any beneficial owner
of CTI common stock, to whom this prospectus is delivered, upon written or oral request, a copy of any and all of the documents that have been incorporated by reference but not delivered with this prospectus (without exhibits, unless the exhibits
are specifically incorporated by reference but not delivered with this prospectus). Requests should be directed to:
Louis A. Bianco
Executive Vice President,
Finance and Administration
Cell Therapeutics, Inc.
501 Elliot Avenue West, Suite 400
Seattle, Washington 98119
(206) 282-7100
You should rely only on the information incorporated by reference or provided in this prospectus or a prospectus supplement or amendment. We have not
authorized anyone else to provide you with different information. We are only making an offer of these securities in states where the offer is permitted. You should not assume the information in this prospectus or a prospectus supplement or
amendment is accurate as of any date other than the date on the front of the documents.
48
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14.
Other Expenses of Issuance and Distribution
The aggregate estimated (other than the registration fee) expenses to be paid by the Registrant in connection with this
offering (including the private placement of the notes in June 2003) are as follows:
|
Securities and Exchange Commission registration fee
|
|
$
|
6,068
|
|
Trustee’s fees and expenses
|
|
|
13,600
|
|
Accounting fees and expenses
|
|
|
50,000
|
|
Legal fees and expenses
|
|
|
250,000
|
|
Miscellaneous
|
|
|
87,082
|
|
|
|
|
|
|
Total
|
|
$
|
406,750
|
|
|
|
|
|
Item
15.
Indemnification of Directors and Officers of Cell Therapeutics, Inc.
Sections 23B.08.500 through 23B.08.600 of the Washington Business Corporation Act (the “WBCA”) authorize a court to award, or a
corporation’s board of directors to grant, indemnification to directors and officers on terms sufficiently broad to permit indemnification under certain circumstances for liabilities arising under the Securities Act of 1933. Article IX of the
Registrant’s Restated Bylaws provides for indemnification of the Registrant’s directors, officers, employees and agents to the maximum extent permitted by Washington law. The directors and officers of the Registrant also may be indemnified
against liability they may incur for serving in such capacity pursuant to a liability insurance policy maintained by the Company for such purpose.
Section 23B.08.320 of the WBCA authorizes a corporation to limit a director’s liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving intentional misconduct, knowing violations of law or illegal corporate losses or distributions, or any transaction from which the director personally receives a benefit
in money, property or services to which the director is not legally entitled. Article VI of the Registrant’s Restated Articles of Incorporation contains provisions implementing, to the fullest extent permitted by Washington law, such
limitations on a director’s liability to the Registrant and its shareholders.
The Registrant has entered into an indemnification agreement with each of its executive officers and directors in which the Registrant agrees to hold harmless and indemnify the officer or director to the fullest
extent permitted by Washington law. The Registrant agrees to hold harmless and indemnify the officer or director against any and all losses, claims, damages, liabilities or expenses incurred in connection with any actual, pending or threatened
action, suit, claim or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal, in which the officer or director is, was or becomes involved by reason of the fact that the officer or director is or was a
director, officer, employee, trustee or agent of the Registrant or any related company, partnership or enterprise, including service with respect to an employee benefit plan, whether the basis of such proceeding is alleged action (or inaction) by
the officer or director in an official capacity and any action, suit, claim or proceeding instructed by or at the direction of the officer or director unless such action, suit, claim or proceeding is or was authorized by the Registrant’s Board
of Directors. No indemnity pursuant to the indemnification agreements shall be provided by the Registrant on account of any suit in which a final, unappealable judgment is rendered against the officer or director for an accounting of profits made
from the purchase or sale by the officer or director of securities of the Registrant in violation of the provisions of Section 16(b) of the Securities Exchange Act of 1934, and amendments thereto, or for damages that have been paid directly to the
officer or director by an insurance carrier under a policy of directors’ and officers’ liability insurance maintained by the Registrant.
II-1
Item 16.
Exhibits
The following exhibits are filed herewith or incorporated by reference
herein:
Exhibit
Number
|
|
|
Exhibit Title
|
|
3.1
|
(1)
|
|
Registrant’s Restated Articles of Incorporation.
|
|
|
|
|
3.2
|
(4)
|
|
Registrant’s Articles of Amendment to Restated Articles of Incorporation Establishing a Series of Preferred Stock.
|
|
|
|
|
3.3
|
(2)
|
|
Registrant’s Articles of Amendment to Restated Articles of Incorporation of Cell Therapeutics, Inc. Effecting a Reverse Stock Split.
|
|
|
|
|
3.4
|
(3)
|
|
Registrant’s Restated Bylaws.
|
|
|
|
|
4.1
|
|
|
Indenture, dated as of June 23, 2003, between CTI and U.S. Bank National Association.
|
|
|
|
|
4.2
|
|
|
Form of Note (included in Exhibit 4.1).
|
|
|
|
|
5.1
|
|
|
Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
|
|
|
|
|
10.1
|
(5)
|
|
Registration Rights Agreement, dated as of June 23, 2003, between CTI and the Initial Purchasers set forth therein.
|
|
|
|
|
12.1
|
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
|
|
|
23.1
|
|
|
Consent of Ernst & Young LLP, Independent Auditors.
|
|
|
|
|
23.2
|
|
|
Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit 5.1).
|
|
|
|
|
24.1
|
|
|
Power of Attorney of certain directors and officers of Cell Therapeutics, Inc. (included on the signature page of this Form S-3 and incorporated herein by
reference).
|
|
|
|
|
25.1
|
|
|
Form T-1 Statement of Eligibility of Trustee for Indenture under the Trust Indenture Act of 1939.
|
|
(1)
|
|
Incorporated by reference to exhibits to the Registrant’s Registration Statement on Form S-1 (No. 333-4154).
|
|
(2)
|
|
Incorporated by reference to exhibits to the Registrant’s Registration Statement on Form S-3 (No. 333-36603).
|
|
(3)
|
|
Incorporated by reference to exhibits to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.
|
|
(4)
|
|
Incorporated by reference to exhibits to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002.
|
|
(5)
|
|
Incorporated by reference to exhibits to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003.
|
Item 17.
Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the “Act”);
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.
II-2
Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high end of the estimated offering range may be reflected fin the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
provided, however
, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply if the information required to be included in a post-effective
amendment by these clauses is contained in periodic reports filed by the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) that are incorporated by reference in this registration
statement.
(2) That, for the purpose of
determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed
to be the initial
bona fide
offering thereof;
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;
(4) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the
Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or proceeding, is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3, and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Seattle, State of Washington on September 18, 2003.
|
C
ELL
T
HERAPEUTICS
, I
NC
.
|
|
|
|
|
By:
|
|
/s/ J
AMES
A. B
IANCO
|
|
|
|
|
|
|
James A. Bianco, M.D.
President and Chief Executive Officer
|
POWER OF
ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the
undersigned officers and directors of Cell Therapeutics, Inc., a Washington corporation, do hereby constitute and appoint James A. Bianco and Louis A. Bianco and each of them individually, the lawful attorneys-in-fact and agents, each with full
power of substitution or re-substitution, with full power and authority to do any and all acts and things and to execute any and all instruments which said attorneys-in-fact and agents, or either one of them, determine may be necessary or advisable
or required to enable said corporation to comply with the Securities Act of 1933, as amended, and any rules or regulation or requirements of the Securities and Exchange Commission in connection with this Registration Statement. Without limiting the
generality of the foregoing power and authority, the powers granted include the power and authority to sign the names of the undersigned officers and directors in the capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this Registration Statement and to any and all instruments or documents filed as part of or in conjunction with this Registration Statement or amendments or supplements thereto,
and each of the undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or either one of them, shall do or cause to be done by virtue hereof. This Power of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the
requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ M
AX
E.
L
INK
Max E. Link,
Ph.D.
|
|
Chairman of the Board
|
|
September 18, 2003
|
|
|
|
|
|
/s/ J
AMES
A.
B
IANCO
James A. Bianco,
M.D.
|
|
President, Chief Executive Officer and Director (Principal Executive Officer)
|
|
September 18, 2003
|
|
|
|
|
|
/s/ L
OUIS
A.
B
IANCO
Louis A.
Bianco
|
|
Executive Vice President, Finance and Administration (Principal Financial Officer and Principal Accounting
Officer)
|
|
September 18, 2003
|
|
|
|
|
|
/s/ J
ACK
L.
B
OWMAN
Jack L.
Bowman
|
|
Director
|
|
September 18, 2003
|
II-4
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ J
OHN
M. F
LUKE
,
J
R
.
John M. Fluke,
Jr.
|
|
Director
|
|
September 18, 2003
|
|
|
|
|
|
/s/ V
ARTAN
G
REGORIAN
Vartan Gregorian,
Ph.D.
|
|
Director
|
|
September 18, 2003
|
|
|
|
|
|
/s/ M
ARY
O’N
EILL
M
UNDINGER
Mary O’Neill Mundinger,
DrPH
|
|
Director
|
|
September 18, 2003
|
|
|
|
|
|
/s/ P
HILLIP
M.
N
UDELMAN
Phillip M. Nudelman,
Ph.D.
|
|
Director
|
|
September 18, 2003
|
|
|
|
|
|
/s/ J
ACK
W.
S
INGER
Jack W. Singer,
M.D.
|
|
Director
|
|
September 18, 2003
|
|
|
|
|
|
/s/ M
ARTIN
P.
S
UTTER
Martin P.
Sutter
|
|
Director
|
|
September 18, 2003
|
II-5
EXHIBIT INDEX
Exhibit
Number
|
|
|
Exhibit Title
|
|
3.1
|
(1)
|
|
Registrant’s Restated Articles of Incorporation.
|
|
|
|
|
3.2
|
(4)
|
|
Registrant’s Articles of Amendment to Restated Articles of Incorporation Establishing a Series of Preferred Stock.
|
|
|
|
|
3.3
|
(2)
|
|
Registrant’s Articles of Amendment to Restated Articles of Incorporation of Cell Therapeutics, Inc. Effecting a Reverse Stock Split.
|
|
|
|
|
3.4
|
(3)
|
|
Registrant’s Restated Bylaws.
|
|
|
|
|
4.1
|
|
|
Indenture, dated as of June 23, 2003, between CTI and U.S. Bank National Association.
|
|
|
|
|
4.2
|
|
|
Form of Note (included in Exhibit 4.1).
|
|
|
|
|
5.1
|
|
|
Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
|
|
|
|
|
10.1
|
(5)
|
|
Registration Rights Agreement, dated as of June 23, 2003, between CTI and the Initial Purchasers set forth therein.
|
|
|
|
|
12.1
|
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
|
|
|
23.1
|
|
|
Consent of Ernst & Young LLP, Independent Auditors.
|
|
|
|
|
23.2
|
|
|
Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit 5.1).
|
|
|
|
|
24.1
|
|
|
Power of Attorney of certain directors and officers of Cell Therapeutics, Inc. (included on the signature page of this Form S-3 and incorporated herein by
reference).
|
|
|
|
|
25.1
|
|
|
Form T-1 Statement of Eligibility of Trustee for Indenture under the Trust Indenture Act of 1939.
|
|
(1)
|
|
Incorporated by reference to exhibits to the Registrant’s Registration Statement on Form S-1 (No. 333-4154).
|
|
(2)
|
|
Incorporated by reference to exhibits to the Registrant’s Registration Statement on Form S-3 (No. 333-36603).
|
|
(3)
|
|
Incorporated by reference to exhibits to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.
|
|
(4)
|
|
Incorporated by reference to exhibits to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002.
|
|
(5)
|
|
Incorporated by reference to exhibits to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003.
|
Exhibit 4.1
CELL THERAPEUTICS, INC.,
as
Issuer
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
INDENTURE
Dated as of June 23, 2003
4% CONVERTIBLE
SENIOR SUBORDINATED NOTES DUE 2010
TABLE OF CONTENTS
i
ii
iii
iv
v
CROSS-REFERENCE TABLE*
TIA
SECTION
|
|
|
|
INDENTURE
SECTION
|
|
|
|
|
|
Section
|
|
310(a)(1)
|
|
5.8
|
|
|
|
|
|
|
|
(a)(2)
|
|
5.8
|
|
|
|
|
|
|
|
(a)(3)
|
|
N.A.**
|
|
|
|
|
|
|
|
(a)(4)
|
|
N.A.
|
|
|
|
|
|
|
|
(a)(5)
|
|
5.8
|
|
|
|
|
|
|
|
(b)
|
|
5.9,5.10,5.13
|
|
|
|
|
|
|
|
(c)
|
|
N.A.
|
|
|
|
|
|
Section
|
|
311(a)
|
|
5.14
|
|
|
|
|
|
|
|
(b)
|
|
5.14
|
|
|
|
|
|
|
|
(c)
|
|
N.A.
|
|
|
|
|
|
Section
|
|
312(a)
|
|
13.1,13.2
|
|
|
|
|
|
|
|
(b)
|
|
13.2
|
|
|
|
|
|
|
|
(c)
|
|
13.2
|
|
|
|
|
|
Section
|
|
313(a)
|
|
13.4
|
|
|
|
|
|
|
|
(b)(1)
|
|
N.A.
|
|
|
|
|
|
|
|
(b)(2)
|
|
13.4
|
|
|
|
|
|
|
|
(c)
|
|
1.6,13.4
|
|
|
|
|
|
|
|
(d)
|
|
13.4
|
|
|
|
|
|
Section
|
|
314(a)
|
|
1.5,8.5,8.6,13.5
|
|
|
|
|
|
|
|
(b)
|
|
N.A.
|
|
|
|
|
|
|
|
(c)(1)
|
|
1.2
|
|
|
|
|
|
|
|
(c)(2)
|
|
1.2
|
|
|
|
|
|
|
|
(c)(3)
|
|
N.A.
|
|
|
|
|
|
|
|
(d)
|
|
N.A.
|
|
|
|
|
|
|
|
(e)
|
|
1.2
|
|
|
|
|
|
|
|
(f)
|
|
N.A.
|
|
|
|
|
|
Section
|
|
315(a)
|
|
5.1(a)
|
|
|
|
|
|
|
|
(b)
|
|
1.6,5.2
|
|
|
|
|
|
|
|
(c)
|
|
5.1(b)
|
|
|
|
|
|
|
|
(d)
|
|
5.1(c)
|
|
|
|
|
|
|
|
(e)
|
|
4.14
|
|
|
|
|
|
Section
|
|
316(a)(last sentence)
|
|
1.1
|
|
|
|
|
|
|
|
(a)(1)(A)
|
|
4.12
|
|
|
|
|
|
|
|
(a)(1)(B)
|
|
4.13
|
|
|
|
|
|
|
|
(a)(2)
|
|
N.A.
|
|
|
|
|
|
|
|
(b)
|
|
4.8
|
|
|
|
|
|
|
|
(c)
|
|
1.4(e)
|
|
|
|
|
|
Section
|
|
317(a)(1)
|
|
4.3
|
|
|
|
|
|
|
|
(a)(2)
|
|
4.4
|
|
|
|
|
|
|
|
(b)
|
|
3.2
|
|
|
|
|
|
Section
|
|
318(a)
|
|
1.13
|
|
*
|
|
This Cross-Reference Table shall not, for any purpose, be deemed a part of this Indenture.
|
|
**
|
|
N.A. means Not Applicable.
|
vi
INDENTURE
, dated as of June 23, 2003, between Cell Therapeutics, Inc., a corporation duly
organized and existing under the laws of the State of Washington, having its principal office at 501 Elliott Avenue West, Suite 400, Seattle, Washington 98119 (herein called the “
Company
”), and U.S. Bank National Association,
as Trustee hereunder (herein called the “
Trustee
”).
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 4% Convertible Senior Subordinated Notes due 2010 (herein called the “
Securities
”), 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 Securities, when the Securities are executed by the Company and authenticated and delivered hereunder, the valid 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 shares of common stock of the Company issuable upon the conversion of the Securities, and to duly reserve for
issuance the number of shares of Common Stock issuable upon such conversion, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
DEFINITIONS
AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1
Definitions
.
For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles in the United States; and
(c) 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.
1
“
Act
,” when used with respect to any Holder of a Security, has the meaning
specified in
Section 1.4
.
“
Affiliate
” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this
definition, “control,” when used with respect to any specified Person, means the power to direct 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.
“
aggregate current market price
” has the meaning specified in Section 10.4(e).
“
Applicable Procedures
” means, with respect to any
transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, to the extent applicable to such transaction and as in effect from time to time.
“
Authenticating Agent
” means any Person authorized
pursuant to
Section 5.12
to act on behalf of the Trustee to authenticate Securities.
“
Average Sales Price Per Share
” means, with respect to the Common Stock of the Company, for any day, (1) the average of the high and low sales price per share regular way on a national
securities exchange or, (2) if the Common Stock is not listed on a national securities exchange, the average of the high and low sales price per share regular way on the Nasdaq National Market, or (3) if the Common Stock is not quoted on the Nasdaq
National Market or listed or admitted to trading on any national securities exchange, the average of the high and low sales prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by
the Company for that purpose.
“
Board of
Directors
” means either the board of directors of the Company or any duly authorized committee of that 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 have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, shall have been delivered to the Trustee.
“
Business Day
,” when used with respect to any Place
of Payment, Place of Conversion or any other place, as the case may be, means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in such Place of Payment, Place of Conversion or other place, as the
case may be, are authorized or obligated by law or executive order to close;
provided
,
however
, that a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close shall not be
a Business Day for purposes of
Section 9.6
or
Section 10.5
.
“
Cash Equivalents
” means (1) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (
provided
that
2
the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (2)
certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic
commercial bank having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating of “B” or better, (3) repurchase obligations with a term of not more than seven days for underlying securities of the types described in
clause (1) above entered into with any financial institution meeting the qualifications specified in clause (2) above, (4) commercial paper having the highest rating obtainable from Moody’s Investors Service, Inc. or Standard & Poor’s
Ratings Services and in each case maturing within six months after the date of acquisition and (5) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1)-(4) of this definition.
“
Change in Control
” means the
occurrence at any time, after the original issuance of the Securities, of any of the following events:
(1) the acquisition by any Person (including any syndicated group that would be deemed to be a “person” under Section 13(d) (3)
of the Exchange Act) of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of capital stock of the Company entitling such Person to exercise more than 50% of
the total voting power of all shares of capital stock of the Company entitled to vote generally in the elections of directors, other than any such acquisition by the Company, any Subsidiary or any employee benefit plan of the Company; or
(2) any Person shall succeed in having sufficient of its
nominees (who are not supported by a majority of the then current Board of Directors of the Company) elected to the Board of Directors of the Company such that such nominees, when added to any existing directors remaining on the Board of Directors
of the Company after such election who are Affiliates of or acting in concert with any such Person, shall constitute a majority of the Board of Directors of the Company; or
(3) any consolidation or merger of the Company with or into any other Person, or any merger of another
Person with or into the Company (other than (A) a merger (i) that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of the Company’s capital stock and (ii) pursuant to which holders of Common
Stock immediately prior to such transaction have, directly or indirectly, 50% or more of the total voting power of all shares of capital stock or other ownership interests entitled to vote generally in the election of directors of the continuing or
surviving Person immediately after such transaction and (B) any merger that is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock
solely into shares of common stock of the Company or another Person); or
(4) any conveyance, transfer, sale, lease or other disposition of all or substantially all of the Company’s assets to another Person;
3
provided
,
however
, that a Change in Control shall not be deemed to have occurred if the Average Sales Price Per Share on any five Trading Days
within (A) the period of 10 consecutive Trading Days ending immediately after the later of the date of the Change in Control or the date of the public announcement of the Change in Control (in the case of a Change in Control under clause (1) above
but not clause (2) or (3) above) or (B) the period of 10 consecutive Trading Days ending immediately prior to the date of the Change in Control (in the case of a Change in Control under clause (2) or (3) above) shall, in either case, equals or
exceed 105% of the Conversion Price of the Securities in effect on each such Trading Day. For the purposes of this definition, “beneficial owner,” has the meaning attributed to it in Rules 13d-3 under the Exchange Act, whether or not
applicable.
“
Code
” has the meaning
specified in
Section 2.1
.
“
combined cash and
tender amount
” has the meaning specified in
Section 10.4(e)
.
“
combined tender and cash amount
” has the meaning specified in
Section 10.4(f)
.
“
Commission
” means the United States Securities and Exchange Commission, as from time to time constituted, created under the
Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.
“
Common Stock
” means the shares of the class
designated as common stock of the Company at the date of this Indenture or as such stock may be reconstituted from time to time. Subject to the provisions of
Section 10.11
, shares issuable on conversion or repurchase of Securities shall
include only shares of Common Stock or shares of any class or classes of common stock resulting from any reclassification or reclassifications thereof;
provided
,
however
, that if at any time there shall be more than one such resulting
class, the shares so issuable on conversion of Securities shall include shares of all such classes, and the shares of each such class then so issuable shall be substantially in the proportion that the total number of shares of such class resulting
from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications.
“
Company
” means the Person named as the “Company” in the first paragraph of this instrument until a successor Person
shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Company” shall mean such successor Person.
“
Company Notice
” has the meaning specified in
Section 12.3(a)
.
“
Company Request
” or “
Company
Order
” means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, its Chief Executive Officer, its President or a Vice President, and by its principal financial
officer, Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.
“
Completion Date
” has the meaning specified in
Section 10.4(f)
.
4
“
Constituent Person
” has the meaning specified in
Section 10.11
.
“
Conversion Agent
” means any Person
authorized by the Company to convert Securities in accordance with
Article Ten
. The Company has initially appointed the Trustee as its Conversion Agent.
“
Conversion Price
” means the amount equal to U.S. $1,000 divided by the Conversion Rate.
“
Conversion Rate
” has the meaning specified in
Section 10.1
.
“
Conversion
Shares
” has the meaning specified in
Section 10.4(m)
.
“
Corporate Trust Office
” means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered (which at the date of this Indenture is
located at 550 S. Hope Street, Suite 500, Los Angeles, CA 90071, Attn: Corporate Trust Services (Cell Therapeutics, Inc.)).
“
Corporation
” means a corporation, company, association, joint-stock company or business trust.
“
Defaulted Interest
” has the meaning specified in
Section 2.8
.
“
Depositary
”
means, with respect to any Registered Securities, a clearing agency that is registered as such under the Exchange Act and is designated by the Company to act as Depositary for such Registered Securities (or any successor securities clearing agency
so registered).
“
Designated Senior
Debt
” means the Company’s obligations under any particular Senior Debt in which the instrument creating or evidencing the same, or the assumption or guarantee thereof, or related agreements or documents to which the Company is a
party, expressly provides that such indebtedness shall be “Designated Senior Debt” for purposes of this Indenture (
provided
that such instrument, agreement or other document may place limitations and conditions on the right of such
Senior Debt to exercise the rights of Designated Senior Debt).
“
Distribution Date
” has the meaning specified in
Section 10.4(m)
.
“
Dollar
” or “
U.S.$
” means a dollar or other equivalent unit in such coin or currency of the United States
as at the time shall be legal tender for the payment of public and private debts.
“
DTC
” means The Depository Trust Company, a New York corporation.
“
Event of Default
” has the meaning specified in
Section 4.1
.
5
“
Exchange Act
” means the United States Securities Exchange Act of 1934 (or any
successor statute), as amended from time to time.
“
Existing Pari Passu Notes
” means the Company’s 5.75% Convertible Senior Subordinated Notes due June 15, 2008, issued under the Existing Pari Passu Notes Indenture.
“
Existing Pari Passu Notes Indenture
” means the
Indenture dated as of December 20, 2002, between the Company and State Street Bank and Trust Company of California, N.A.
“
Existing Subordinated Notes
” means the Company’s 5.75% Convertible Subordinated Notes due June 15, 2008, issued under the
Existing Subordinated Notes Indenture.
“
Existing
Subordinated Notes Indenture
” means the Indenture dated as of June 13, 2001, between the Company and State Street Bank and Trust Company of California, N.A.
“
Global Security
” means a Registered Security that is registered in the Security Register in the
name of a Depositary or a nominee thereof.
“
Holder
” means the Person in whose name the Security is registered in the Security Register.
“
Indenture
” means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of
and govern this instrument and any such supplemental indenture, respectively.
“
Initial Purchasers
” means CIBC World Markets Corp. and U.S. Bancorp Piper Jaffray Inc.
“
Interest Payment Date
” means the Stated Maturity of an installment of interest on the Securities.
“
Liquidated Damages
” has the meaning specified in the
Registration Rights Agreement.
“
Liquidated Damages
Notice
” has the meaning specified in Section 3.1.
“
Maturity
,” when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption, exercise of the repurchase right set forth in
Article Twelve
or otherwise.
“
Member
” means any member of, or participant in, the Depositary.
“
Non-electing Share
” has the meaning specified in
Section 10.11
.
6
“
Notice of Default
” has the meaning specified in
Section 4.1
.
“
Officers’ Certificate
” means a certificate
signed by the Chairman of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the President or a Vice President and by the principal financial officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary
of the Company, and delivered to the Trustee.
“
Opinion of Counsel
” means a written opinion of counsel, who may be counsel for or employed by the Company and who shall be acceptable to the Trustee.
“
Outstanding
,” when used with respect to Securities, means, as of the date of determination, all
Securities theretofore authenticated and delivered under this Indenture, except:
(1) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;
(2) Securities for the payment or redemption of which money
in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (if other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders
of such Securities (
provided
that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made); and
(3) Securities that have been paid pursuant to
Section
2.7
or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to
it that such Securities are held by a
bona fide
purchaser in whose hands such Securities are valid obligations of the Company;
provided
,
however
, that in determining whether the Holders of the requisite principal amount of Outstanding Securities are present at a meeting of Holders
of Securities for quorum purposes or have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities 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 determination as to the presence of a quorum or upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities that a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor.
“
Paying
Agent
” means any Person authorized by the Company to pay the principal of or interest on any Securities on behalf of the Company and, except as otherwise specifically set
7
forth herein, such term shall include the Company if it shall act as its own Paying Agent. The Company has initially appointed the Trustee as its Paying
Agent.
“
Person
” means any individual,
corporation, limited liability company, partnership, joint venture, trust, estate, unincorporated organization or government or any agency or political subdivision thereof.
“
Place of Conversion
” has the meaning specified in
Section 2.2
.
“
Place of Payment
” has the meaning specified in
Section 2.2
.
“
Predecessor
Security
” of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and
delivered under
Section 2.7
in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.
“
Purchase Agreement
” means the Purchase Agreement,
dated as of June 18, 2003, between the Company and the Initial Purchasers, as such agreement may be amended from time to time.
“
Purchased Shares
” has the meaning specified in
Section 10.4(f)
.
“
Purchasers
” has the meaning specified in
Section
9.9
.
“
Record Date
” means any
Regular Record Date or Special Record Date.
“
Record
Date Period
” means the period from the close of business of any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date.
“
Redemption Date
,” when used with respect to any
Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.
“
Redemption Price
,” when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant
to this Indenture.
“
Registered
Securities
” has the meaning specified in
Section 2.1
.
“
Registrable Securities
” has the meaning specified in the Registration Rights Agreement.
“
Registration Default
” has the meaning specified in the Registration Rights Agreement.
“
Registration Rights Agreement
” means the
Registration Rights Agreement, dated the date hereof, by and among the Company and the Initial Purchasers.
8
“
Regular Record Date
” for interest payable in respect of any Registered Security
on any Interest Payment Date means the December 15 and the June 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date.
“
Representative
” means (1) the indenture trustee or other trustee, agent or representative for any
Designated Senior Debt or (2) with respect to Designated Senior Debt that does not have any such trustee, agent or other representative, (A) in the case of such Designated Senior Debt issued pursuant to an agreement providing for voting arrangements
as among the holders or owners of such Designated Senior Debt, any holder or owner of such Designated Senior Debt acting with the consent of the required Persons necessary to bind such holders or owners of such Designated Senior Debt and (B) in the
case of all other such Designated Senior Debt, the holder or owner of such Designated Senior Debt.
“
Repurchase Date
” has the meaning specified in
Section 12.1
.
“
Repurchase Price
” has the meaning specified in
Section 12.1
.
“
Responsible Officer
,” when used with respect to the
Trustee, means any officer within the Corporate Trust Office, including without limitation any vice president, assistant vice president, assistant treasurer, corporate trust officer or other employee of the Trustee customarily performing functions
similar to those performed by any of the above designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge and familiarity with the particular
subject.
“
Restricted Global Security
”
has the meaning specified in
Section 2.1
.
“
Restricted Securities Legend
” means, collectively, the legends substantially in the forms of the legends required in the form of Security attached hereto as
Exhibit A
to be placed upon each Security.
“
Rule 144A
” means Rule 144A under the
Securities Act (or any successor provision), as it may be amended from time to time.
“
Rule 144A Information
” has the meaning specified in
Section 8.9
.
“
Securities
” has the meaning ascribed to it in the first paragraph under the caption “Recitals of the Company.”
“
Securities Act
” means the United
States Securities Act of 1933 (or any successor statute), as amended from time to time.
“
Security Register
” and “
Security Registrar
” have the respective meanings specified in
Section 2.6
.
9
“
Senior Debt
” means the principal of (and premium, if any) and interest
(including all interest accruing subsequent to the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowable as a claim in any such proceeding) on, and rent payable on or in connection with,
and all fees, costs, claims, expenses and other amounts payable in connection with, the following, whether absolute or contingent, secured or unsecured, due or to become due, outstanding on the date of this Indenture or thereafter created, incurred
or assumed: (1) all the Company’s indebtedness evidenced by a credit or loan agreement, note, bond, debenture, or other similar instrument whether or not the recourse of the lender is to all of the Company’s assets or only to a portion,
(2) all of the Company’s indebtedness, obligations and other liabilities, contingent or otherwise, for borrowed money, including, without limitation, overdrafts, foreign exchange contracts, currency exchange agreements, interest rate protection
agreements and any loans or advances from banks, whether or not evidenced by notes or similar instruments, or bonds, debentures, notes or similar instruments, whether or not the recourse of the lender is to all of the Company’s assets or only
to a portion thereof, (3) all of the Company’s obligations as lessee under leases required to be capitalized on the balance sheet of the lessee under generally accepted accounting principles, (4) all of the Company’s obligations and other
liabilities, contingent or otherwise, under any lease or related document, including a purchase agreement, in connection with the lease of real property or improvements, or any personal property included as part of any such lease, which provides
that the Company is contractually obligated to purchase or cause a third party to purchase the leased property and thereby guarantee a residual value of leased property to the lessor and all of the Company’s obligations under such lease or
related document to purchase or cause a third party to purchase the leased property, whether or not such lease transaction is characterized as an operating lease or capitalized lease in accordance with generally accepted accounting principles, (5)
all of the Company’s obligations under interest rate and currency swaps, caps, floors, collars, hedge agreements, forward contracts, or similar agreements or arrangements, (6) all of the Company’s obligations with respect to letters of
credit, bank guarantees, bankers’ acceptances and similar facilities, including related reimbursement obligations, (7) all of the Company’s obligations issued or assumed as the deferred purchase price of property or services (but excluding
trade accounts payable and accrued liabilities arising in the ordinary course of business), (8) all of the Company’s obligations of the type referred to in clauses (1) through (7) above of another Person and all dividends of another Person, the
payment of which, in either case, the Company has assumed or guaranteed or for which the Company is responsible or liable, directly or indirectly, jointly or severally, as obligor, guarantor or otherwise or which is secured by a lien on the
Company’s property and (9) renewals, extensions, modifications, replacements, restatements and refundings of, or any indebtedness or obligation issued in exchange for, any such indebtedness or obligation described in clauses (1) through (8) of
this definition;
provided
,
however
, that Senior Debt shall not include (a) the Securities, (b) the Existing Pari Passu Notes or the Existing Subordinated Notes or (c) any indebtedness or obligation if the terms of such indebtedness or
obligation (or the terms of the instrument under which such indebtedness or obligation is issued) expressly provides that such indebtedness or obligation is not superior in right of payment to the Securities; and
provided
,
further
,
that Senior Debt shall not include accounts payable or other accrued liabilities or obligations incurred in the ordinary course of business in connection with the obtaining of materials or services and any indebtedness or obligation that the Company
may owe to any direct or indirect Subsidiary. For the purposes of this definition of Senior Debt under this Indenture, it is the intent of the parties hereto that the
10
Securities issued under this Indenture be “Senior Debt” (as defined under the Existing Subordinated Notes Indenture) for purposes of the Existing
Subordinated Notes Indenture and the Existing Subordinated Notes and, in furtherance thereof, the parties hereto agree that nothing contained in this Indenture or in the definition of Senior Debt under this Indenture is meant to or shall be
construed to expressly provide that the Securities issued under this Indenture are not senior or superior to the Existing Subordinated Notes.
“
Shelf Registration Statement
” has the meaning specified in the Registration Rights Agreement.
“
Significant Subsidiary
” means any Subsidiary that
would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the date hereof.
“
Special Record Date
” for the payment of any
Defaulted Interest means a date fixed by the Company pursuant to
Section 2.8
.
“
Stated Maturity
,” when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal of such
Security or such installment of interest is due and payable.
“
Subsidiary
” means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, “voting stock” means stock or other similar interests in the corporation that ordinarily has or have voting power for the election of directors or Persons performing similar functions,
whether at all times or only so long as no senior class of stock or other interests has or have such voting power by reason of any contingency.
“
Successor Security
” of any particular Security means every Security issued after, and evidencing all or a portion of the same
debt as that evidenced by, such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under
Section 2.7
in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be
deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.
“
Trading Days
” means (1) if the Common Stock is listed or admitted for trading on any national securities exchange, days on which such national securities exchange is open for business; (2) if
the Common Stock is quoted on the Nasdaq National Market or any other system of automated dissemination of quotations of securities prices, days on which trades may be effected through such system; or (3) if the Common Stock is not listed or
admitted for trading on any national securities exchange or quoted on the Nasdaq National Market or any other system of automated dissemination of quotation of securities prices, days on which the Common Stock is traded regular way in the
over-the-counter market and for which a closing bid and a closing asked price for the Common Stock are available.
11
“
Trust Indenture Act
” means the Trust Indenture Act of 1939 as in force at the
date as of which this instrument was executed;
provided
,
however
, that in the event the Trust Indenture Act of 1939 is amended after such date, “Trust Indenture Act” means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
“
Trustee
” means the Person named as the “Trustee” in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and
thereafter “Trustee” shall mean such successor Trustee.
“
United States
” means the United States of America (including the several States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction (its
“possessions” including Puerto Rico, the United States Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands).
“
Vice President
,” when used with respect to the Company, means any vice president, whether or not designated by a number or a word
or words added before or after the title “vice president.”
SECTION 1.2
Compliance Certificates and Opinions
.
Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers’ Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and, if required by the Trust Indenture Act, an Opinion of Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application
or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (including certificates provided for in
Section 8.8
) shall
include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate
or opinion are based;
(c) a statement that, in the opinion of
such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such individual, such
condition or covenant has been complied with; provided, however, with respect to matters of fact, an Opinion of Counsel may rely on an Officers’ Certificate or certificates of public officials.
12
SECTION 1.3
Form of Documents Delivered to the Trustee
.
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such certificate or opinion is based are erroneous.
Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company or any other Person stating that the information with
respect to such factual matters is in the possession of the Company or such other Person, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters
are erroneous.
Where any Person is required to make, give or
execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
SECTION 1.4
Acts of Holders of Securities
.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given or taken by Holders of Securities may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such Holders in person or by an agent or proxy duly appointed in writing by such Holders. Such action shall become effective when such instrument or instruments is delivered to the Trustee
and, where it is hereby expressly required, to the Company. The Trustee shall promptly deliver to the Company copies of all such instruments delivered to the Trustee. Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the “
Act
” of the Holders of Securities signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent or proxy, or of
the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and (subject to
Section 5.1
) conclusive in favor of the Trustee and the Company if made in the manner provided in this
Section 1.4
.
(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 him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority.
13
(c) The principal amount and serial number of any Registered Security held by any Person, and the date of
his holding the same, shall be proved by the Security Register.
(d) The fact and date of execution of any such instrument or writing and the authority of the Person executing the same may also be proved in any other manner that the Trustee deems sufficient; and the Trustee may in any instance require
further proof with respect to any of the matters referred to in this
Section 1.4
.
(e) The Company may set any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote
on any action, authorized or permitted by this Indenture to be given or taken by Holders. Promptly and in any case not later than ten days after setting a record date, the Company shall notify the Trustee and the Holders of such record date. If not
set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the thirtieth day (or, if
later, the date of the most recent list of Holders required to be provided pursuant to
Section 13.1
) prior to such first solicitation or vote, as the case may be. With regard to any record date, the Holders on such date (or their duly
appointed agents or proxies), and only such Persons, shall be entitled to give or take, or vote on, the relevant action, whether or not such Holders remain Holders after such record date. Notwithstanding the foregoing, the Company shall not set a
record date for, and the provisions of this paragraph shall not apply with respect to, any notice, declaration or direction referred to in the next paragraph.
Upon receipt by the Trustee from any Holder of (1) any notice of default or breach referred to in
Section 4.1(d)
, if such default or breach has
occurred and is continuing and the Trustee shall not have given such a notice to the Company, (2) any declaration of acceleration referred to in
Section 4.2
, if an Event of Default has occurred and is continuing and the Trustee shall not have
given such a declaration to the Company, or (3) any direction referred to in
Section 4.12
, if the Trustee shall not have taken the action specified in such direction, then, with respect to clauses (2) and (3), a record date shall
automatically and without any action by the Company or the Trustee be set for determining the Holders entitled to join in such declaration or direction, which record date shall be the close of business on the tenth day (or, if such day is not a
Business Day, the next succeeding Business Day) following the day on which the Trustee receives such declaration or direction, and, with respect to clause (1), the Trustee may set any day as a record date for the purpose of determining the Holders
entitled to join in such notice of default. Promptly after such receipt by the Trustee of any such declaration or direction referred to in clause (2) or (3), and promptly after setting any record date with respect to clause (1), and as soon as
practicable thereafter, the Trustee shall notify the Company and the Holders of any such record date so fixed. The Holders on such record date (or their duly appointed agents or proxies), and only such Persons, shall be entitled to join in such
notice, declaration or direction, whether or not such Holders remain Holders after such record date;
provided
,
however
, that, unless such notice, declaration or direction shall have become effective by virtue of Holders of the
requisite principal amount of Securities on such record date (or their duly appointed agents or proxies) having joined therein on or prior to the ninetieth day after such record date, such notice, declaration or direction shall automatically and
without any action by any Person be cancelled
14
and of no further effect. Nothing in this paragraph shall be construed to prevent a Holder (or a duly appointed agent or proxy thereof) from giving, before
or after the expiration of such 90-day period, a notice, declaration or direction contrary to or different from, or, after the expiration of such period, identical to, the notice, declaration or direction to which such record date relates, in which
event a new record date in respect thereof shall be set pursuant to this paragraph. In addition, nothing in this paragraph shall be construed to render ineffective any notice, declaration or direction of the type referred to in this paragraph given
at any time to the Trustee and the Company by Holders (or their duly appointed agents or proxies) of the requisite principal amount of Securities on the date such notice, declaration or direction is so given.
(f) Except as provided in
Sections 4.2
and
4.13
, any request,
demand, authorization, direction, notice, consent, election, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or
in exchange 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 Security.
SECTION 1.5
Notices, Etc., to Trustee and Company
.
Any request, demand, authorization, direction, notice, consent, election, waiver or other Act of Holders of Securities or other document provided or permitted by this Indenture to be made upon, given or furnished to,
or filed with,
(a) the Trustee by any Holder of Securities or
by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee and received at the Corporate Trust Office, Attention: Corporate Trust Services, and shall be deemed given when
received,
(b) the Company by the Trustee or by any Holder of
Securities shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing, mailed, first-class postage prepaid, or telecopied and confirmed by mail, first-class postage prepaid, or delivered by hand or
overnight courier, addressed to the Company at 501 Elliott Avenue West, Suite 400, Seattle, Washington 98119, Attention: Louis A. Bianco (telecopy no.: (206) 284-6206), or at any other address previously furnished in writing to the Trustee by the
Company, and shall be deemed given when received.
Any request,
demand, authorization, direction, notice, consent, election or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication.
SECTION 1.6
Notice to Holders of Securities; Waiver
.
Except as otherwise expressly provided herein, where this Indenture provides for notice to Holders of Securities of any event, such notice shall be sufficiently given to Holders if in writing and mailed, first-class
postage prepaid, to each Holder of a Security affected by such
15
event, at the address of such Holder as it appears in the Security Register, not earlier than the earliest date and not later than the latest date prescribed
for the giving of such notice.
Neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular Holder of a Registered Security shall affect the sufficiency of such notice with respect to other Holders of Registered Securities. In case by reason of the suspension of regular
mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification to Holders of Registered Securities as shall be made with the approval of the Trustee, which approval shall not be
unreasonably withheld or delayed, shall constitute a sufficient notification to such Holders for every purpose hereunder.
Such notice shall be deemed to have been given when such notice is mailed.
Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders of Securities shall be filed with the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
SECTION 1.7
Effect of Headings and Table of Contents
.
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
SECTION 1.8
Successors and Assigns
.
All covenants and agreements in this Indenture by the Company and by the Trustee shall bind its successors and assigns, whether so expressed or not.
SECTION 1.9
Separability Clause
.
In case any provision in this Indenture or the Securities 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 1.10
Benefits of Indenture
.
Except as provided in the next sentence, nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns hereunder and the
Holders of Securities, any benefit or legal or equitable right, remedy or claim under this Indenture. The provisions of
Article Eleven
are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Debt.
16
SECTION 1.11
Governing Law
.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, THE UNITED STATES OF AMERICA, INCLUDING, WITHOUT LIMITATION, THE NEW YORK GENERAL OBLIGATIONS LAW §5-1401.
SECTION 1.12
Legal Holidays
.
In any case where any Interest Payment Date, Redemption Date, Repurchase Date or Stated Maturity of any Security or the last day on which a Holder of a Security has a right to convert his Security shall not be a Business Day at a Place of
Payment or Place of Conversion, as the case may be, then (notwithstanding any other provision of this Indenture or of the Securities) payment of principal of, premium, if any, or interest on, or the payment of the Repurchase Price (whether the same
is payable in cash or in shares of Common Stock) with respect to, or delivery for conversion of, such Security need not be made at such Place of Payment or Place of Conversion, as the case may be, on or by such day, but may be made on or by the next
succeeding Business Day at such Place of Payment or Place of Conversion, as the case may be, with the same force and effect as if made on the Interest Payment Date, Redemption Date or Repurchase Date, or at the Stated Maturity or by such last day
for conversion;
provided
,
however
, that in the case that payment is made on such succeeding Business Day, no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date,
Repurchase Date, Stated Maturity or last day for conversion, as the case may be.
SECTION 1.13
Conflict with Trust Indenture Act
.
If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such act to be a part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be.
Until such time as this Indenture shall be qualified under the Trust Indenture Act, this Indenture, the Company and the Trustee shall be deemed for all purposes hereof to be subject to and governed by the Trust Indenture Act to the same extent as
would be the case if this Indenture were so qualified on the date hereof.
SECTION 1.14
Counterparts
.
This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
17
ARTICLE TWO
THE
SECURITIES
SECTION 2.1
Form Generally
.
The Securities and the Trustee’s Certificate of Authentication shall be in substantially the form set forth in
Exhibit A
hereto, which Exhibit is a part of this Indenture, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any
securities exchange or the Internal Revenue Code of l986, as amended, and regulations thereunder (the “
Code
”), or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their
execution thereof. All Securities shall be issued in registered form, as opposed to bearer form, and shall sometimes be referred to as the “
Registered Securities
.”
The Securities shall be printed, lithographed, typewritten or engraved or produced by any combination of these methods on
steel engraved borders, if so required by any securities exchange upon which the Securities may be listed, or may be produced in any other manner permitted by the rules of any such securities exchange, or, if the Securities are not listed on a
securities exchange, in any other manner approved by the Company, all as determined by the officers executing such Securities, as evidenced by their execution thereof.
Upon their original issuance, Securities shall be issued in the form of one or more Global Securities without interest
coupons and shall be registered in the name of DTC, as Depositary, or its nominee and deposited with the Trustee, as custodian for DTC, for credit by DTC to the respective accounts of beneficial owners of the Securities represented thereby (or such
other accounts as they may direct). Such Global Security, together with its Successor Securities that are Global Securities, are collectively herein called the “
Restricted Global Security
.”
SECTION 2.2
Title and Terms
.
The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture is limited to U.S.$75,000,000 (or such greater amount necessary to reflect exercise of the Initial Purchasers’ over-allotment
option in compliance with the Purchase Agreement, but not in excess of U.S.$90,000,000), except for Securities authenticated and delivered in exchange for, or in lieu of, other Securities pursuant to
Section 2.5
,
2.6
,
2.7
,
7.5
,
9.8
,
10.2
or
12.3(e)
.
The
Securities shall be known and designated as the “4% Convertible Senior Subordinated Notes due 2010” of the Company. Their Stated Maturity shall be July 1, 2010 and they shall bear interest on their principal amount from June 23, 2003,
payable semiannually in arrears on January 1 and July 1 in each year, commencing January 1, 2004, at the rate of 4% per annum until the principal thereof is due and at the rate then in effect on any overdue principal
18
and, to the extent permitted by law, on any overdue interest;
provided
,
however
, that payments shall only be made on Business Days as provided
in
Section 1.12
.
The principal of, premium, if any, and
interest on the Securities shall be payable as provided in the form of Securities attached hereto as
Exhibit A
, and the Repurchase Price, whether payable in cash or in shares of Common Stock, shall be payable at such places as are identified
in the Company Notice given pursuant to
Section 12.3
(any city in which any Paying Agent is located being herein called a “
Place of Payment
”).
The Registrable Securities are entitled to the benefits of a Registration Rights Agreement as provided by the form of
Securities attached hereto as
Exhibit A
. The Securities are entitled to the payment of Liquidated Damages as provided in the Registration Rights Agreement.
The Securities shall be redeemable at the option of the Company, as provided in
Article Nine
and in the form of
Securities attached hereto as
Exhibit A
.
The Securities
shall be convertible as provided in
Article Ten
(any city in which any Conversion Agent is located being herein called a “
Place of Conversion
”).
The Securities shall be subordinated in right of payment to Senior Debt of the Company as provided in
Article Eleven
.
The Securities shall be subject to repurchase by the Company
at the option of the Holders as provided in
Article Twelve
.
SECTION 2.3
Denominations
.
The Securities shall be issuable only in registered form, without coupons, in denominations of U.S.$1,000 and integral multiples thereof.
SECTION 2.4
Execution, Authentication, Delivery and Dating
.
The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its Chief Executive Officer, its
President, one of its Vice Presidents, its Chief Financial Officer, its Treasurer or its Controller and attested by its Secretary or one of its Assistant Secretaries. Any such signature may be manual or facsimile.
Securities bearing the manual or facsimile signature of individuals who were
at any time 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 Securities or did not hold such offices at
the date of such Securities.
At any time and from time to time
after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee or to its order for authentication, together with a Company Order for the authentication and delivery of such
19
Securities, and the Trustee in accordance with such Company Order shall authenticate and make available for delivery such Securities as provided in this
Indenture and not otherwise.
Each Security shall be dated the
date of its authentication.
No Security shall be entitled to
any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature of an
authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder.
SECTION 2.5
Global Securities; Temporary Securities
.
(a)
Global Securities
(1) Each Global Security authenticated under this Indenture shall be registered in the name of the Depositary designated by the Company
for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture,
no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee
thereof unless (A) such Depositary (i) has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or (ii) has ceased to be a clearing agency registered as such under the Exchange Act or announces an
intention permanently to cease business or does in fact do so or (B) there shall have occurred and be continuing an Event of Default with respect to such Global Security.
(3) If any Global Security is to be exchanged for other Securities or cancelled in whole, it shall be
surrendered by or on behalf of the Depositary or its nominee to the Trustee, as Security Registrar, for exchange or cancellation, as provided in this
Article Two
. If any Global Security is to be exchanged for other Securities or cancelled in
part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, in each case, as provided in
Section 2.6
, then either (A) such Global Security shall be so surrendered for exchange or
cancellation, as provided in this
Article Two
, or (B) the principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or cancelled or equal to the principal amount of such other Security
to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Trustee, as Security Registrar, whereupon the Trustee, in accordance with the Applicable Procedures, shall
instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security, the Trustee shall, subject to
Section 2.6(c)
and as otherwise provided in
20
this
Article Two
, authenticate and make available for delivery any Securities issuable in exchange for such Global Security (or any portion thereof)
to or upon the order of, and registered in such names as may be directed by, the Depositary or its authorized representative. Upon the request of the Trustee in connection with the occurrence of any of the events specified in the preceding
paragraph, the Company shall promptly make available to the Trustee a reasonable supply of Securities that are not in the form of Global Securities. The Trustee shall be entitled to rely upon any order, direction or request of the Depositary or its
authorized representative which is given or made pursuant to this
Article Two
.
(4) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or
any portion thereof, whether pursuant to this
Article Two
or otherwise, shall be authenticated and delivered in the form of, and shall be, a registered Global Security, unless such Security is registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof, in which case such Registered Security shall be authenticated and delivered in definitive, fully registered form, without interest coupons.
(5) The Depositary or its nominee, as registered owner of a
Global Security, shall be the Holder of such Global Security for all purposes under the Indenture and the Registered Securities, and owners of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner’s beneficial interest in a Global Security shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Agent Members, and such
owners of beneficial interests in a Global Security shall not be considered the owners or holders thereof.
(b)
Temporary Securities
Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and make available for
delivery, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Registered Securities in lieu of which they are issued and
with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Registered Securities may determine, as evidenced by their execution of such Securities.
If temporary Securities are issued, the Company shall cause definitive
Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the
Company designated pursuant to
Section 8.2
, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and make available for delivery in
exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities.
21
SECTION 2.6
Registration, Registration of Transfer and Exchange; Restrictions on Transfer
.
(a) The Company shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office and in any other office or agency
of the Company designated pursuant to
Section 8.2
being herein sometimes collectively referred to as the “
Security Register
”) in which, subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Registered Securities and of transfers of Registered Securities. The Trustee is hereby appointed “
Security Registrar
” for the purpose of registering Registered Securities and transfers and
exchanges of Registered Securities as herein provided.
Upon
surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to
Section 8.2
for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture.
At the option of the Holder, and subject to the other provisions of this
Section 2.6
, Securities may be exchanged for other Securities of any authorized denomination and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at any such office or agency. Whenever any Securities are
so surrendered for exchange, and subject to the other provisions of this
Section 2.6
, the Company shall execute, and the Trustee shall authenticate and make available for delivery, the Securities the Holder making the exchange is entitled to
receive. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.
All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt,
subject to the other provisions of this
Section 2.6
, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.
No service charge shall be made for any registration of transfer or exchange
of Securities except as provided in
Section 2.7
, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to
Section 2.5
,
7.5
,
9.8
,
10.2
or
12.3(e)
(other than where the shares of Common Stock are to be issued or delivered in a name other than that of the Holder of the
Security) not involving any transfer and other than any stamp and other duties, if any, that may be imposed in connection with any such transfer or exchange by the United States or any political subdivision thereof or therein, which shall be paid by
the Company.
In the event of a redemption of the Securities,
the Company shall not be required (1) to register the transfer of or exchange Securities for a period of 15 days immediately preceding the
22
date notice is given identifying the serial numbers of the Securities called for such redemption or (2) to register the transfer of or exchange any Security,
or portion thereof, called for redemption.
(b)
Restricted
Securities Legends.
All Securities shall bear the applicable Restricted Securities Legend subject to the following:
(1) subject to the following clauses of this
Section 2.6(b)
, a Security or any portion thereof that is exchanged, upon transfer or
otherwise, for a Global Security or any portion thereof shall bear the Restricted Securities Legend borne by such Global Security while represented thereby;
(2) subject to the following clauses of this
Section 2.6(b)
, a new Security that is not a Global Security and is issued in exchange
for another Security (including a Global Security) or any portion thereof, upon transfer or otherwise, shall bear the Restricted Securities Legend borne by such other Security;
(3) any Securities that are sold or otherwise disposed of pursuant to an effective registration statement
under the Securities Act (including the Shelf Registration Statement), together with their Successor Securities, shall not bear a Restricted Securities Legend; the Company shall inform the Trustee in writing of the effective date of any such
registration statement registering the Securities under the Securities Act and shall notify the Trustee at any time when prospectuses may not be delivered with respect to Securities to be sold pursuant to such registration statement. The Trustee
shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the aforementioned registration statement;
(4) at any time after the Securities may be freely transferred without registration under the Securities Act or without being subject to
transfer restrictions pursuant to the Securities Act, a new Security that does not bear a Restricted Securities Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof that bears such a
legend if the Trustee has received a certificate regarding the unrestricted nature of the Securities, satisfactory to the Trustee and duly executed by the Holder of such legended Security or his attorney duly authorized in writing, and after such
date and receipt of such certificate, the Trustee shall authenticate and make available for delivery such a new Security in exchange for or in lieu of such other Security as provided in this
Article Two
;
(5) a new Security that does not bear a Restricted
Securities Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof that bears such a legend if, in the Company’s judgment, placing such a legend upon such new Security is not necessary
to ensure compliance with the registration requirements of the Securities Act, and the Trustee, at the direction of the Company, shall authenticate and make available for delivery such a new Security as provided in this
Article Two
; and
23
(6) notwithstanding the foregoing provisions of this
Section 2.6(b)
, a Successor
Security of a Security that does not bear a particular form of Restricted Securities Legend shall not bear such form of legend unless the Company has reasonable cause to believe that such Successor Security is a “restricted security”
within the meaning of Rule 144, in which case the Trustee, at the direction of the Company, shall authenticate and make available for delivery a new Security bearing a Restricted Securities Legend in exchange for such Successor Security as provided
in this
Article Two
.
(c) Neither the Trustee, the
Paying Agent nor any of their agents shall (1) have any duty to monitor compliance with or with respect to any federal or state or other securities or tax laws or (2) have any duty to obtain documentation on any transfers or exchanges other than as
specifically required hereunder.
SECTION 2.7
Mutilated, Destroyed, Lost or Stolen Securities
.
If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and make available for delivery in
exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding.
If there be delivered to the Company and to the Trustee:
(a) evidence to their satisfaction of the destruction, loss or theft of any Security, and
(b) such security or indemnity as may be satisfactory to the Company and the Trustee to save each of them and any agent of
either of them harmless,
then, in the absence of actual notice to the Company
or the Trustee that such Security has been acquired by a
bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and make available for delivery, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion, but subject to any conversion rights, may, instead of issuing a new
Security, pay such Security, upon satisfaction of the conditions set forth in the preceding paragraph.
Upon the issuance of any new Security under this
Section 2.7
, 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 (other than any stamp and other duties, if any, that may be imposed in connection therewith by the United States or any political subdivision thereof or therein, which shall be paid by the
Company) and any other expenses (including the fees and expenses of the Trustee) connected therewith.
24
Every new Security issued pursuant to this
Section 2.7
in lieu of any mutilated, destroyed, lost
or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and such new Security shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.
The provisions of this
Section 2.7
are exclusive and shall preclude (to the extent lawful) all other rights and remedies of any Holder with respect
to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.8
Payment of Interest; Interest Rights Preserved
.
Interest on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest.
Any interest on any Security that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (“
Defaulted
Interest
”) shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in
clause (a) or (b) below:
(a) The Company may elect to make
payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security, the date of the proposed payment and the Special Record Date, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as provided in this clause. The Special Record Date for the payment of such Defaulted Interest shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not less than 15 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at such Holder’s address as it appears in the Security Register, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b).
25
(b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this
Section 2.8
and
Section 2.6
, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights
to interest accrued and unpaid, and to accrue, that were carried by such other Security.
Interest on any Security that is converted in accordance with
Section 10.2
during a Record Date Period shall be payable in accordance with the provisions of
Section 10.2
.
SECTION 2.9
Persons Deemed Owners
.
Prior to due presentment of a Security 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 Security is registered as the owner of
such Security for the purpose of receiving payment of principal of, premium, if any, and (subject to
Section 2.8
) interest on such Security and for all other purposes whatsoever, whether or not such Security 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 2.10
Cancellation
.
All Securities surrendered for payment, redemption, repurchase, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee. All Securities so delivered to the
Trustee shall be cancelled promptly by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this
Section 2.10
. The Trustee shall dispose of all cancelled Securities in
accordance with applicable law and its customary practices in effect from time to time.
SECTION 2.11
Computation of Interest
.
Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months.
SECTION 2.12
CUSIP Numbers
.
The Company in issuing Securities may use “CUSIP” numbers (if then generally in use) in addition to serial numbers; the Trustee shall use such CUSIP numbers in addition to serial numbers in notices of redemption and repurchase as
a convenience to Holders;
provided
,
however
, that any such notice may state that no representation is made as to the correctness of such CUSIP numbers either as printed on the Securities or as contained in any notice of a redemption or
repurchase and that reliance may be placed only on the serial or other
26
identification numbers printed on the Securities, and any such redemption or repurchase shall not be affected by any defect in or omission of such CUSIP
numbers. The Company shall promptly notify the Trustee in writing of any change in any such CUSIP number.
ARTICLE THREE
SATISFACTION AND DISCHARGE
SECTION 3.1
Satisfaction and Discharge of Indenture
.
This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of conversion, or registration of transfer or
exchange, or replacement of Securities herein expressly provided for and any right to receive Liquidated Damages as provided in the form of Securities attached hereto as
Exhibit A
and the Company’s obligations to the Trustee pursuant to
Section 5.7
), and the Trustee, at the expense of the Company, shall execute proper instruments in form and substance satisfactory to the Trustee acknowledging satisfaction and discharge of this Indenture, when
(a) either
(1) all Securities theretofore authenticated and delivered (other than (A) Securities that have been
destroyed, lost or stolen and that have been replaced or paid as provided in
Section 2.7
and (B) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid
to the Company or discharged from such trust, as provided in
Section 8.3
) have been delivered to the Trustee for cancellation; or
(2) all such Securities not theretofore delivered to the Trustee or its agent for cancellation (other than Securities referred to in
clauses (A) and (B) of clause (a)(1) above)
(i) have become due and payable, or
(ii) will have become due and payable at their Stated Maturity within one year, or
(iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of clause (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds (immediately available to the Holders in the case of clause (i) above) an amount
sufficient to pay and discharge the entire principal, premium, if any, interest and Liquidated Damages, if any, on such Securities not theretofore delivered to the Trustee for cancellation, to the date of such deposit (in the
27
case of Securities that have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be;
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(c) the Company has delivered to
the Trustee an Officers’ Certificate stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under
Section 5.7
, the obligations of the Company to any Authenticating Agent under
Section 5.12
, the obligation of the Company to pay Liquidated Damages, the obligations of the Trustee under
Section 3.2
and the last paragraph of
Section 8.3
, if money shall have been deposited with the Trustee pursuant to clause (a)(2) of this
Section 3.1
, and the obligations of the Company and the Trustee under
Section 2.6
and
Article Ten
shall survive. Funds
held in trust pursuant to this
Section 3.1
are not subject to the provisions of
Article Eleven
.
In the event that the Company is required to pay Liquidated Damages to the Holders 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 15 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 responsibility to any Holder 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. Unless the Trustee receives a Liquidated Damages Notice within the time period specified above, the
Trustee is entitled to assume that no Liquidated Damages are due and payable.
SECTION 3.2
Application of Trust Money
.
Subject to the provisions of the last paragraph of
Section 8.3
, all money deposited with the Trustee pursuant to
Section 3.1
shall be held in trust and applied by it, in accordance with the provisions of
the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent), to the Persons entitled thereto, of the principal, premium, if any, Liquidated Damages, if any,
and interest for whose payment such money has been deposited with the Trustee.
All moneys deposited with the Trustee pursuant to
Section 3.1
(and held by it or any Paying Agent) for the payment of Securities subsequently converted shall be returned to the Company upon Company Request.
28
ARTICLE FOUR
REMEDIES
SECTION 4.1
Events of Default
.
“
Event of Default
,” wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of
Article
Eleven
or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of the principal of or premium, if any, on any
Security at its Maturity, whether or not the such payment is prohibited by the subordination provisions of this Indenture; or
(b) default in the payment of any interest if any, upon any Security when it becomes due and payable, and continuance of such default for a period of 30
days, whether or not such payment is prohibited by the subordination provisions of this Indenture; or
(c) failure by the Company to give the Company Notice in accordance with
Section 12.3
, whether or not such notice is prohibited by the
subordination provisions of this Indenture; or
(d) default in
the performance, or breach, of any covenant of the Company in this Indenture (other than a covenant a default in the performance or breach of which is specifically dealt with elsewhere in this
Section 4.1
), and continuance of such default or
breach for a period of 60 days after there has been given, by registered or certified mail, 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 Outstanding Securities, a
written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “
Notice of Default
” hereunder; or
(e) default in the payment when due of the principal of any indebtedness under any bond, debenture, note or other evidence
of indebtedness for money borrowed by the Company or any Significant Subsidiary in excess of U.S. $10,000,000, whether such indebtedness now exists or shall hereafter be created, if the indebtedness is not discharged and such default continues for a
period of 30 days or more, or if such indebtedness has been accelerated, such acceleration is not rescinded or annulled, within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or
to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or such acceleration to be
rescinded or annulled and stating that such notice is a “Notice of Default” hereunder; or
(f) the entry by a court having jurisdiction in the premises of (1) a decree or order for relief in respect of the Company or any Significant Subsidiary
in an involuntary case or
29
proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (2) a decree or order adjudging the Company
or any Significant Subsidiary a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or any Significant Subsidiary under any applicable
federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Significant Subsidiary or of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or
(g) the commencement by the Company or any Significant Subsidiary of a voluntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company or
any Significant Subsidiary in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it,
or the filing by it of a petition or answer or consent seeking reorganization or similar relief under any applicable federal or state law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Significant Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or
the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company or any Significant Subsidiary in furtherance of any such action.
SECTION 4.2
Acceleration of Maturity; Rescission and Annulment
.
If an Event of Default (other than an Event of Default specified in
Section 4.1(f)
or
4.1(g)
with respect to the Company) occurs and is
continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the principal of all the Securities to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by the Holders), and upon any such declaration, such principal and all accrued interest thereon shall become immediately due and payable. If an Event of Default specified in
Section 4.1(f)
or
4.1(g)
with respect to the Company occurs, the principal of, and accrued interest on, all the Securities shall
ipso facto
become immediately due and payable without any declaration or other Act of the Holder or any act on the part of the Trustee.
At any time after such declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this
Article Four
provided, the Holders of a majority in principal amount of the Outstanding Securities, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum sufficient to pay
(1) all overdue interest and Liquidated Damages, if any, on all Securities,
30
(2) the principal of and premium, if any, on any Securities that have become due
otherwise than by such declaration of acceleration and any interest thereon at the rate borne by the Securities,
(3) to the extent permitted by applicable law, interest upon overdue interest at the rate then in effect, and
(4) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel; and
(b) all Events of Default, other than the non-payment of the principal of, and any premium and interest on, Securities that have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 4.13
.
No rescission or annulment referred to above shall affect any subsequent default or impair any right consequent thereon.
SECTION 4.3
Collection of Indebtedness and Suits for Enforcement by Trustee
.
The Company covenants that if:
(a) default is made in the payment of any interest or Liquidated Damages on any Security when it becomes due and payable and such default continues for a
period of 30 days, or
(b) default is made in the payment of
the principal of or premium, if any, on any Security at the Maturity thereof,
the Company will upon demand of the Trustee pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal, premium, if any, Liquidated Damages, if any, and interest on
any overdue principal, premium, if any, Liquidated Damages, if any, and, to the extent permitted by applicable law, on any overdue interest at the rate then in effect, and in addition thereto, such further amount as shall be sufficient to cover the
reasonable costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel.
If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an
express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Securities and
collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated.
31
If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities by such appropriate judicial proceedings as the Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 4.4
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 relating to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or the creditors of either, the Trustee (whether or not the principal of, and any interest on, the Securities shall then be due and payable as therein expressed or by declaration or
otherwise and whether or not the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal, premium, if
any, Liquidated Damages, if any, and interest owing and unpaid in respect of the Securities and take such other actions, including participating as a member, voting or otherwise, of any official committee of creditors appointed in such matter, and
to file such other papers or documents, in each of the foregoing cases, as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and its counsel) and of the Holders of Securities allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or deliverable on any such claim and to distribute the same; and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder of Securities 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 of Securities, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel and any other amounts due the
Trustee under
Section 5.7
.
Nothing herein contained
shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Security any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder
thereof or to authorize the Trustee to vote in respect of the claim of any Holder of a Security in any such proceeding;
provided
,
however
, that the Trustee may, on behalf of such Holders, vote for the election of a trustee in
bankruptcy or similar official.
32
SECTION 4.5
Trustee May Enforce Claims without Possession of Securities
.
All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, be for the ratable benefit of the Holders of the Securities in respect of which judgment has been recovered.
SECTION 4.6
Application of Money Collected
.
Subject to
Article Eleven
, any money collected by the Trustee pursuant to this
Article Four
shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal, premium, if any, or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section
5.7
;
SECOND: To the payment of the amounts then due and
unpaid for principal of, premium, if any, Liquidated Damages, if any, or interest on, the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium, if any, Liquidated Damages, if any, and interest, respectively; and
THIRD: Any remaining amounts shall be repaid to the Company.
SECTION 4.7
Limitation on Suits
.
No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(a) such Holder has previously given written notice
to the Trustee of a continuing Event of Default;
(b) the
Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(c) such Holder or Holders have furnished to the Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and
33
(e) the Trustee has not received any direction inconsistent with such written request from the Holders of
a majority of the aggregate principal amount of the Outstanding Securities during the 60 day period referred to in (d) above;
it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all such Holders.
SECTION 4.8
Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert
.
Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of, premium, if any, and (subject to
Section 2.8
) interest on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption or repurchase, on the Redemption Date or
Repurchase Date, as the case may be), and to convert such Security in accordance with
Article Ten
, and to institute suit for the enforcement of any such payment and right to convert, and such rights shall not be impaired without the consent
of such Holder.
SECTION 4.9
Restoration of Rights and Remedies
.
If the Trustee or any Holder of a Security has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders of Securities shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and such Holders shall continue as though no such proceeding had been instituted.
SECTION 4.10
Rights and Remedies Cumulative
.
Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 2.7
, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders of Securities is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
34
SECTION 4.11
Delay or Omission Not Waiver
.
No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of
Default or any acquiescence therein. Every right and remedy given by this
Article Four
or by law to the Trustee or to the Holders of Securities may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or
(subject to the limitations contained in this Indenture) by the Holders of Securities, as the case may be.
SECTION 4.12
Control by Holders of Securities
.
The Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee,
provided
that
(a) such direction shall not be in conflict with any rule of law or with this Indenture, and
(b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction.
SECTION 4.13
Waiver of Past Defaults
.
The Holders, either (a) through the written consent of not less than a majority in principal amount of the Outstanding Securities or (b) by the adoption of a resolution, at a meeting of Holders of the Outstanding
Securities at which a quorum is present, by the Holders of at least a majority in principal amount of the Outstanding Securities represented at such meeting, may on behalf of the Holders of all the Securities waive any past default hereunder and its
consequences, except a default (1) in the payment of the principal of, premium, if any, interest, the Repurchase Price or Liquidated Damages, if any, on any Security or (2) in respect of a covenant or provision hereof that under
Article Seven
cannot be modified or amended without the consent of the Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
SECTION 4.14
Undertaking for Costs
.
All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right
or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses
35
made by such party litigant; but the provisions of this
Section 4.14
shall not apply to any suit instituted by the Company, to any suit instituted by
the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities, or to any suit instituted by any Holder of any Security for the enforcement of the
payment of the principal of, premium, if any, Liquidated Damages, if any, or interest on any Security on or after the respective Stated Maturity or Maturities expressed in such Security (or, in the case of redemption or repurchase, on or after the
Redemption Date or Repurchase Date, as the case may be) or for the enforcement of the right to convert any Security in accordance with
Article Ten
.
SECTION 4.15
Waiver of Stay, Usury or Extension 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, usury or extension law wherever enacted, now or at any time hereafter in force, that 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 by reason of such law 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 FIVE
THE TRUSTEE
SECTION 5.1
Certain Duties and Responsibilities
.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions that 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 but not to verify the contents thereof.
(b) In case an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
36
(c) 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
(1) this paragraph (c) shall not be construed to limit the effect of paragraph (a) of this
Section 5.1
;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;
(3) 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 of a majority in principal amount of the Outstanding Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture; and
(4) 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 it shall have
reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this
Section 5.1
.
SECTION 5.2
Notice of Defaults
.
Within 90 days after the occurrence of any default hereunder as to which a Responsible Officer of the Trustee has actually received written notice, the Trustee shall give to all Holders of Securities, in the manner
provided in
Section 1.6
, notice of such default, unless such default shall have been cured or waived;
provided
,
however
, that, except in the case of a default in the payment of the principal of, premium, if any, or interest on
any Security, 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 Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the Holders. For the purpose of this
Section 5.2
, the term “default” means any event that is, or after notice or lapse of time or both would become, an Event of Default.
SECTION 5.3
Certain Rights of Trustee
.
Subject to the provisions of
Section 5.1
:
(a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officers’ Certificate, other certificate, statement, instrument, opinion,
37
report, notice, request, direction, consent, order, bond, debenture, note, coupon, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors shall be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this
Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith
on its part, rely upon an Officers’ Certificate;
(d) the
Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and
in reliance thereon;
(e) the Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon, other evidence of indebtedness or other paper or document, but the Trustee may make such further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and
(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, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.
SECTION 5.4
Not Responsible for Recitals or Issuance of Securities
.
The recitals contained herein and in the Securities (except the Trustee’s certificates of authentication) shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture, of the Securities or of the Common Stock issuable upon the conversion of the
Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof.
38
SECTION 5.5
May Hold Securities, Act as Trustee under Other Indentures
.
The Trustee, any Authenticating Agent, any Paying Agent, any Conversion Agent or any other agent of the Company or the Trustee, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Conversion Agent or such other agent.
The Trustee may become and act as trustee under other indentures under which
other securities, or certificates of interest or participation in other securities, of the Company are outstanding in the same manner as if it were not Trustee hereunder.
SECTION 5.6
Money Held in Trust
.
Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder,
except as otherwise agreed in writing with the Company.
SECTION 5.7
Compensation and Reimbursement
.
The Company agrees
(a) to pay
to the Trustee from time to time such reasonable compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and
(c) to indemnify the Trustee (and its directors, officers, employees and agents) for, and to hold it harmless against, any and all loss, damage, claim,
liability or expense, including taxes (other than taxes based on the income of the Trustee), incurred without negligence, bad faith or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this
trust, including the reasonable costs, expenses and reasonable attorneys’ fees of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in
Section 4.1(f)
or
Section 4.1(g)
with respect to the Company, the expenses (including the reasonable charges of its counsel) and the compensation for the services are intended to constitute expenses of the
administration under any applicable federal or state bankruptcy, insolvency or other similar law.
39
The Trustee shall have a lien prior to the Securities as to all property and funds held by it hereunder
for any amount owing it or any predecessor Trustee pursuant to this
Section 5.7
, except with respect to funds held in trust for the benefit of the Holders of particular Securities.
The provisions of this
Section 5.7
shall survive the termination of this Indenture or the earlier resignation or
removal of the Trustee.
SECTION 5.8
Corporate Trustee Required; Eligibility
.
There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such, having a
combined capital and surplus (or for such purposes, the combined capital and surplus of any parent holding company) of at least U.S. $25,000,000, subject to supervision or examination by federal or state authority, in good standing and having an
established place of business or agency in the Borough of Manhattan, The City of New York. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then
for the purposes of this
Section 5.8
, 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. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this
Section 5.8
, it shall resign immediately in the manner and with the effect hereinafter specified in this Article and a successor shall be appointed pursuant to
Section
5.9
.
SECTION 5.9
Resignation and Removal; Appointment of Successor
.
(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the applicable requirements of
Section 5.10
.
(b) The Trustee may resign at any time by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by
Section 5.10
shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee or the Company may petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of
the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and the Company. If the instrument of acceptance by a successor Trustee required by
Section 5.10
shall not have been delivered to the
Trustee within 30 days after the giving of such notice of removal, the removed Trustee or the Company may petition any court of competent jurisdiction for the appointment of a successor Trustee.
40
(d) If at any time:
(1) the Trustee shall cease to be eligible under
Section 5.8
and shall fail to resign after written
request therefor by the Company or by any Holder of a Security who has been a
bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, (i) in any such case the Company may remove the Trustee, or (ii) in the case of clause (d)(1) above only and subject to
Section
4.14
, any Holder of a Security who has been a
bona fide
Holder of a Security 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.
(e) If the Trustee
shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company shall promptly appoint a successor Trustee and shall comply with the applicable requirements of this
Section
5.9
and
Section 5.10
. If, within one year after such resignation, removal or incapability, or occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of
Section 5.10
, become the successor
Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders of Securities and accepted appointment in the manner required by this
Section 5.9
and
Section 5.10
, any Holder of a Security who has been a
bona fide
Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment
of a successor Trustee.
(f) The successor Trustee shall give
notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders of Securities in the manner provided in
Section 1.6
. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
SECTION 5.10
Acceptance of Appointment by Successor
.
Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the
retiring Trustee. Such retiring Trustee shall, upon payment of its charges, promptly execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign,
41
transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be
eligible under this Article.
SECTION 5.11
Merger, Conversion, Consolidation or Succession to Business
.
Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee (including the administration of the trust created by this Indenture), shall
be the successor of the Trustee hereunder (
provided
such corporation shall be otherwise eligible under this Article), without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any
Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated
with the same effect as if such successor Trustee had itself authenticated such Securities.
SECTION 5.12
Authenticating Agents
.
The Trustee may, with the consent of the Company, appoint an Authenticating Agent or Agents acceptable to the Company with respect to the Securities, which shall be authorized to act on behalf of the Trustee to
authenticate Securities issued upon exchange or substitution pursuant to this Indenture.
Securities authenticated by an Authenticating Agent shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder, and every
reference in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee’s certificate of authentication shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating
Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be subject to acceptance by the Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent and subject to supervision or examination by government or other fiscal authority. If at any
time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this
Section 5.12
, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this
Section 5.12
.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding
42
to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent (
provided
such
corporation shall be otherwise eligible under this
Section 5.12
), without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof 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 such Authenticating Agent shall cease to be eligible in accordance with the provisions of this
Section 5.12
, the Trustee may appoint a successor Authenticating Agent, which shall be subject to
acceptance by the Company. Any successor Authenticating Agent, upon acceptance of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this
Section 5.12
.
The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this
Section 5.12
.
If an Authenticating Agent is appointed with respect to the
Securities pursuant to this
Section 5.12
, the Securities may have endorsed thereon, in addition to or in lieu of the Trustee’s certification of authentication, an alternative certificate of authentication in the following form:
This is one of the Securities referred to in the
within-mentioned Indenture.
|
|
|
By: U.S. Bank National Association,
as Authenticating Agent
|
|
|
|
|
|
|
|
By
|
|
|
|
|
|
|
|
Authorized Signature
|
SECTION 5.13
Disqualification; Conflicting Interests
.
If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest
or resign as Trustee hereunder, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.
43
SECTION 5.14
Preferential Collection of Claims Against Company
.
If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor).
ARTICLE SIX
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 6.1
Company May Consolidate, Etc., Only on Certain Terms
.
Without the consent or affirmative vote of the Holders of each Outstanding Security, the Company shall not consolidate with or merge into any other Person
or convey, transfer, sell or lease its properties and assets substantially as an entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into it or convey, transfer, sell or lease such Person’s
properties and assets substantially as an entirety to it, unless:
(a) the Company is the surviving person or the Person formed by such consolidation or into which the Company is merged, or the Person to which the Company’s properties and assets are conveyed, transferred, sold or leased, shall be (1)
a corporation, limited liability company, partnership or trust organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia or (2) organized under the laws of a jurisdiction outside the
United States of America and have common stock or American Depositary Shares representing such common stock traded on a national securities exchange in the United States, including The Nasdaq Stock Market, Inc., and, in each case, if other than the
Company, shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of, premium, if any, Liquidated Damages, if any, and
interest on all of the Securities as applicable, and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed;
(b) immediately after giving effect to such transaction, no Event of Default, and no event that, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be continuing; and
(c) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with, together with any documents required
under
Section 7.3
.
44
SECTION 6.2
Successor Substituted
.
Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of all or substantially all the properties and assets of the Company in accordance with
Section 6.1
, the successor Person formed by such consolidation or into which the Company is merged or 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 Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this
Indenture and the Securities.
ARTICLE SEVEN
SUPPLEMENTAL INDENTURES
SECTION 7.1
Supplemental Indentures without Consent of Holders of Securities
.
Without the consent of any Holders of Securities, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time,
may enter into one or more indentures supplemental hereto for any of the following purposes:
(a) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants and obligations of the Company herein and in the Securities as permitted by this Indenture; or
(b) to add to the covenants of the Company for the benefit of
the Holders of Securities or to surrender any right or power herein conferred upon the Company; or
(c) to secure the Securities; or
(d) to make provision with respect to the conversion rights of Holders of Securities pursuant to
Section 10.11
; or
(e) to make any changes or modifications to this Indenture necessary in
connection with the registration of any Registrable Securities under the Securities Act as contemplated by the Registration Rights Agreement (
provided
such action pursuant to this clause (e) shall not, in the judgment of the Company,
adversely affect the interests of the Holders of Securities in any material respect); or
(f) to comply with the requirements of the Trust Indenture Act or the rules and regulations of the Commission thereunder in order to effect or maintain the qualification of this Indenture under the Trust Indenture
Act, as contemplated by this Indenture or otherwise; or
(g) to
evidence and provide for the acceptance of appointment hereunder by a successor Trustee; or
45
(h) to cure any ambiguity, to correct or supplement any provision herein that may be inconsistent with
any other provision herein or that is otherwise defective, or to make any other provisions with respect to matters or questions arising under this Indenture as the Company and the Trustee may deem necessary or desirable (
provided
such action
pursuant to this clause (h) shall not, in the judgment of the Company, adversely affect the interests of the Holders of Securities in any material respect).
Upon Company Request accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and subject to and upon receipt by
the Trustee of the documents described in
Section 7.3
hereof, the Trustee shall join with the Company in the execution of any supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained.
SECTION 7.2
Supplemental Indentures with Consent of Holders of Securities
.
With either (a) the written consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by the Act of said
Holders delivered to the Company and the Trustee, or (b) by the adoption of a resolution, at a meeting of Holders of the Outstanding Securities at which a quorum is present, by the Holders of a majority in principal amount of the Outstanding
Securities represented at such meeting, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities under this Indenture;
provided
,
however
, that no such supplemental indenture shall, without the consent or
affirmative vote of the Holder of each Outstanding Security affected thereby,
(l) change the Stated Maturity of the principal of, or any installment of interest on, any Security, or reduce the principal amount, any premium or the rate of interest payable thereon, or change the place at which or
the coin or currency in which any Security or the interest or any premium thereon or any other amount in respect thereof is payable; or
(2) reduce the amount payable on any Security upon redemption at the Company’s option; or
(3) impair the right to institute suit for the enforcement
of any payment in respect of any Security on or after the Stated Maturity thereof (or, in the case of redemption or any repurchase, on or after the Redemption Date or Repurchase Date, as the case may be); or
(4) except as permitted by
Section 10.11
, adversely
affect the right to convert any Security as provided in
Article Ten
; or
46
(5) modify the provisions of this Indenture with respect to the subordination of the
Securities in a manner adverse to the Holders of any Securities; or
(6) reduce the percentage in principal amount of the Outstanding Securities the consent of whose Holders is required for any supplemental indenture to modify or amend any provision of this Indenture or the consent of
whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or
(7) modify any of the provisions of this
Section 7.2
except to increase any percentage contained
herein or therein or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; or
(8) amend or modify the provisions of
Article Twelve
in a manner adverse to the Holders after the Holder’s right to require the Company to repurchase the Securities upon a Change in Control arises.
It shall not be necessary for any Act of Holders of Securities under this
Section 7.2
to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance thereof.
The quorum at any meeting called to adopt a resolution shall be Holders representing a majority in aggregate principal amount of Securities at the time Outstanding.
SECTION 7.3
Execution of Supplemental Indentures
.
In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to
Sections 5.1
and
5.3
) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and that such
supplemental indenture has been duly authorized, executed and delivered by the Company and constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture that affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.
SECTION 7.4
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 Securities theretofore or thereafter authenticated and delivered hereunder appertaining thereto shall be bound thereby.
47
SECTION 7.5
Reference in Securities to Supplemental Indentures
.
Securities 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 Securities so modified as to conform, in the opinion of the Company and the Trustee, to any
such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities.
SECTION 7.6
Notice of Supplemental Indentures
.
Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of
Section 7.2
, the Company shall give notice to all Holders of Securities of such fact,
setting forth in general terms the substance of such supplemental indenture, in the manner provided in
Section 1.6
. Any failure of the Company to give such notice, or any defect therein, shall not in any way impair or affect the validity of
any such supplemental indenture.
ARTICLE EIGHT
COVENANTS
SECTION 8.1
Payment of Principal, Premium and Interest
.
The Company covenants and agrees that it will duly and punctually pay the principal of and premium, if any, and interest on the Securities in accordance
with the terms of the Securities and this Indenture. The Company shall deposit or cause to be deposited with the Trustee, no later than 12:00 noon Eastern time on the date of the Stated Maturity of any Security or no later than 12:00 noon Eastern
time on the due date for any installment of interest, all payments so due, which payments shall be in immediately available funds on the date of such Stated Maturity or due date, as the case may be.
SECTION 8.2
Maintenance of Offices or Agencies
.
The Company hereby appoints the Corporate Trust Office or such other office or agency of the Trustee as its agent in the Borough of Manhattan, The City of New York, where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or exchange, where Securities may be surrendered for conversion, and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be
served.
The Company may at any time and from time to time vary
or terminate the appointment of any such agent or appoint any additional agents for any or all of such purposes;
provided
,
however
, that until all of the Securities have been delivered to the Trustee for cancellation, or moneys
sufficient to pay the principal of, premium, if any, and interest on the Securities have
48
been made available for payment and either paid or returned to the Company pursuant to the provisions of
Section 8.3
, the Company shall maintain in
the Borough of Manhattan, The City of New York, an office or agency where Securities may be presented or surrendered for payment and conversion, where Securities may be surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company shall give prompt written notice to the Trustee, and notice to the Holders in accordance with
Section 1.6
, of the appointment or
termination of any such agents and of the location and any change in the location of any such office or agency.
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,
presentations and surrenders may be made and notices and demands may be served on the Corporate Trust Office.
SECTION 8.3
Money for Security Payments to Be Held in Trust
.
If the Company will act as its own Paying Agent, it shall, on or before each due date of the principal of, premium, if any, or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal, premium, if any, or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as
herein provided, and the Company will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will, no later than 12:00 noon Eastern time on each due date of the principal of, premium,
if any, or interest on any Securities, deposit with the Trustee a sum sufficient to pay the principal, premium, if any, or interest so becoming due, such sum to be held for the benefit of the Persons entitled to such principal, premium, if any, or
interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of any failure so to act.
The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this
Section 8.3
, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of, premium, if any, or interest on Securities for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal, premium,
if any, or interest; and
(c) at any time during the
continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent,
49
such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment
by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.
Anything contained herein to the contrary notwithstanding, any money held by the Trustee or any Paying Agent in trust for the payment and discharge of the
principal of, premium, if any, Liquidated Damages, if any, or interest on any Security that remains unclaimed for two years after the date when each payment of such principal, premium, Liquidated Damages, if any, or interest has become payable
shall, upon the request of the Company, be repaid by the Trustee to the Company as its absolute property free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Holders shall look only to the Company
for the payment of the principal, premium or interest on such Security. The Trustee shall not be liable to the Company or any Holder for interest on funds held by it for the payment and discharge of the principal, premium or interest on any of the
Securities to any Holder. The Company shall not be liable for any interest on the sums paid to it pursuant to this paragraph and shall not be regarded as a trustee of such money.
SECTION 8.4
Existence
.
Subject to
Article Six
, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises;
provided
,
however
, that
the Company shall not be required to preserve any such right or franchise if the Board of Directors 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 Holders.
SECTION 8.5
Statement by Officers as to Default
.
The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers’ Certificate (one of the signers of which shall be the
Company’s principal executive, principal financial or principal accounting officer), 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 have
knowledge.
The Company will deliver to the Trustee, forthwith
upon becoming aware of any default in the performance or observance of any covenant, agreement or condition contained in this Indenture, or any Event of Default, an Officers’ Certificate specifying with particularity such default or Event of
Default and further stating what action the Company has taken, is taking or proposes to take with respect thereto.
Any notice required to be given under this
Section 8.5
shall be delivered to the Trustee at the Corporate Trust Office.
50
SECTION 8.6
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 of a Security or the holder of shares of Common Stock issued upon conversion thereof, the Company
will promptly furnish or cause to be furnished Rule 144A Information to such Holder of Securities or such holder of shares of Common Stock issued upon conversion of Securities, or to a prospective purchaser of any such security designated by any
such Holder or 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 (or any successor provision thereto) in connection with the resale of any such security;
provided
,
however
, that the Company shall not be required to furnish such information in connection with any request made on or after the date that is two years from the later of (a) the date such a security (or any such predecessor
security) was last acquired from the Company or (b) the date such a security (or any such predecessor security) was last acquired from an “affiliate” of the Company within the meaning of Rule 144 under the Securities Act (or any successor
provision thereto). “
Rule 144A Information
” shall be such information as is specified pursuant to Rule 144A(d) (4) under the Securities Act (or any successor provision thereto).
ARTICLE NINE
REDEMPTION
OF SECURITIES
SECTION 9.1
Right of Redemption
.
The Securities may be redeemed in accordance with the provisions of the form of Securities attached hereto as
Exhibit A
.
SECTION 9.2
Applicability of Article
.
Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of the Securities or this Indenture, shall be made in accordance with such provision and this
Article
Nine
.
SECTION 9.3
Election to Redeem; Notice to Trustee
.
In case of any redemption at the election of the Company of any of the Securities, the Company shall, at least 35 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory
to the Trustee), notify the Trustee in writing of such Redemption Date.
SECTION 9.4
Selection by Trustee of Securities to Be Redeemed
.
If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected by the Trustee at least three Business Days
prior to the date that the notice
51
described in
Section 9.5
is given from the Outstanding Securities not previously called for redemption by lot or such method as the Trustee may deem
fair and appropriate.
If any Registered Security selected for
partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for
redemption. Securities that have been converted during a selection of Securities to be redeemed may be treated by the Trustee as Outstanding for the purpose of such selection.
The Trustee shall promptly notify the Company and each Security Registrar in writing of the Securities selected for
redemption and, in the case of any Securities selected for partial redemption, the principal amount and certificate numbers thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities that has been or is to be redeemed.
SECTION 9.5
Notice of Redemption
.
Notice of redemption shall be given in the manner provided in
Section 1.6
to the Holders of Securities to be redeemed not less than 30 nor more than 60 days prior to the Redemption Date, and such notice shall
be irrevocable.
All notices of redemption shall identify the
Securities to be redeemed (including CUSIP numbers) and shall state:
(a) the Redemption Date,
(b) the Redemption Price,
and accrued interest, if any,
(c) if less than all Outstanding
Securities are to be redeemed, the aggregate principal amount of Securities to be redeemed,
(d) that on the Redemption Date the Redemption Price, and accrued interest, if any, will become due and payable upon each such Security to be redeemed, and that interest thereon shall cease to accrue on and after said
date,
(e) the Conversion Rate, the date on which the right to
convert the Securities to be redeemed will terminate and the places where such Securities may be surrendered for conversion, and
(f) the place or places where such Securities are to be surrendered for payment of the Redemption Price and accrued interest, if any.
52
Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the
Company or, at the Company’s written request, by the Trustee in the name of and at the expense of the Company. Notice of redemption of Securities to be redeemed at the election of the Company received by the Trustee shall be given by the
Trustee to each Paying Agent in the name of and at the expense of the Company.
SECTION 9.6
Deposit of Redemption Price
.
Not less than one Business Day prior to any Redemption Date, the Company shall deposit with the Trustee (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in
Section
8.3
) an amount of money (which shall be in immediately available funds on such Redemption Date) sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the
Securities that are to be redeemed on that date other than any Securities called for redemption on that date that have been converted prior to the date of such deposit.
If any Security called for redemption is converted, any money deposited with the Trustee or so segregated and held in trust
for the redemption of such Security shall (subject to any right of the Holder or such Security or any Predecessor Security to receive interest as provided in the last paragraph of
Section 2.8
) be paid to the Company on Company Request or, if
then held by the Company, shall be discharged from such trust.
SECTION 9.7
Securities Payable on Redemption Date
.
Notice of redemption having been given as aforesaid, the Securities to be so redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date
(unless the Company shall default in the payment of the Redemption Price, including accrued interest) such Securities shall cease to bear interest. Upon surrender of any Security for redemption in accordance with said notice, such Security shall be
paid by the Company at the Redemption Price together with accrued and unpaid interest to the Redemption Date;
provided
,
however
, that installments of interest on Securities whose Stated Maturity is on or prior to the Redemption Date
shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Record Date according to their terms and the provisions of
Section 2.8
.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal amount of, premium, if any, and, to the extent permitted by applicable law, accrued interest on such Security shall, until paid, bear interest from the Redemption Date at the rate then in effect, and such
Security shall remain convertible until the principal of such Security (or portion thereof, as the case may be) shall have been paid or duly provided for.
SECTION 9.8
Securities Redeemed in Part
.
Any Security that is to be redeemed only in part shall be surrendered at an office or agency of the Company designated for that purpose pursuant to
Section 8.2
(with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in
53
form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security without service charge, a new Registered Security or Securities, of any authorized denomination as requested by such Holder, in aggregate
principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered.
SECTION 9.9
Conversion Arrangement on Call for Redemption
.
In connection with any redemption of the Securities, the Company may arrange for the purchase and conversion of any Securities by an agreement with one or
more investment bankers or other purchasers (the “
Purchasers
”) to purchase such Securities by paying to the Trustee in trust for the Holders, on or before the Redemption Date, an amount not less than the applicable Redemption
Price, together with interest accrued and unpaid to the Redemption Date, of such Securities. Notwithstanding anything to the contrary contained in this
Article Nine
, the obligation of the Company to pay the Redemption Price, together with
interest accrued and unpaid to the Redemption Date, 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 shall be filed with the Trustee prior
to the close of business on the second Business Day immediately prior to the Redemption Date), any Securities called for redemption that are 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, and consistent with any agreement or agreements with such Purchasers, to be acquired by such Purchasers from such Holders and (notwithstanding anything to the contrary contained in this
Article Nine
)
surrendered by such Purchasers for conversion, all as of immediately prior to the close of business on the Redemption Date (and the right to convert any such Securities 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 by the Purchasers to the Holders in the same manner as it would monies deposited with it by the Company for the redemption of Securities.
Without the Trustee’s prior written consent, no arrangement between the Company and such Purchasers for the purchase and conversion of any Securities shall increase or otherwise affect any of the powers, duties, responsibilities or obligations
of the Trustee as set forth in this Indenture, and the Company agrees to indemnify the Trustee from, and hold it harmless against, any loss, liability or expense arising out of or in connection with any such arrangement for the purchase and
conversion of any Securities between the Company and such Purchasers, including the costs and expenses, including reasonable legal fees, incurred by the Trustee in the defense of any claim or liability arising out of or in connection with the
exercise or performance of any of its powers, duties, responsibilities or obligations under this Indenture.
54
ARTICLE TEN
CONVERSION
OF SECURITIES
SECTION 10.1
Conversion Privilege and Conversion Rate
.
Subject to and upon compliance with the provisions of this Article, at the option of the Holder thereof, any Security or any portion of the principal
amount thereof that is U.S.$l,000 or an integral multiple of U.S.$1,000 may be converted into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100th of a share) of Common Stock of the Company at the Conversion
Rate, determined as hereinafter provided, in effect at the time of conversion. Such conversion right shall commence upon the original issuance of the Securities and expire at the close of business on July 1, 2010, unless the Security has been
previously redeemed or repurchased, subject, in the case of conversion of any Global Security, to any Applicable Procedures. In case a Security or portion thereof is called for redemption at the election of the Company or the Holder thereof
exercises his right to require the Company to repurchase the Security, such conversion right in respect of the Security, or portion thereof so called, shall expire at the close of business on the Business Day immediately preceding the Redemption
Date or the Repurchase Date, as the case may be, unless the Company defaults in making the payment due upon redemption or repurchase, as the case may be (in each case subject, as aforesaid, to any Applicable Procedures with respect to any Global
Security).
The rate at which shares of Common Stock shall be
delivered upon conversion (herein called the “
Conversion Rate
”) shall be initially 74.0741 shares of Common Stock for each U.S.$l,000 principal amount of Securities. The Conversion Rate shall be adjusted in certain instances
as provided in this
Article Ten
.
SECTION 10.2
Exercise of Conversion Privilege
.
In order to exercise the conversion privilege, the Holder of any Security to be converted shall surrender such Security, duly endorsed or assigned to the Company or in blank, at any office or agency of the Company
maintained for that purpose pursuant to
Section 8.2
, accompanied by a duly signed and completed conversion notice substantially in the form attached hereto as
Exhibit C
stating that the Holder elects to convert such Security or, if
less than the entire principal amount thereof is to be converted, the portion thereof to be converted. Each Security surrendered for conversion (in whole or in part) during the period from the close of business on any Regular Record Date next
preceding any Interest Payment Date to the opening of business on such Interest Payment Date shall (except in the case of any Security or portion thereof that has been called for redemption on a Redemption Date, or is to be repurchased on a
Repurchase Date, with the consequence that the conversion right of such Security would terminate between such Regular Record Date and the close of business on such Interest Payment Date) be accompanied by payment in New York Clearing House funds or
other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of such Security (or part thereof, as the case may be) being surrendered for conversion. The interest so payable
on such Interest Payment Date, with respect to any Security (or portion thereof, if applicable) that is surrendered for conversion during the period from the
55
close of business on any Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date, shall be paid to the
Holder of such Security as of such Regular Record Date. Interest payable in respect of any Security surrendered for conversion on or after an Interest Payment Date shall be paid to the Holder of such Security as of the next preceding Regular Record
Date, notwithstanding the exercise of the right of conversion. Except as provided in this paragraph and subject to the last paragraph of
Section 2.8
, no cash payment or adjustment shall be made upon any conversion on account of any interest
accrued from the Interest Payment Date next preceding the conversion date, in respect of any Security (or part thereof, as the case may be) surrendered for conversion, or on account of any dividends on the Common Stock issued upon conversion. The
Company’s delivery to the Holder of the number of shares of Common Stock (and cash in lieu of fractions thereof, as provided in this Indenture) into which a Security is convertible and any rights and warrants pursuant to
Section 10.4(m)
will be deemed to satisfy the Company’s obligation to pay the principal amount of the Security.
Securities shall be deemed to have been converted on the day of surrender of such Securities for conversion in accordance with the foregoing provisions,
and at such time the rights of the Holders of such Securities as Holders shall cease, and the Person or Persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such
Common Stock at such time. As promptly as practicable on or after the conversion date, the Company shall issue and deliver to the Trustee, for delivery to the Holder, a certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a share, as provided in
Section 10.3
.
All shares of Common Stock delivered upon such conversion of Securities shall bear restrictive legends substantially in the form of the legends required
to be set forth on the Securities pursuant to
Section 2.6
and shall be subject to the restrictions on transfer provided in such legends. Neither the Trustee nor any agent maintained for the purpose of such conversion shall have any
responsibility for the inclusion or content of any such restrictive legends on such Common Stock;
provided
,
however
, that the Trustee or any agent maintained for the purpose of such conversion shall have provided to the Company or to
the Company’s transfer agent for such Common Stock, prior to or concurrently with a request to the Company to deliver such Common Stock, written notice that the Securities delivered for conversion are Securities.
In the case of any Security that is converted in part only, upon such
conversion 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 Registered Security or Securities of authorized denominations in an aggregate
principal amount equal to the unconverted portion of the principal amount of such Security. A Security may be converted in part, but only if the principal amount of such Security to be converted is any integral multiple of U.S.$1,000 and the
principal amount of such security to remain Outstanding after such conversion is equal to U.S.$l,000 or any integral multiple of U.S.$l,000 in excess thereof.
56
SECTION 10.3
Fractions of Shares
.
No fractional shares of Common Stock shall be issued upon conversion of any Security or Securities. If more than one Security shall be surrendered for conversion at one time by the same Holder, the number of full
shares that shall be issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Securities (or specified portions thereof) so surrendered. Instead of any fractional share of Common Stock that would
otherwise be issuable upon conversion of any Security or Securities (or specified portions thereof), the Company shall calculate and pay a cash adjustment in respect of such fraction (calculated to the nearest 1/100th of a share) in an amount equal
to the same fraction of the Average Sales Price Per Share at the close of business on the day of conversion.
SECTION 10.4
Adjustment of Conversion Rate
.
The Conversion Rate shall be subject to adjustments from time to time as follows:
(a) In case the Company shall pay or make a dividend or other distribution on any class of capital stock of the Company payable in shares of Common Stock,
the Conversion Rate in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be increased by dividing such Conversion Rate by a
fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such increase to become effective (subject to paragraph (l) of this
Section 10.4
) immediately after the opening of business on the day following the date fixed for such determination. For the
purposes of this paragraph (a), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions
of shares of Common Stock. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company.
(b) In case the Company shall issue rights, options or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the current market price per share (determined as provided in paragraph (h) of this
Section 10.4
) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such
rights, options or warrants (other than any rights, options or warrants (1) that by their terms will also be issued to any Holder upon conversion of a Security into shares of Common Stock without any action required by the Company or any other
Person or (2) that are only exercisable upon the occurrence of specified triggering event and such triggering event has not occurred), the Conversion Rate in effect at the opening of business on the day following the date fixed for such
determination shall be increased by dividing such Conversion Rate by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of
shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price and the denominator shall be the number of shares of
Common Stock outstanding at the
57
close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such increase
to become effective (subject to paragraph (l) of this
Section 10.4
) immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this paragraph (b), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not issue any
rights, options or warrants in respect of shares of Common Stock held in the treasury of the Company.
(c) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, 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 shares of Common Stock shall each be combined into a smaller number of shares of
Common Stock, the Conversion Rate in effect at the opening of business on the day following the day upon which such combination 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 combination becomes effective.
(d) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness, shares of any class
of capital stock, or other property (including cash or assets or securities, but excluding (1) any rights, options or warrants referred to in paragraph (b) of this
Section 10.4
and the distribution of rights to all holders of Common Stock
pursuant to the adoption of a stockholders’ rights plan or the detachment of such rights under the terms of such stockholders’ rights plan, (2) any dividend or distribution paid in cash, except as set forth in paragraphs (e) and (f) of
this
Section 10.4
, (3) any dividend or distribution referred to in paragraph (a) of this
Section 10.4
and (4) any merger or consolidation to which
Section 10.11
applies), the Conversion Rate shall be adjusted so that the same
shall equal the rate determined by dividing the Conversion Rate in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the numerator
shall be the current market price per share (determined as provided in paragraph (h) of this
Section 10.4
) of the Common Stock on the date fixed for such determination less the then fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a Board Resolution) of the portion of the assets, shares or evidences of indebtedness so distributed applicable to one share of Common Stock and the denominator shall be such current market
price per share of the Common Stock, such adjustment to become effective (subject to paragraph (l) of this
Section 10.4
) immediately prior to the opening of business on the day following the date fixed for the determination of stockholders
entitled to receive such distribution.
Under the provisions of
the Company’s Rights Agreement dated as of November 11, 1996, between the Company and Harris Trust Company of California, as amended as of November 20, 2002 between the Company, Harris Trust Company of California and Compushare Investor
Services LLC (the “
Rights Plan
”), upon conversion of the Securities into Common Stock, to the extent that the Rights Plan is still in effect upon such conversion, the Holders of Securities will receive, in addition to the
Common Stock, the rights described therein
58
(whether or not the rights have separated from the Common Stock at the tine of conversion), subject to the limitations set forth in the Rights Plan. In
addition, if the Company implements a new rights plan (“
New Rights Plan
”), the Company will provide under such New Rights Plan that the Holders of the Securities will receive, in addition to the Common Stock, the rights under
the New Rights Plan (whether or not the rights under the New Rights Plan have separated from the Common Stock at the time of conversion), subject to any limitations set forth in the New Rights Plan.
(e) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock cash (excluding cash portions of distribution referred to in
Section 10.4(d)
and any cash that is distributed upon a merger or consolidation to which
Section 10.11
applies) in an aggregate amount that,
combined together with (1) the aggregate amount of any other cash distributions to all holders of its Common Stock made exclusively in cash within the 365-day period preceding the date of payment of such distribution and in respect of which no
adjustment pursuant to this paragraph (e) has been made and (2) the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) of
consideration payable in respect of any tender offer by the Company or any Subsidiary for all or any portion of the Common Stock concluded within the 365-day period preceding the date of payment of such distribution and in respect of which no
adjustment pursuant to paragraph (f) of this
Section 10.4
has been made (the “
combined cash and tender amount
”) exceeds 10% of the product of the current market price per share (determined as provided in paragraph (h)
of this
Section 10.4
) of the Common Stock on the date for the determination of holders of shares of Common Stock entitled to receive such distribution times the number of shares of Common Stock outstanding on such date (the
“
aggregate current market price
”), then, and in each such case, immediately after the close of business on such date for determination, subject to paragraph (l) of
Section 10.4
, the Conversion Rate shall be adjusted so
that the same shall equal the rate determined by dividing the Conversion Rate in effect immediately prior to the close of business on the date fixed for determination of the stockholders entitled to receive such distribution by a fraction (A) the
numerator of which shall be equal to the current market price per share (determined as provided in paragraph (h) of this
Section 10.4
) of the Common Stock on the date fixed for such determination less an amount equal to the quotient of (i)
the excess of such combined cash and tender amount over 10% of such aggregate current market price divided by (ii) the number of shares of Common Stock outstanding on such date fixed for determination and (B) the denominator of which shall be equal
to the current market price per share (determined as provided in paragraph (h) of this
Section 10.4
) of the Common Stock on such date fixed for determination.
(f) In case a tender offer made by the Company or any Subsidiary for all or any portion of the Common Stock shall be
completed for an aggregate consideration consisting of cash and/or property having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) that combined together with
(1) the aggregate of the cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution), of consideration payable in respect of any other tender offer by the
Company or any Subsidiary for all or any portion of the Common Stock concluded within the 365-day period preceding the completion of such tender offer and in respect of which no adjustment pursuant to this paragraph
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(f) has been made and (2) the aggregate amount of any distributions to all holders of the Company’s Common Stock made exclusively in cash within the
365-day period preceding the completion of such tender offer and in respect of which no adjustment pursuant to paragraph (e) of this
Section 10.4
has been made (the “
combined tender and cash amount
”) exceeds 10% of the
product of the current market price per share of the Common Stock (determined as provided in paragraph (h) of this
Section 10.4
) as of the completion of such tender offer (the “
Completion Date
”) times the number of
shares of Common Stock outstanding (including any tendered shares) as of the Completion Date, then, and in each such case, immediately prior to the opening of business on the day after the date of the Completion Date, the Conversion Rate shall be
adjusted so that the same shall equal the rate determined by dividing the Conversion Rate immediately prior to close of business on the Completion Date by a fraction (A) the numerator of which shall be equal to (i) the product of (x) the current
market price per share of the Common Stock (determined as provided in paragraph (h) of this
Section 10.4
) on the Completion Date multiplied by (y) the number of shares of Common Stock outstanding (including any tendered shares) on the
Completion Date less (ii) the combined tender and cash amount, and (B) the denominator of which shall be equal to the product of (x) the current market price per share of the Common Stock (determined as provided in paragraph (h) of this
Section
10.4
) as of the Completion Date multiplied by (y) the number of shares of Common Stock outstanding (including any tendered shares) as of the Completion Date less the number of all shares validly tendered and not withdrawn as of the Completion
Date (the shares deemed so accepted up to any such maximum, being referred to as the “
Purchased Shares
”).
(g) The reclassification of Common Stock into securities including other than Common Stock (other than any reclassification upon a consolidation or merger
to which
Section 10.11
applies) shall be deemed to involve (1) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be “the date
fixed for the determination of stockholders entitled to receive such distribution” and “the date fixed for such determination” within the meaning of paragraph (d) of this
Section 10.4
), and (2) a subdivision or combination, as
the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be
deemed to be “the day upon which such subdivision becomes effective” or “the day upon which such combination becomes effective”, as the case may be, and “the day upon which such subdivision or combination becomes
effective” within the meaning of paragraph (c) of this
Section 10.4
).
(h) For the purpose of any computation under paragraphs (b), (d), (e) or (f) of this
Section 10.4
, the current market price per share of Common Stock on any date shall be calculated by the Company and be deemed
to be the average of the daily Average Sales Prices Per Share for the five consecutive Trading Days selected by the Company commencing not more than 10 Trading Days before, and ending not later than, the earlier of the day in question and the day
before the “ex date” with respect to the issuance or distribution requiring such computation. For purposes of this paragraph, the term “ex date,” when used with respect to any issuance or distribution, means the first date on
which the Common Stock trades regular way in the applicable securities market or on the applicable securities exchange without the right to receive such issuance or distribution.
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(i) No adjustment in the Conversion Rate shall be required unless such adjustment (plus any adjustments
not previously made by reason of this paragraph (i)) would require an increase or decrease of at least one percent in such rate;
provided
,
however
, that any adjustments which by reason of this paragraph (i) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be.
(j) The Company may make such increases in the Conversion Rate, for the
remaining term of the Securities or any shorter term, in addition to those required by paragraphs (a), (b), (c), (d), (e) and (f) of this
Section 10.4
, as it considers to be advisable in order to avoid or diminish any income tax liability to
any holders of shares of Common Stock resulting from any dividend or distribution of Common Stock or issuance of rights or warrants to purchase or subscribe for Common Stock or from any event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from time to time may
increase the Conversion Rate by any amount for any period of time if the period is at least twenty (20) days and 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;
provided
,
however
, that such increase shall not be taken into account for purposes of determining whether the Average Sales Price Per Share of the Common Stock exceeds the Conversion Price by 105% in
connection with an event which would otherwise be a Change in Control. Whenever the Conversion Rate is increased pursuant to the preceding sentence, the Company shall give notice of the increase to the Holders of Securities in the manner provided in
Section 1.6
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.
(k) Notwithstanding the foregoing provisions of this
Section 10.4
, no
adjustment of the Conversion Rate shall be required to be made (1) upon the issuance of shares of Common Stock pursuant to any present or future plan for the reinvestment of dividends, (2) because of a tender or exchange offer of the character
described in Rule 13e-4(h) (5) under the Exchange Act or any successor rule thereto or (3) as a result of a rights plan or poison pill implemented by the Company.
(l) In any case in which this
Section 10.4
shall require that an adjustment be made immediately following a record
date, the Company may elect to defer the effectiveness of such adjustment (but in no event until a date later than the effective time of the event giving rise to such adjustment), in which case the Company shall, with respect to any Security
converted after such record date and on and before such adjustment shall have become effective (1) defer paying any cash payment pursuant to
Section 10.3
hereof or issuing to the Holder of such Security the number of shares of Common Stock
issuable upon such conversion in excess of the number of shares of Common Stock issuable thereupon only on the basis of the Conversion Rate prior to adjustment, and (2) not later than five Business Days after such adjustment shall have become
effective, pay to such Holder the appropriate cash payment pursuant to
Section 10.3
hereof and issue to such Holder the additional shares of Common Stock issuable on such conversion.
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Notwithstanding the foregoing, no adjustment of the Conversion Rate shall be made if the event giving rise to such adjustment does not occur.
(m) In the event that the Company distributes rights or warrants (other than
those referred to in paragraph (b) above)
pro rata
to holders of Common Stock, so long as any such rights or warrants have not expired or been redeemed by the Company, the Company shall make proper provision so that the Holder of any Security
surrendered for conversion will be entitled to receive upon such conversion, in addition to the Common Stock issuable upon conversion of the Securities (the “
Conversion Shares
”), a number of rights and warrants to be
determined as follows: (i) if such conversion occurs on or prior to the date for the distribution to the holders of rights or warrants of separate certificates evidencing such rights or warrants (the “
Distribution Date
”), the
same number of rights or warrants to which a holder of a number of shares of Common Stock equal to the number of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions of and applicable to the rights
or warrants, and (ii) if such conversion occurs after such Distribution Date, the same number of rights or warrants to which a holder of the number of shares of Common Stock into which the principal amount of such Security so converted was
convertible immediately prior to such Distribution Date would have been entitled on such Distribution Date in accordance with the terms and provisions of and applicable to the rights or warrants.
SECTION 10.5
Notice of Adjustments of Conversion Rate
.
Whenever the Conversion Rate is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Rate in accordance with
Section 10.4
and shall prepare a certificate signed by the Chief
Financial Officer of the Company setting forth the adjusted Conversion Rate and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall promptly be filed with the Trustee and with the Conversion Agent;
and
(b) upon each such adjustment, a notice stating that the
Conversion Rate has been adjusted and setting forth the adjusted Conversion Rate shall be required, and as soon as practicable after it is required, such notice shall be provided by the Company to all Holders in accordance with
Section 1.6
.
Neither the Trustee nor the Conversion Agent shall be under any duty or
responsibility with respect to any such certificate or the information and calculations contained therein, except to exhibit the same to any Holder of Securities desiring inspection thereof at its office during normal business hours. Unless and
until a Responsible Officer of the Trustee and Conversion Agent receive notice of an adjusted Conversion Rate, the Trustee and the Conversion Agent may rely without inquiry on the Conversion Rate most recently in effect.
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SECTION 10.6
Notice of Certain Corporate Action
.
In case:
(a) the Company
shall declare a dividend (or any other distribution) on its Common Stock payable (i) otherwise than exclusively in cash or (ii) exclusively in cash in an amount that would require any adjustment pursuant to
Section 10.4
; or
(b) the Company shall authorize the granting to the holders of its Common
Stock of rights, options or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock of the Company, or of any consolidation, merger or share exchange to which the Company is a party and for
which approval of any stockholders of the Company is required, or of the conveyance, sale, transfer or lease of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company;
then the Company shall cause to be filed at each office or agency maintained for the purpose
of conversion of Securities pursuant to
Section 8.2
, and shall cause to be provided to all Holders in accordance with
Section 1.6
, at least 20 days (or 10 days in any case specified in clause (a) or (b) above) prior to the applicable
record or effective date hereinafter specified, a notice stating (1) the date on which a record is to be taken for the purpose of such dividend, distribution, rights, options or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution, rights, options or warrants are to be determined or (2) the date on which such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution,
liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution, liquidation or winding up. Neither the failure to give such notice or the notice referred to in the following paragraph nor any defect therein shall
affect the legality or validity of the proceedings described in clauses (a) through (d) of this
Section 10.6
. If at the time the Trustee shall not be the Conversion Agent, a copy of such notice shall also forthwith be filed by the Company
with the Trustee.
The Company shall cause to be filed at each
office or agency maintained for the purpose of conversion of Securities pursuant to
Section 8.2
, and shall cause to be provided to all Holders in accordance with
Section 1.6
, notice of any tender offer by the Company or any Subsidiary
for all or any portion of the Common Stock at or about the time that such notice of tender offer is provided to the public generally.
63
SECTION 10.7
Company to Reserve Common Stock
.
The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of Securities, the full number of
shares of Common Stock then issuable upon the conversion of all Outstanding Securities.
SECTION 10.8
Taxes on Conversions
.
Except as provided in the next sentence, the Company will pay any and all taxes and duties that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Securities pursuant hereto.
The Company shall not, however, be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the Holder of the Security or Securities to
be converted, and no such issue or delivery shall be made unless and until 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 10.9
Covenant as to Common Stock
.
The Company agrees that all shares of Common Stock that may be delivered upon conversion of Securities, upon such delivery, will be newly issued shares and will have been duly authorized and validly issued and will be
fully paid and nonassessable and, except as provided in
Section 10.8
, the Company will pay all taxes, liens and charges with respect to the issue thereof.
SECTION 10.10
Cancellation of Converted Securities
.
All Securities delivered for conversion shall be delivered to the Trustee or its agent to be cancelled by or at the direction of the Trustee, which shall
dispose of the same as provided in
Section 2.10
.
SECTION 10.11
Provision in Case of Consolidation, Merger or Sale of Assets
.
In case of any consolidation or merger of the Company with or into any other Person, any merger of another Person with or into the Company (other than a
merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company) or any conveyance, sale, transfer or lease of all or substantially all of the assets of the Company, the
Person formed by such consolidation or resulting from such merger or that acquires such assets, as the case may be, shall execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then Outstanding shall
have the right thereafter, during the period such Security shall be convertible as specified in
Section 1l.l
, to convert such Security only into the kind and amount of securities, cash and other property receivable upon such consolidation,
merger, conveyance, sale, transfer or lease by a holder of the number of shares of Common Stock of the Company into which such Security might have been converted immediately prior to such consolidation, merger, conveyance, sale, transfer or lease,
64
assuming such holder of Common Stock of the Company (a) is not a Person with which the Company consolidated or merged with or into or that merged into or
with the Company or to which such conveyance, sale, transfer or lease was made, as the case may be (a “
Constituent Person
”), or an Affiliate of a Constituent Person and (b) failed to exercise his rights of election, if any,
as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease (
provided
that if the kind or amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance, sale, transfer, or lease is not the same for each share of Common Stock of the Company held immediately prior to such consolidation, merger, conveyance, sale, transfer or lease by others than a Constituent Person
or an Affiliate thereof and in respect of which such rights of election shall not have been exercised (“
Non-electing Share
”), then for the purpose of this
Section 10.11
the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance, sale, transfer or lease by the holders of 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 that, for events subsequent to the effective date of such supplemental indenture, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article. The above
provisions of this
Section 10.11
shall similarly apply to successive consolidations, mergers, conveyances, sales, transfers or leases. Notice of the execution of such a supplemental indenture shall be given by the Company to the Holder of
each Security as provided in
Section 1.6
promptly upon such execution.
Neither the Trustee nor the Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any such supplemental indenture relating either to the kind or amount of
shares of stock or other securities or property or cash receivable by Holders of Securities upon the conversion of their Securities after any such consolidation, merger, conveyance, transfer, sale or lease or to any such adjustment but may accept as
conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, an Officers Certificate or an Opinion of Counsel with respect thereto, which the Company shall cause to be furnished to the Trustee upon request.
SECTION 10.12
Responsibility of Trustee for Conversion Provisions
.
The Trustee, subject to the provisions of
Section 5.1
, and any Conversion Agent shall not at any time be under any duty or responsibility to any
Holder of Securities to determine whether any facts exist that may require any adjustment of the Conversion Rate, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any
supplemental indenture provided to be employed, in making the same, or whether a supplemental indenture need be entered into. Neither the Trustee, subject to the provisions of
Section 5.1
, nor any Conversion Agent shall be accountable with
respect to the validity or value (or the kind or amount) of any Common Stock, or of any other securities or property or cash, that may at any time be issued or delivered upon the conversion of any Security; and it or they do not make any
representation with respect thereto. Neither the Trustee, subject to the provisions of
Section 5.1
, nor any Conversion Agent shall be responsible for any failure of the Company to make or calculate any cash payment or to issue, transfer or
deliver any shares of Common Stock or share certificates or other securities or property or cash upon the surrender of any Security for the purpose of conversion; and the Trustee, subject to the
65
provisions of
Section 5.1
, and any Conversion Agent shall not be responsible for any failure of the Company to comply with any of the covenants of the
Company contained in this Article.
ARTICLE ELEVEN
SUBORDINATION OF SECURITIES
SECTION 11.1
Securities Subordinate to Senior Debt
.
The Company covenants and agrees, and each Holder of a Security by his acceptance thereof likewise covenants and agrees, that to the extent and in the
manner hereinafter set forth in this Article (subject to the provisions of
Article Three
) the indebtedness represented by the Securities and the payment of the principal of (and premium, if any) and interest on, and any payment of the
Repurchase Price with respect to, each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full in cash or Cash Equivalents of all Senior Debt. The Securities shall in all respects
rank pari passu with the Existing Pari Passu Notes and shall rank senior to the Existing Subordinated Notes.
SECTION 11.2
No Payments in Certain Circumstances; Payment Over of Proceeds Upon Dissolution, Etc
.
No payment on account of principal of, premium, if any, or interest (and Liquidated Damages, if any) on, or redemption or repurchase of, the Securities
shall be made if, at the time of such payment: (a) a default in the payment of principal, premium, if any, or interest or other amounts due on or in connection with any Senior Debt, including any default under any redemption or repurchase
obligation, occurs and is continuing (or, in the case of Senior Debt for which there is a period of grace, in the event of such a default that continues beyond the period of grace, if any, specified in the instrument or lease evidencing such Senior
Debt), unless and until such default shall have been cured or waived or shall have ceased to exist; or (b) a default, other than a payment default, on Designated Senior Debt occurs and is continuing that then permits holders of such Designated
Senior Debt to accelerate its maturity and the Trustee receives a notice of the default (a “
Payment Blockage Notice
”) from the Company, a holder of Designated Senior Debt or a Representative. Notwithstanding the foregoing,
the Company may make, and the Trustee may receive and shall apply, any payment in respect of the Securities (for principal, premium, if any, or interest (and Liquidated Damages, if any) or repurchase) if such payment was made prior to the occurrence
of any of the contingencies specified in clauses (a) and (b) above.
If the Trustee receives any Payment Blockage Notice pursuant to clause (b) above, no subsequent Payment Blockage Notice shall be effective for purposes of this
Section 11.2
unless and until (1) at least 365 days shall have elapsed
since the effectiveness of the immediately prior Payment Blockage Notice and (2) all scheduled payments of principal, premium, if any, interest and Liquidated Damages, if any, on the Securities that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
66
Blockage Notice unless such existing nonpayment default has been cured for a period of at least 90 days.
The Company may and shall resume payments on and distributions in respect of
the Securities (including missed payments, if any) upon the earlier of: (A) the date upon which the default is cured or waived, or (B) in the case of a default referred to in clause (b) of the second preceding paragraph, 179 days after notice is
received if the maturity of such Designated Senior Debt has not been accelerated such that such debt is then presently payable, unless this Indenture otherwise prohibits the payment or distribution at the time of such payment or distribution.
Upon (i) any acceleration of the principal amount due on the
Securities or (ii) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution, winding up or total or partial liquidation or reorganization of the
Company, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all principal of, premium, if any, sinking fund and interest or other amounts due, or to become due, upon or in connection with all Senior
Debt shall first be paid in full in cash or Cash Equivalents, or payment thereof provided for in cash or Cash Equivalents in accordance with its terms, before any payment is made on account of the principal of, premium, if any, or interest (and
Liquidated Damages, if any) on, or repurchase of, the indebtedness evidenced by the Securities, and upon any such dissolution or winding up or liquidation or reorganization any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Securities or by the Trustee under this Indenture if received by them or it, as the case may be, directly to the holders of Senior
Debt (
pro rata
to each such holder on the basis of the respective amounts of Senior Debt held by such holder) or their representatives, to the extent necessary to pay all Senior Debt in full, in cash or Cash Equivalents, after giving effect
to any concurrent payment or distribution to or for the holders of Senior Debt, before any payment or distribution is made to the Holders of the Securities or to the Trustee under this Indenture.
In the event that, contrary to the foregoing, any payment or distribution of
assets of the Company of any kind or character, whether in cash, property or securities (other than junior securities, as defined in
Section 11.11
), shall be received by the Trustee or the Holders of the Securities before all Senior Debt is
paid in full in cash or Cash Equivalents or provision made for such payment in accordance with its terms, such payment or distribution shall be paid over or delivered to the holders of such Senior Debt or their representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Debt have been issued, as their respective interests may appear, for application to the payment of all Senior Debt remaining unpaid to the
extent necessary to pay all such Senior Debt in full in cash or Cash Equivalents in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Debt.
Subject to the payment in full in cash or Cash Equivalents of all Senior
Debt, the Holders of the Securities (together with the holders of the Existing Pari Passu Notes and any other
67
indebtedness of the Company that is subordinated in right of payment to the payment in full of all Senior Debt that is not subordinated in right of payment
to the Securities and that by its terms grants such right of subrogation to the holders thereof) shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of assets of the Company made on the Senior Debt
until the principal of, premium, if any, and interest on, or amounts payable upon repurchase of, the Securities shall be paid in full, and, for the purposes of such subrogation, no payments or distributions to the holders of Senior Debt of any cash,
property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payment over pursuant to the provisions of this Article to the holders of Senior Debt by the Holders of
the Securities or the Trustee, shall, as between the Company, its creditors other than the holders of Senior Debt, and the Holders of Securities, be deemed to be a payment by the Company to the holders of or on account of Senior Debt, it being
understood that the provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of Senior Debt, on the other hand.
SECTION 11.3
Trustee to Effectuate Subordination
.
Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 11.4
No Waiver of Subordination Provisions
.
No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder of any Senior Debt or by any non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the
Holders of the Securities to the holders of Senior Debt, do any one or more of the following in good faith: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt or otherwise amend or
supplement in any manner Senior Debt or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt;
(c) release any Person liable in any manner for the collection of Senior Debt; and (d) exercise or refrain from exercising any rights against the Company and any other Person.
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SECTION 11.5
Notice to Trustee
.
The Company shall give prompt written notice to the Trustee of any fact known to the Company that would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment to or by the Trustee in respect of the Securities,
unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company or a holder of Senior Debt or from any trustee, agent or representative therefor; and, prior to the receipt of any such written notice,
the Trustee, subject to the provisions of
Section 5.1
, shall be entitled in all respects to assume that no such facts exist;
provided
,
however
, that if the Trustee shall not have received the notice provided for in this
Section 11.5
prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Security), then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary
that may be received by it within two Business Days prior to such date.
Subject to the provisions of
Section 5.1
, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Debt (or a trustee, agent or representative therefor)
to establish that such notice has been given by a holder of Senior Debt (or a trustee, agent or representative therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this
Article
Eleven
, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this
Article
Eleven
, and if such evidence is
not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.
SECTION 11.6
Reliance on Judicial Order or Certificate of Liquidating Agent
.
Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of
Section 5.1
, and
the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case
or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the
Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other indebtedness of the Company, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to this Article.
69
SECTION 11.7
Trustee Not Fiduciary for Holders of Senior Debt
.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders if it shall in good
faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Debt shall be entitled by virtue of this Article or otherwise. With respect to the
holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this
Article
Eleven
, and no implied covenants or obligations with respect to holders of
Senior Debt shall be read into this Indenture against the Trustee.
SECTION 11.8
Reliance by Holders of Senior Debt on Subordination Provisions
.
Each Holder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of any Senior Debt, whether such Senior Debt was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Debt, and such holder of Senior
Debt shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Debt. Such holders of the Company’s Senior Debt are intended by the parties to the
Indenture to be third-party creditor beneficiaries under this Indenture for the purposes of enforcing the provisions of this
Article
Eleven
.
SECTION 11.9
Rights of Trustee as Holder of Senior Debt; Preservation of Trustee’s Rights
.
The Trustee in its individual capacity shall be entitled to all the rights set forth in this
Article
Eleven
with respect to any Senior Debt
that may at any time be held by it, to the same extent as any other holder of Senior Debt, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.
Nothing in this
Article
Eleven
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 5.7
.
SECTION 11.10
Article Applicable to Paying Agents
.
In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term “Trustee” as used in this Article shall in such case (unless the
context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this
Article Eleven
in addition to or in place of the
Trustee;
provided
,
however
, that
Section 11.9
shall not apply to the Company or any Affiliate of the Company if the Company or any such Affiliate acts as Paying Agent.
SECTION 11.11
Certain Conversions and Repurchases Deemed Payment
.
70
For the purposes of this
Article Eleven
only (a) the issuance and delivery of junior securities
upon conversion of Securities in accordance with
Article Ten
or upon the repurchase of Securities in accordance with
Article Twelve
shall not be deemed to constitute a payment or distribution on account of the principal of or premium
or interest or Liquidated Damages on Securities or on account of the purchase or other acquisition of Securities, and (b) the payment, issuance or delivery of cash, property or securities (other than junior securities) upon conversion of a Security
shall be deemed to constitute payment on account of the principal of such Security. For the purposes of this
Section 11.11
, the term “junior securities” means (1) shares of any stock of any class of the Company and any cash,
property or securities into which the Securities are convertible pursuant to
Article Ten
and (2) securities of the Company that are subordinated in right of payment to all Senior Debt that may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this
Article Eleven
. Nothing contained in this
Article Eleven
or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors and the Holders of the Securities, the right, which is absolute and unconditional, of the Holder of any Security to convert such Security in
accordance with
Article Ten
or to exchange such Security for Common Stock in accordance with
Article Twelve
if the Company elects to satisfy the obligations under
Article Twelve
by the delivery of Common Stock.
ARTICLE TWELVE
REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER UPON A CHANGE IN CONTROL
SECTION 12.1
Right to Require Repurchase
.
In the event that a Change in Control shall occur, then each Holder shall have the right, at the Holder’s option, but subject to the provisions of
Section 12.2
, to require the Company to repurchase, and
upon the exercise of such right the Company shall repurchase, all of such Holder’s Securities not theretofore called for redemption, or any portion of the principal amount thereof that is equal to U.S.$1,000 or any greater integral multiple of
U.S.$1,000, on the date (the “
Repurchase Date
”) that is fixed by the Company at a cash purchase price equal to 100% of the principal amount of the Securities to be repurchased plus interest accrued to the Repurchase Date (the
“
Repurchase Price
”);
provided
,
however
, that installments of interest on Securities whose Stated Maturity is on or prior to the Repurchase Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such on the relevant Record Date according to their terms and the provisions of
Section 2.8
. The Repurchase Date will be determined by the Company in the following manner: (i) the Company will give notice
of the Change in Control as contemplated in Section 12.3(a); (ii) each Holder electing to exercise the repurchase right must deliver, on or before the thirtieth (30th) day (or such greater period as may be required by applicable law) after the date
of the Company’s notice provided in provision (i) above: (A) irrevocable written notice to the trustee of such Holder’s exercise of its repurchase right, and (B) the Securities with respect to which such repurchase right is being
exercised; and (iii) the Company will make the repurchase on a date that is no later than 45 days after the
71
Holder has delivered the notice provided in proviso (ii) above. Such right to require the repurchase of the Securities shall not continue after a discharge
of the Company from its obligations with respect to the Securities in accordance with
Article Three
unless a Change in Control shall have occurred prior to such discharge. At the option of the Company, the Repurchase Price may be paid in cash
or, subject to the fulfillment by the Company of the conditions set forth
Section 12.2
, by delivery of shares of Common Stock or in a combination of cash and Common Stock having a fair market value equal to the Repurchase Price. Whenever in
this Indenture (including
Sections 2.2
,
4.1(a)
and
4.8)
there is a reference, in any context, to the principal of any Security as of any time, such reference shall be deemed to include reference to the Repurchase Price that has
become and remains payable in respect of such Security to the extent that such Repurchase Price is, was or would be so payable at such time, and express mention of the Repurchase Price in any provision of this Indenture shall not be construed as
excluding the Repurchase Price in those provisions of this Indenture when such express mention is not made;
provided
,
however
, that for the purposes of
Article Eleven
such reference shall be deemed to include reference to the
Repurchase Price only to the extent the Repurchase Price is payable in cash.
For purposes of this
Section 12.1
, the fair market value of shares of Common Stock shall be determined by the Company and shall be equal to 95% of the average of the closing price per share of the Common Stock
or the principal exchange on which the Common Stock is traded in on the Nasdaq National Market for each of the five consecutive Trading Days immediately preceding and including the third Trading Day prior to the Repurchase Date.
SECTION 12.2
Conditions to the Company’s Election to Pay the Repurchase Price in Common Stock
.
The Company may elect to pay the Repurchase Price by delivery of shares of Common Stock pursuant to
Section 12.1
if and only if the following
conditions shall have been satisfied:
(a) As to each Holder,
the Repurchase Price shall be paid only in cash in the event any shares of Common Stock to be issued to such Holder upon repurchase of Securities hereunder (1) require registration under any federal securities law before such shares may be freely
transferable without being subject to any transfer restrictions under the Securities Act upon repurchase and if such registration is not completed or does not become effective prior to the Repurchase Date or (2) require registration with or approval
of any governmental authority under any state law or any other federal law before such shares may be validly issued or delivered upon repurchase and if such registration is not completed or does not become effective or such approval is not obtained
prior to the Repurchase Date;
(b) Payment of the Repurchase
Price may not be made in Common Stock unless such stock is, or shall have been, approved for quotation on the Nasdaq National Market or listed or quoted on a national securities exchange or other quotation system, in either case, prior to the
Repurchase Date; and
(c) All shares of Common Stock that may
be issued upon repurchase of Securities will be issued out of the Company’s authorized but unissued Common Stock will and, upon
72
issue, be duly and validly issued and fully paid and non-assessable and free of any preemptive rights.
If all of the conditions set forth in this
Section 12.2
are not
satisfied in accordance with the terms thereof, the Repurchase Price shall be paid by the Company only in cash.
SECTION 12.3
Notices; Method of Exercising Repurchase Right, Etc
.
(a) Unless the Company shall have theretofore called for redemption all of the Outstanding Securities, on or before the thirtieth day after the occurrence
of a Change in Control, the Company or, at the request and expense of the Company on or before the thirtieth day after such occurrence, the Trustee, shall give to all Holders of Securities, in the manner provided in
Section 1.6
, notice (the
“
Company Notice
”) of the occurrence of the Change in Control and of the repurchase right set forth herein arising as a result thereof. The Company shall also deliver a copy of such notice of a repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must be
exercised,
(3) the Repurchase Price, and
whether the Repurchase Price shall be paid by the Company in cash or by delivery of shares of Common Stock,
(4) a description of the procedure that a Holder must follow to exercise a repurchase right, and the place or places where such Securities
are to be surrendered for payment of the Repurchase Price and accrued interest, if any,
(5) that on the Repurchase Date, the Repurchase Price, and accrued interest, if any, will become due and payable upon each such Security
designated by the Holder to be repurchased and that interest thereon shall cease to accrue on and after said date,
(6) the Conversion Rate then in effect, the date on which the right to convert the principal amount of the Securities to be repurchased
will terminate and the place or places where such Securities may be surrendered for conversion,
(7) the place or places that the Notice of Election of Holder to Require Repurchase attached hereto as
Exhibit B
, shall be
delivered, and the form of such notice, and
(8) the CUSIP number or numbers of such Securities.
No failure of the Company to give the foregoing notices or defect therein shall limit any Holder’s right to exercise a repurchase right or affect the validity of the proceedings for the repurchase of Securities.
73
If any of the foregoing provisions or other provisions of this
Article Twelve
are inconsistent
with applicable law, such law shall govern.
(b) To exercise a
repurchase right, a Holder shall deliver to the Trustee on or before the thirtieth day (or such greater period as may be required by applicable law) after the date of the Company Notice (1) written notice of the Holder’s exercise of such right,
which notice shall set forth the name of the Holder, the principal amount of the Securities to be repurchased (and, if any Security is to repurchased in part, the serial number thereof, the portion of the principal amount thereof to be repurchased
and the name of the Person in which the portion thereof to remain Outstanding after such repurchase is to be registered) and a statement that an election to exercise the repurchase right is being made thereby, and, in the event that the Repurchase
Price shall be paid in shares of Common Stock, the name or names (with addresses) in which the certificate or certificates for shares of Common Stock shall be issued, and (2) the Securities with respect to which the repurchase right is being
exercised. Such written notice shall be irrevocable, except that the right of the Holder to convert the Securities with respect to which the repurchase right is being exercised shall continue until the close of business on the Business Day
immediately preceding the Repurchase Date.
(c) In the event a
repurchase right shall be exercised in accordance with the terms hereof, the Company shall pay or cause to be paid to the Trustee the Repurchase Price in cash or shares of Common Stock, as provided above, for payment to the Holder on the Repurchase
Date or, if shares of Common Stock are to be paid, as promptly after the Repurchase Date as practicable, together with accrued and unpaid interest to the Repurchase Date payable with respect to the Securities as to which the purchase right has been
exercised;
provided
,
however
, that installments of interest that mature on or prior to the Repurchase Date shall be payable in cash to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Regular Record Date.
(d) If
any Security (or portion thereof) surrendered for repurchase shall not be so paid on the Repurchase Date, the principal amount of such Security (or portion thereof, as the case may be) shall, until paid, bear interest to the extent permitted by
applicable law from the Repurchase Date at the rate then in effect per annum, and each Security shall remain convertible into Common Stock until the principal of such Security (or portion thereof, as the case may be) shall have been paid or duly
provided for.
(e) Any Security that is to be repurchased only
in part shall be surrendered to the Trustee (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 his
attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security without service charge, a new Security or Securities, containing identical terms
and conditions, each in an authorized denomination in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Security so surrendered.
74
(f) Any issuance of shares of Common Stock in respect of the Repurchase Price shall be deemed to have
been effected immediately prior to the close of business on the Repurchase Date and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such repurchase shall be deemed to
have become on the Repurchase Date the holder or holders of record of the shares represented thereby;
provided
,
however
, that any surrender for repurchase on a date when the stock transfer books of the Company shall be closed shall
constitute the Person or Persons in whose name or names the certificate or certificates for such shares are to be issued as the record holder or holders thereof for all purposes at the opening of business on the next succeeding day on which such
stock transfer books are open. No payment or adjustment shall be made for dividends or distributions on any Common Stock issued upon repurchase of any Security declared prior to the Repurchase Date.
(g) No fractions of shares shall be issued upon repurchase of Securities. If
more than one Security shall be repurchased from the same Holder and the Repurchase Price shall be payable in shares of Common Stock, the number of full shares that shall be issuable upon such repurchase shall be computed on the basis of the
aggregate principal amount of the Securities so repurchased. Instead of any fractional share of Common Stock that would otherwise be issuable on the repurchase of any Security or Securities, the Company will deliver to the applicable Holder a check
for the current market value of such fractional share. The current market value of a fraction of a share is determined by multiplying the current market price of a full share by the fraction and rounding the result to the nearest cent. For purposes
of this
Section 12.3
, the current market price of a share of Common Stock is the average of the high and low sales price per Share of the Common Stock on the Trading Day immediately preceding the Repurchase Date.
(h) Any issuance and delivery of certificates for shares of Common Stock on
repurchase of Securities shall be made without charge to the Holder of Securities being repurchased for such certificates or for any tax or duty in respect of the issuance or delivery of such certificates or the securities represented thereby;
provided
,
however
, that the Company shall not be required to pay any tax or duty that may be payable in respect of (1) income of the Holder or (2) any transfer involved in the issuance or delivery of certificates for shares of Common
Stock in a name other than that of the Holder of the Securities being repurchased, and no such issuance or delivery shall be made unless and until the Person requesting such issuance or delivery has paid to the Company the amount of any such tax or
duty or has established, to the satisfaction of the Company, that such tax or duty has been paid.
(i) All Securities delivered for repurchase shall be delivered to the Trustee to be canceled at the direction of the Trustee, which shall dispose of the
same as provided in
Section 2.10
.
75
ARTICLE THIRTEEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE
SECTION 13.1
Company to Furnish Trustee Names and Addresses of Holders
.
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after the Regular Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders of Securities as of such Regular Record Date, and
(b) at such other times as the Trustee may reasonably request in writing, within 30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time such list is furnished;
provided, however,
that no such list need be furnished so long as the Trustee is acting as Security Registrar.
SECTION 13.2
Preservation of Information
.
(a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in
Section 13.1
and
the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in
Section 13.1
upon receipt of a new list so furnished.
(b) After this Indenture has been qualified under the Trust Indenture Act,
the rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture
Act.
SECTION 13.3
No Recourse Against Others
.
An incorporator or any past, present or future director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture
or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder shall waive and release all such liability. Such waiver and release shall be part of the consideration for the issue of
the Securities.
76
SECTION 13.4
Reports by Trustee
.
(a) After this Indenture has been qualified under the Trust Indenture Act, the Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act at the times and in the manner provided therein. If required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within 60 days after each May 15 following the date of this Indenture, deliver to Holders a brief
report, dated as of such May 15, that complies with the provisions of such Section 313(a).
(b) After this Indenture has been qualified under the Trust Indenture Act, a copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company will promptly notify the Trustee when the Securities are listed on any stock exchange.
SECTION 13.5
Reports by Company
.
After this Indenture has been qualified under the Trust Indenture Act, the Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided therein;
provided
,
however
, that any such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission.
Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s
receipt thereof 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).
77
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day
and year first above written.
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Cell Therapeutics, Inc.
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By
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/s/ J
AMES
B
IANCO
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Name:
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James A. Bianco
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Title:
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President and Chief Executive Officer
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U.S. Bank National Association,
as Trustee
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By
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/s/ P
AULA
O
SWALD
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Name:
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Paula Oswald
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Title:
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Vice President
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78
EXHIBIT A
[FORM OF FACE]
[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH RESTRICTED SECURITY OTHER THAN ANY RESTRICTED GLOBAL SECURITY:
THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR OTHER EXEMPTIONS THEREFROM.
THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON THAT THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL
INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT WHO PRIOR TO SUCH TRANSFER PROVIDES TO THE TRUSTEE FOR THE NOTES A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF THE LETTER CAN BE OBTAINED FROM THE TRUSTEE OF THE NOTES), (4) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE)
(AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO CELL THERAPEUTICS, INC.) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES AND OTHER JURISDICTIONS.
THIS NOTE, ANY SHARES
OF COMMON STOCK ISSUABLE UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS NOTE AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN
APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE
A-1
OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS NOTE AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION SHALL BE DEEMED BY THE
ACCEPTANCE OF THIS NOTE AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.]
[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH RESTRICTED GLOBAL SECURITY:
THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY BENEFICIAL INTEREST IN THIS NOTE IS HEREBY NOTIFIED THAT THE
SELLER OF SUCH BENEFICIAL INTEREST IN THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR OTHER EXEMPTIONS THEREFROM.
EACH BENEFICIAL OWNER OF AN INTEREST IN ANY OF THE SECURITIES
EVIDENCED BY THIS NOTE (INCLUDING ANY PARTICIPANT IN THE DEPOSITARY HOLDING THIS NOTE THAT IS SHOWN AS HOLDING SUCH AN INTEREST ON THE RECORDS OF SUCH DEPOSITARY AND EACH BENEFICIAL OWNER THAT HOLDS THROUGH ANY SUCH PARTICIPANT) AGREES FOR THE
BENEFIT OF CELL THERAPEUTICS, INC. THAT (A) ANY BENEFICIAL INTEREST IN THIS NOTE AND ANY SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A)(1) TO A PERSON THAT THE TRANSFEROR
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT WHO PRIOR TO SUCH TRANSFER PROVIDES TO THE TRUSTEE FOR THE NOTES A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF THE LETTER
CAN BE OBTAINED FROM THE TRUSTEE OF THE NOTES), (4) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO CELL THERAPEUTICS, INC.) OR (5) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS AND THAT (B) THE BENEFICIAL OWNER WILL, AND
A-2
EACH SUBSEQUENT BENEFICIAL OWNER OF AN INTEREST IN ANY OF THE SECURITIES EVIDENCED BY THIS NOTE OR ANY COMMON STOCK ISSUABLE UPON CONVERSION
THEREOF IS REQUIRED TO, NOTIFY ANY PURCHASER OF ANY BENEFICIAL INTEREST IN THE NOTE OR SUCH COMMON STOCK ISSUABLE UPON ITS CONVERSION FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.
THIS NOTE, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS
CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS NOTE AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE
INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS NOTE AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION SHALL BE DEEMED BY THE ACCEPTANCE OF THIS NOTE AND ANY
SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.]
[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL SECURITY:
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR
A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS NOTE FOR ALL PURPOSES.]
[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL SECURITY FOR WHICH THE DEPOSITORY TRUST COMPANY IS TO BE THE
DEPOSITARY:
UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
A-3
CELL THERAPEUTICS, INC.
4% CONVERTIBLE SENIOR SUBORDINATED NOTE DUE JULY 1, 2010
CUSIP No.
Cell Therapeutics, Inc., a corporation duly organized and existing under the
laws of the State of Washington (herein called the “Company,” which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to Cede & Co., or registered
assigns, the principal sum of
United States Dollars (U.S.$
)
[if this Security is a
Global Security, then insert—(which principal amount may from time to time be increased or decreased to such other principal amounts (which, taken together with the principal amounts of all other Outstanding Securities, shall not exceed
$75,000,000 in the aggregate at any time, unless the Initial Purchasers exercise their over-allotment rights, in which case the principal amount of the Outstanding Securities shall not exceed U.S. $90,000,000) by adjustments made on the records of
the Trustee hereinafter referred to in accordance with the Indenture)]
on July 1, 2010, unless redeemed or repurchased on an earlier date, and to pay interest thereon, from June 23, 2003, or from the most recent Interest Payment Date (as
defined below) to which interest has been paid or duly provided for, semiannually in arrears on January 1 and July 1 in each year (each, an “Interest Payment Date”), commencing January 1, 2004, at the rate of 4% per annum, until the
principal hereof is due, and at the rate then in effect on any overdue principal and premium, if any, and, to the extent permitted by law, on any overdue interest. The interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the
December 15 and June 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Except as otherwise provided in the Indenture, any such interest not so punctually paid or duly provided for will forthwith cease
to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Company, notice whereof shall be given to Holders of Registered Securities not less than ten days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Payments of principal shall be made upon the surrender of this
Security at the option of the Holder at the Corporate Trust Office or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the payment of public and private debts, or at such other offices or agencies as the Company may designate, by United States Dollar check drawn on, or wire transfer to, a United
States Dollar account (such a wire transfer to be made only to a Holder of an aggregate principal amount of Registered Securities in excess of U.S.$2,000,000 and only if such Holder shall have furnished wire
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instructions in writing to the Trustee no later than 15 days prior to the relevant payment date) maintained by the payee. Payment of interest on this
Security may be made by United States Dollar check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or, upon written application by the Holder to the Security Registrar setting forth wire
instructions not later than the relevant Record Date, by wire transfer to a United States dollar account (such a wire transfer to be made only to a Holder of an aggregate principal amount of Registered Securities in excess of U.S.$2,000,000 and only
if such Holder shall have furnished wire instructions in writing to the Trustee no later than 15 days prior to the relevant payment date) maintained by the payee.
Except as specifically provided herein and in the Indenture, the Company shall not be required to make any payment with
respect to any tax, assessment or other governmental charge imposed by any government or any political subdivision or taxing authority thereof or therein.
Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have
the same effect as if set forth at this place.
Unless the
certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof or an Authenticating Agent by the manual signature of one of their respective authorized signatories, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.
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IN WITNESS WHEREOF,
the Company has caused this Security to be duly executed.
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CELL THERAPEUTICS, INC.
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By:
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Name:
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Title:
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Attest:
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Name:
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Dated: June 23, 2003
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This is one of the
Securities referred to in the within-mentioned Indenture.
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U.S. BANK NATIONAL ASSOCIATION,
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as Trustee
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By:
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Authorized Signatory
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[FORM OF REVERSE]
This Security is one of a duly authorized issue of securities of the Company designated as its “4% Convertible Senior
Subordinated Notes due July 1, 2010” (herein called the “Securities”), limited in aggregate principal amount to U.S.$75,000,000 (U.S.$90,000,000 if the over-allotment is fully exercised), issued and to be issued under an Indenture,
dated as of June 23, 2003 (herein called the “Indenture”), between the Company and U.S. Bank National Associational, as Trustee (herein called the “Trustee,” which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Debt and the
Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. As provided in the Indenture and subject to certain limitations set forth therein, Registered Securities are exchangeable for a
like aggregate principal amount of Registered Securities of any authorized denominations as requested by the Holder surrendering the same upon surrender of the Registered Security or Registered Securities to be exchanged at the Corporate Trust
Office. The Trustee upon such surrender by the Holder will issue the new Registered Securities in the requested denominations.
No sinking fund is provided for the Securities.
The Securities are subject to redemption at the option of the Company at any time before July 1, 2010 (“Provisional Redemption”), in whole or in
part, upon not less than 30 nor more than 60 days’ notice to the Holders prior to the Redemption Date at a Redemption Price equal to 100% of the principal amount, together, in each case, with accrued and unpaid interest, if any, to, but
excluding, the Redemption Date, if (a) the closing price of the Company’s Common Stock has exceeded 150% of the Conversion Price then in effect for at least 20 trading days within a period of 30 consecutive trading days ending on the trading
day before the date of mailing of the notice of the Provisional Redemption, and (b) the Shelf Registration Statement is effective and available for use and is expected to remain effective and available for use for the 30 days following the
Redemption Date, unless registration is no longer required. Upon any Provisional Redemption, the Company will pay to the Holders cash or Common Stock, or a combination of cash and Common Stock, with respect to the Securities called for Provisional
Redemption, including any Security converted after the date of the notice of Provisional Redemption and before to the date of the Provisional Redemption, in an amount equal to $280.00 per $1,000 principal amount of the Securities, less the amount of
any interest paid on the Securities before the date of the Provisional Redemption. For purposes of any such payment in Common Stock, the value of such Common Stock will be based upon the highest closing price of shares of the Common Stock for the 20
trading days referred to above.
In the event of a redemption
of the Securities, the Company will not be required (a) to register the transfer or exchange of Registered Securities for a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities called for
such
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redemption (it being understood that the Company will not be required to identify the serial numbers of Outstanding Securities if all such Securities are
called for redemption) or (b) to register the transfer or exchange of any Registered Security, or portion thereof, called for redemption.
Notice to the Holders will be given not less than 30 nor more than 60 days prior to the Redemption Date as provided in the Indenture.
In any case where the due date for the payment of the principal of, premium,
if any, Liquidated Damages, if any, or interest on any Security or the last day on which a Holder of a Security has a right to convert his Security shall be, at any Place of Payment or Place of Conversion, as the case may be, a day on which banking
institutions at such Place of Payment or Place of Conversion are authorized or obligated by law or executive order to close, then payment of principal, premium, if any, Liquidated Damages, if any, or interest or delivery for conversion of such
Security need not be made on or by such date at such place but may be made on or by the next succeeding day at such place which is not a day on which banking institutions are authorized or obligated by law or executive order to close, with the same
force and effect as if made on the date for such payment or the date fixed for redemption or repurchase, or by such last day for conversion, and no interest shall accrue on the amount so payable for the period from and after such due date.
Subject to and upon compliance with the provisions of the
Indenture, the Holder of this Security is entitled, at its option, at any time following the original issue date of the Securities and on or before the close of business on July 1, 2010, or in case this Security or a portion hereof is called for
redemption or the Holder hereof has exercised his right to require the Company to repurchase this Security or such portion hereof, then in respect of this Security until and including, but (unless the Company defaults in making the payment due upon
redemption or repurchase, as the case may be) not after, the close of business on the Business Day immediately preceding the Redemption Date or the Repurchase Date, as the case may be, to convert this Security or any portion of the principal amount
hereof that is an integral multiple of U.S.$1,000 (
provided
that the unconverted portion of such principal amount is U.S.$1,000 or any integral multiple of U.S.$1,000 in excess thereof) into fully paid and nonassessable shares of Common Stock
of the Company at an initial Conversion Rate of 74.0741 shares of Common Stock per $1,000 principal amount of Securities (or at the current adjusted Conversion Rate if an adjustment has been made as provided in the Indenture) by surrender of this
Security, duly endorsed or assigned to the Company or in blank and, in case such surrender shall be made during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on
such Interest Payment Date (except if this Security has been called for redemption on a Redemption Date or is repurchasable on a Repurchase Date, with the consequence that the conversion right of such Security would terminate between such Regular
Record Date and the close of business on such Interest Payment Date), also accompanied by payment in New York Clearing House or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the
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principal amount of this Security then being converted, and also the conversion notice hereon duly executed, to the Company at the Corporate Trust Office, or
at such other office or agency of the Company, subject to any laws or regulations applicable thereto and subject to the right of the Company to terminate the appointment of any Conversion Agent (as defined below) as may be designated by it for such
purpose in the Borough of Manhattan, The City of New York, or at such other offices or agencies as the Company may designate (each a “Conversion Agent”),
provided
,
further
, that in case surrender of this Security for
conversion shall be made during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date and if this Security or portion hereof has been called
for redemption on a Redemption Date or is repurchasable on a Repurchase Date, with the consequence that the conversion right of such Security would terminate between such Regular Record Date and the close of business on such Interest Payment Date,
then the Holder of this Security will be entitled to receive the interest accruing hereon from the Interest Payment Date next preceding the date of such conversion to such succeeding Interest Payment Date and shall not be required to pay such
interest upon surrender of this Security for conversion. Subject to the provisions of the preceding sentence and, in the case of a conversion after the close of business on the Regular Record Date next preceding any Interest Payment Date and on or
before the close of business on such Interest Payment Date, to the right of the Holder of this Security (or any Predecessor Security of record as of such Regular Record Date) to receive the related installment of interest to the extent and under the
circumstances provided in the Indenture, no cash payment or adjustment is to be made on conversion for interest accrued hereon from the Interest Payment Date next preceding the day of conversion, or for dividends on the Common Stock issued on
conversion hereof. The Company shall thereafter deliver to the Holder the fixed number of shares of Common Stock (together with any cash adjustment or rights or warrants, as provided in the Indenture) into which this Security is convertible and such
delivery will be deemed to satisfy the Company’s obligation to pay the principal amount of this Security. No fractions of shares or scrip representing fractions of shares will be issued on conversion, but instead of any fractional interest
(calculated to the nearest 1/100th of a share) the Company shall pay a cash adjustment as provided in the Indenture. The Conversion Rate is subject to adjustment as provided in the Indenture. In addition, the Indenture provides that in case of
certain consolidations or mergers to which the Company is a party or the conveyance, transfer, sale or lease of all or substantially all of the property and assets of the Company, the Indenture shall be amended, without the consent of any Holders of
Securities, so that this Security, if then Outstanding, will be convertible thereafter, during the period this Security shall be convertible as specified above, only into the kind and amount of securities, cash and other property receivable upon
such consolidation, merger, conveyance, transfer, sale or lease by a holder of the number of shares of Common Stock of the Company into which this Security could have been converted immediately prior to such consolidation, merger, conveyance,
transfer, sale or lease (assuming such holder of Common Stock is not a Constituent Person or an Affiliate of a Constituent Person, failed to exercise any rights of election and received per share the kind and amount received per share by a plurality
of Non-electing Shares). No adjustment in the Conversion Rate will be made until such adjustment would require an increase or decrease of at
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least one percent of such rate,
provided
that any adjustment that would otherwise be made will be carried forward and taken into account in the
computation of any subsequent adjustment.
Subject to certain
limitations in the Indenture, at any time when the Company is not subject to Section 13 or 15(d) of the United States Securities Exchange Act of 1934, as amended, upon the request of a Holder of a Security or the holder of shares of Common Stock
issued upon conversion thereof, the Company will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder of Securities or such holder of shares of Common Stock issued upon conversion of Securities, or to a
prospective purchaser of any such security designated by any such Holder or 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 of 1933, as amended (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 (or any successor provision thereto).
The Holder of this Security
[if this Security is a
Global Security, then insert—(including any Person that has a beneficial interest in this Security)]
and the Common Stock issuable upon conversion hereof is entitled to the benefits of a Registration Rights Agreement, dated as of June
23, 2003 (the “Registration Rights Agreement”), executed by the Company. Pursuant to the Registration Rights Agreement, the Company has agreed for the benefit of the Holders from time to time of Registered Securities and the Common Stock
issuable upon conversion thereof, in each case, that are Registrable Securities, at the Company’s expense, (a) to file on or before 90 days after the first date of original issuance of the Securities, a shelf registration statement (the
“Shelf Registration Statement”) with the Commission with respect to resales of the Registrable Securities, (b) thereafter to use its reasonable efforts to cause such Shelf Registration Statement to be declared effective by the Commission
on or before the later of (i) 180 days after the first date of original issuance of the Securities or (ii) 45 days after the first to occur of (A) the termination of the Agreement and Plan of Merger, dated as of June 16, 2003, between the Company
and Novuspharma S.p.A. (the “Merger Agreement”) or (B) the consummation of the merger transaction contemplated by the Merger Agreement, in each such case, subject to the Company’s right to postpone having the Shelf Registration
Statement declared effective for an additional 60 days in limited circumstances described in the Registration Rights Agreement, and (c) to use its reasonable efforts to maintain such Shelf Registration Statement continuously effective under the
Securities Act until the earlier of (1) the sale under the Shelf Registration Statement of all the Registrable Securities registered thereunder or (2) the expiration of the holding period applicable to such Registrable Securities held by persons
that are not affiliates of the Company under Rule 144(k) under the Securities Act or any successor previously subject to specific permitted exceptions. The Company is required to pay Liquidated Damages to holders of Registrable Securities for
failure to comply with the foregoing registration obligations, all as more fully set forth in the Registration Rights Agreement.
Whenever in this Security there is a reference, in any context, to the payment of the principal of, premium, if any, or interest on, or in respect of, any
Security such mention shall be
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deemed to include mention of the payment of Liquidated Damages payable as described in the Registration Rights Agreement to the extent that, in such context,
Liquidated Damages are, were or would be payable in respect of this Security pursuant to the Registration Rights Agreement, and an express mention of the payment of Liquidated Damages (if applicable) in any provisions of this Security shall not be
construed as excluding Liquidated Damages in those provisions of this Security where such express mention is not made. If the Holder of this Security
[if this Security is a Global Security, then insert—(including any Person that has a
beneficial interest in this Security)]
elects to sell this Security pursuant to the Shelf Registration Statement then, by its acceptance hereof, such Holder of this Security agrees to be bound by the terms of the Registration Rights
Agreement relating to the Registrable Securities which are the subject of such election.
If a Change in Control occurs, the Holder of this Security, at the Holder’s option, shall have the right, in accordance with the provisions of the Indenture, to require the Company to repurchase this Security (or
any portion of the principal amount hereof that is equal to U.S.$1,000 or any greater integral multiple of U.S.$1,000) for cash at a Repurchase Price equal to 100% of the principal amount thereof plus interest accrued to, but excluding, the
Repurchase Date. At the option of the Company, the Repurchase Price may be paid in cash or, subject to the conditions provided in the Indenture, by delivery of shares of Common Stock or in a combination of cash and Common Stock, having a fair market
value equal to the Repurchase Price. For purposes of this paragraph, the fair market value of shares of Common Stock shall be determined by the Company and shall be equal to 95% of the average of the closing price per share for the five consecutive
Trading Days immediately preceding and including the third Trading Day prior to the Repurchase Date. Whenever in this Security there is a reference, in any context, to the principal of any Security as of any time, such reference shall be deemed to
include reference to the Repurchase Price payable in respect of such Security to the extent that such Repurchase Price is, was or would be so payable at such time, and express mention of the Repurchase Price in any provision of this Security shall
not be construed as excluding the Repurchase Price so payable in those provisions of this Security when such express mention is not made;
provided
,
however
, that, for the purposes of the paragraph below concerning the consequences of
an Event of Default, such reference shall be deemed to include reference to the Repurchase Price only to the extent the Repurchase Price is payable in cash.
[The following paragraph shall appear in each Registered Security that is not a Global Security:
In the event of redemption, repurchase or conversion of this Security
in part only, a new Registered Security or Registered Securities for the unredeemed, unrepurchased or unconverted portion hereof will be issued in the name of the Holder hereof.]
[The following paragraph shall appear in each Global Security:
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In the event of a deposit or withdrawal of an interest in this Security, including an exchange,
transfer, redemption, repurchase or conversion of this Security in part only, the Trustee, as custodian of the Depositary, shall make an adjustment on its records to reflect such deposit or withdrawal in accordance with the Applicable Procedures.]
The indebtedness evidenced by this Security is, to the
extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full in cash or Cash Equivalents of all Senior Debt of the Company, and this Security is issued subject to such provisions of the
Indenture with respect thereto. Each Holder of this Security, by accepting the same,
(a) agrees to and shall be bound by such provisions,
(b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided, and
(c) appoints the Trustee his attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the
principal of all the Securities, together with accrued and unpaid interest, if any, to the date of declaration, may be declared due and payable in the manner and with the effect provided in the Indenture. Upon payment (i) of the amount of principal
so declared due and payable, together with accrued and unpaid interest to the date of declaration, and (ii) of interest on any overdue principal and, to the extent permitted by applicable law, overdue interest, all of the Company’s obligations
in respect of the payment of the principal of and interest on the Securities shall terminate.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities under the
Indenture at any time by the Company and the Trustee with the written consent of the Holders of a majority in principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued in exchange herefor or in lieu hereof, whether or
not notation of such consent or waiver is made upon this Security or such other Security.
As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or
trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default, the Holders of
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not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of
such Event of Default as Trustee and furnished the Trustee reasonable indemnity, the Trustee shall have failed to institute any such proceeding for 60 days after receipt of such notice, request and offer of indemnity, and the Trustee has not
received any direction inconsistent with such written request from the Holders of a majority of the aggregate principal amount of the Outstanding Securities during such 60 day period. The foregoing shall not apply to any suit instituted by the
Holder of this Security for the enforcement of any payment of principal hereof, premium, if any, Liquidated Damages, if any, or interest hereon on or after the respective due dates expressed herein or for the enforcement of the right to convert this
Security as provided in the Indenture.
No reference herein to
the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, Liquidated Damages, if any, and interest on this
Security at the times, places and rate, and in the coin or currency, herein prescribed or to convert this Security as provided in the Indenture.
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of Registered Securities is registrable on the Security
Register upon surrender of a Registered Security for registration of transfer at the Corporate Trust Office of the Trustee or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The
City of New York, or at such other offices or agencies as the Company may designate, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder
thereof or his attorney duly authorized in writing, and thereupon one or more new Registered Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees by the
Registrar. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to recover any tax or other governmental charge payable in connection therewith.
Prior to due presentation of a Registered Security 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 Registered Security is registered as the owner thereof for all purposes, whether or not such Security be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the contrary.
Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New
York, United States of America, including, without limitation, Section 5-1401 of the New York General Obligations Law.
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All terms used in this Security which are defined in the Indenture shall have the meanings assigned to
them in the Indenture.
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EXHIBIT B
ELECTION OF HOLDER TO REQUIRE REPURCHASE
1. Pursuant to Section 12.1 of the Indenture, the undersigned hereby elects to have this Security repurchased by the Company.
2. The undersigned hereby directs the Trustee or the Company to pay it or
an amount in cash equal to 100% of the principal amount to be repurchased (as set forth below), plus interest accrued to
the Repurchase Date or, at the Company’s election, Common Stock, valued as set forth in the Indenture.
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Dated:
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Signature
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Signature Guaranteed
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Principal amount to be repurchased:
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(must be equal to U.S.$1,000 or any
greater integral multiple of U.S.$1,000):
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Remaining principal amount following such repurchase:
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NOTICE:
The signature to the
foregoing election must correspond to the name as written upon the face of this Security in every particular, without alteration or any change whatsoever.
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EXHIBIT C
CONVERSION NOTICE
The undersigned Holder of this Security hereby irrevocably exercises the option to convert this Security, or any portion of the principal amount hereof
(which is an integral multiple of U.S.$1,000) below designated, into shares of Common Stock in accordance with the terms of the Indenture referred to in this Security and directs that such shares, together with a check in payment for any fractional
share and any Securities representing any unconverted principal amount hereof, be delivered to and be registered in the name of the undersigned unless a different name has been indicated below. If shares of Common Stock or Securities are to be
registered in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any amount required to be paid by the undersigned on account of interest accompanies this Security.
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Dated:
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Signature
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If shares or Registered Securities are to be registered in the name of a Person other than the Holder, please print such Person’s name and address:
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If only a portion of the Securities is to be converted, please indicate:
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1.
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Principalamount to be converted:
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U.S.$
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(any integral multiple of U.S. $1,000)
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Address
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2.
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Principal amount and denomination of Registered Securities representing unconverted principal amount to be issued:
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Social Security or other Taxpayer Identification Number, if any
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Amount: U.S.$
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[Signature Guaranteed]
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