As filed with the Securities and Exchange Commission on December 16, 2005
Registration No. 333-
UNITED STATES
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.
O’Melveny & Myers LLP
Embarcadero Center West
275 Battery Street, Suite 2600
San Francisco, California 94111-3305
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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$82,000,000 6.75% Convertible Senior Notes due October 31, 2010
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$82,000,000(1)
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100%
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$82,000,000
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$8,774
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Common Stock, no par value per share(3)
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31,540,340(4)
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$2.31(4)
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$808,500(4)
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$87(5)(6)
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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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Shares of the registrant’s common stock being registered hereby are accompanied by the registrant’s preferred stock purchase rights. Until the occurrence of certain
prescribed events, such rights are not exercisable, are evidenced by each certificate for common stock and will be transferred along with and only with the common stock.
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(4)
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Represents (i) 31,190,340 shares of common stock issuable upon conversion of the notes at the conversion rate of 380.37 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 $2.63 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, and (ii) 350,000 shares of common stock issuable upon the exercise of
warrants with an exercise price of $3.50 per share.
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(5)
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Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act, based on the average of the high and low prices for the
registrant’s common stock as reported on the Nasdaq National Market on December 15, 2005, which was $2.31.
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(6)
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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. The selling
securityholders may not sell these securities 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
selling securityholders named in this prospectus are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion,
Dated December 16, 2005
PRELIMINARY PROSPECTUS
Making cancer more treatable
TM
$82,000,000
6.75% Convertible Senior Notes
due October 31, 2010
and the common stock issuable upon conversion of the notes
We issued the notes offered by this prospectus in a private placement in
November 2005. This prospectus will be used by selling securityholders to resell their notes and the common stock issuable upon conversion of their notes and the exercise of warrants. 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 October 31, 2010. The conversion rate is 380.37 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 $2.63 per share.
We will pay interest on the notes on April 30 and October 31 of each year. The first interest payment will be made on April 30, 2006. The
notes will be senior in right of payment to our 5.75% Convertible Subordinated Notes due 2008, our 5.75% Convertible Senior Subordinated Notes due 2008 and our 4% Convertible Senior Subordinated Notes due 2010.
On April 30, 2006, you shall have the right to cause us to redeem in
cash up to 30% of the aggregate principal amount of the notes on a pro rata basis. Such redemption will be at par, but excluding accrued and unpaid interest through the redemption date. Any such interest not paid upon redemption will be forfeited to
us. We shall hold in escrow, out of the net proceeds of the initial offering, an amount equal to the aggregate amount necessary to fund any such redemptions.
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 December 15, 2005, the last reported sale price for our common stock on the Nasdaq National Market was $2.29 per share.
Investing in the notes involves risk. See “
Risk Factors
” beginning on page 7.
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
, 2005
TABLE OF CONTENTS
i
PROSPECTUS SUMMARY
The
following is a summary of this prospectus. The following summary does not contain all the information that you should consider before investing in the notes. You should read this entire prospectus carefully, including the documents that we have
incorporated by reference into this prospectus. Unless otherwise indicated, “CTI,” “Company,” “we,” “us,” “our” and similar terms refer to Cell Therapeutics, Inc. and its subsidiaries.
Our Company
We develop, acquire and commercialize novel treatments for cancer. Our goal
is to build a leading biopharmaceutical company with a diversified portfolio of proprietary oncology drugs. Our research, development, acquisition and in-licensing activities concentrate on identifying and developing new, less toxic and more
effective ways to treat cancer. We are developing XYOTAX, paclitaxel poliglumex, for the treatment of non-small cell lung cancer, or NSCLC, and ovarian cancer. Our phase III clinical studies for XYOTAX did not meet our primary endpoint of superior
overall survival. However, in a pooled analysis of our STELLAR 3 and 4 pivotal trials, woman receiving XYOTAX for first-line treatment of NSCLC had statistically significant improvement in median, 1 year and overall survival compared to women
receiving standard first-line chemotherapy. In addition, a phase II clinical trial that we reported in September 2005 demonstrated a survival advantage for women receiving XYOTAX as first-line therapy for NSCLC when compared to men. We, therefore,
plan to submit a new drug application, or NDA, with the U.S. Food and Drug Administration, or FDA, for XYOTAX as first-line monotherapy for women with advanced NSCLC who have poor performance status (PS2) based on data from the pooled analysis of
our STELLAR 3 and 4 first-line trials. To support this indication, we also have initiated an additional study for XYOTAX as first-line monotherapy in women and to have interim results available at the time of FDA review of that NDA, as an
alternative to waiting for the completion of the study. In Europe, we plan to submit a marketing authorization application, or MAA, based on non inferior survival and improved side effect profile demonstrated in our first-line pivotal trials. We
will need additional positive input from the Scientific Advisory Working Group of the European Medicines Agency, or EMEA, prior to submitting an MAA on these bases. We are developing pixantrone, a novel anthracycline derivative, for the treatment of
non-Hodgkin’s lymphoma, or NHL. We are targeting an interim analysis from our ongoing phase III study late in the second quarter of 2006. We also are developing CT-2106, polyglutamate camptothecin, which is in a phase I/II trial for
the treatment of colorectal cancer and a phase II trial in ovarian cancer. In the first half of 2005, we commenced a cost savings initiative, including a reduction of workforce, in an effort to conserve capital.
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
. Information on our website does not constitute part of this prospectus.
“CTI” 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.
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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$82,000,000 aggregate principal amount of 6.75% Convertible Senior Notes due October 31, 2010.
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Mandatory Redemption Right
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On April 30, 2006, you shall have the right to cause us to redeem in cash up to 30% of the aggregate principal amount of the notes on a pro rata basis. Such redemption will be at par and
will exclude any accrued and unpaid interest through the redemption date. Any such interest not paid to you upon redemption will be forfeited to us. We shall hold in escrow, out of the net proceeds of this offering, an amount equal to the aggregate
amount necessary to fund any such redemptions.
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Issuer
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Cell Therapeutics, Inc.
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Maturity
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October 31, 2010
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Offering Price
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100% of the principal amount.
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Interest
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Interest is payable on the notes at a rate of 6.75% per year, payable in cash, registered common stock or some combination of cash and registered common stock having a fair market value equal to
the interest payment due, semi-annually on April 30 and October 31 of each year, beginning April 30, 2006. For the purposes of this provision, the fair market value of our common stock shall be equal to 95% of its volume-weighted average price for
the five consecutive trading days ending on the trading day immediately preceding the interest payment date.
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Conversion
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You have the option to convert the notes into shares of our common stock at a conversion rate of 380.37 shares of common stock per $1,000 principal
amount of our notes, which is equivalent to a conversion price of approximately $2.63 per share. The conversion rate is subject to adjustment as described more fully in the “Description of the Notes—Conversion Rights.”
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 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 repurchase. See “Description of Notes—Conversion Rights.”
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Optional Redemption
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We have the option to redeem all, but not less than all, of the notes if the closing price per share of our common stock has exceeded 125% of the conversion price then in effect for at least 20
trading days within any 30-consecutive trading day period, provided that for each day during such 30 trading day period a shelf registration statement was in effect with respect to the resale of the shares of our common stock underlying these notes.
The redemption price shall be par including accrued and unpaid interest up to but not including the redemption date and shall be payable in shares of registered common stock valued at the conversion price then in effect. See “Description of
Notes—Conversion Rights.”
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Make-Whole Provision
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Upon any conversion of the notes, we will pay to you an amount equal to $337.50 per $1,000 principal amount of your notes so converted, less the amount of any interest paid on such notes
prior to the conversion date. This payment may be made in cash, registered common stock or some combination of cash and registered common stock. For the purposes of this provision, the fair market value of our common stock shall be equal to 95% of
its volume-weighted average price for the five consecutive trading days ending on the trading day immediately preceding the conversion date.
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Ranking
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The notes rank
pari passu
in right of payment with all existing and future senior indebtedness. The notes are senior to our existing 5.75% Convertible Subordinated Notes due 2008, our
5.75% Convertible Senior Subordinated Notes due 2008 and our 4% Convertible Senior Subordinated Notes due 2010. The notes are structurally subordinated in right of payment to the liabilities of our subsidiaries. The indenture governing the notes
restricts our incurrence of indebtedness and our subsidiaries’ incurrence of indebtedness. See “Description of Notes—Ranking.”
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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, at our option, in cash, in shares of registered common stock or a combination of cash and registered 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 volume weighted average price per share of our common stock for each of the five consecutive trading days ending on the trading day immediately preceding the repurchase date.
A change in control could be an event of default under our senior debt. 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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Covenants
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We have agreed not to incur or suffer to exist, and to not permit our subsidiaries to incur or suffer to exist (i) any indebtedness that is structurally senior or senior by its terms to
these notes, or (ii) secured indebtedness, in an aggregate principal amount for both clauses (i) and (ii) exceeding $10,000,000 unless, in the case of clause (ii) only, these notes are equally and ratably secured with such secured
indebtedness, except that we may incur liens or encumbrances in connection with biopharmaceutical licensing and/or partnering arrangements.
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We have also agreed (i) not to issue any preferred equity or debt security convertible into or
exchangeable for our common stock and (ii) not to refinance, retire or exchange any
of our
existing 5.75% Convertible Subordinated Notes due 2008, 5.75% Convertible Senior
Subordinated Notes due 2008 or 4% Convertible Senior Subordinated Notes due 2010 prior to
March 31, 2006, subject to certain exceptions. After this
date, if we refinance, retire or
exchange our existing 5.75% Convertible Subordinated Notes due 2008, 5.75% Convertible
Senior Subordinated Notes due 2008 or 4% Convertible Senior Subordinated Notes due 2010
by issuing new indebtedness, we
agree that such newly issued indebtedness will have a
maturity date later than the maturity date of these notes.
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Blocker Provision
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We will not (i) effect any conversion of any of these notes, and you will not have the right to convert any portion of these notes, or (ii) make any interest payment or make-whole
payment in shares of our common stock in respect of any of these notes, in either case to the extent that after giving effect to such conversion or payment you would beneficially own 9.5% or more of the number of shares of our common stock
outstanding immediately after giving effect to such conversion or payment. To the extent that this blocker provision prevents us from issuing to you sufficient shares of our common stock to satisfy in full any conversion or interest or make-whole
payment obligation, we shall issue to you a number of zero strike price warrants equal to the number of shares of our common stock that we are precluded by the terms of this blocker provision from issuing to you. Such zero strike price warrants
shall have an expiration date of October 31, 2010 and will themselves contain provisions similar to this blocker provision.
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Events of Default
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The following will be events of default under the indenture for the notes:
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;
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;
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;
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;
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
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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5
Risk Factors
You should read the “Risk Factors” section,
beginning on page 7 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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Nine Months
Ended
September 30,
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2000
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2001
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2002
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2003
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2004
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2004
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2005
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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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—
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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, 2000, 2001, 2002, 2003, 2004, and for the nine months ended September 30,
2004 and 2005, were insufficient to cover fixed charges by $51,929, $80,273, $49,903, $130,031, $252,298, $208,761 and $83,811 (in thousands) respectively.
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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 Our Business
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 September 30, 2005, we had an
accumulated deficit of approximately $806.6 million. Effective July 18, 2005, we divested our sole commercial product TRISENOX
®
(arsenic trioxide) and we may never become profitable, even if we are able to commercialize other products. We are pursuing regulatory approval for
XYOTAX and will need to conduct research, development, testing and regulatory compliance activities expenses for which, together with projected general and administrative expenses, will result in operating losses for the foreseeable future.
We expect to need to raise additional funds in the near future, and they
may not be available on acceptable terms, or at all.
As
of September 30, 2005, we expected that our existing capital resources, including the proceeds from our November 2005 convertible senior notes offering, net of amounts held in escrow until April 30, 2006 to fund potential mandatory
redemptions of these notes, and our ability to control expenditures would enable us to maintain our operations for at least the next twelve months based on then current activities; however, to fully fund ongoing and planned activities beyond the
next twelve months, we will need to raise additional funds. In particular, we will need to raise additional funds to complete an additional study for XYOTAX as first-line monotherapy in women and the regulatory approval process for XYOTAX.
If our plans or assumptions change or are inaccurate, it will
affect the amount of additional funds we will need to raise. We may raise such capital through public or private equity financings, partnerships, debt financings or restructurings, 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 will further curtail operations significantly, including the delay, modification or cancellation of operations and plans related to XYOTAX, pixantrone and
other products we may be developing. 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, shareholders may experience dilution of their proportionate ownership of us.
7
The terms of our newly issued 6.75% convertible senior notes and the terms of the related Conversion and
Placement Agreement preclude us from pursuing certain financings for various periods of time, and if one or more of the resale registration statements that we have agreed to file is not declared effective, we may be precluded from raising funds
through equity or debt financings for an extended period of time.
We may be
delayed, limited or precluded from obtaining regulatory approval of XYOTAX given that each of our three STELLAR phase III clinical trials for the treatment of non-small cell lung cancer did not meet their primary endpoints.
In March 2005, we announced the results of STELLAR 3, and in May 2005, we
announced the results of STELLAR 2 and 4, our phase III clinical trials of XYOTAX in non-small cell lung cancer. All three trials, which were designed to demonstrate a significant improvement in overall survival compared to current marketed agents
for treating NSCLC, did not achieve their primary endpoints of superior overall survival. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval. Negative or inconclusive results
or adverse medical events during a clinical trial could delay, limit or prevent regulatory approval. Our success depends in large part on obtaining regulatory approval of XYOTAX. Our filing strategy for XYOTAX has not been previewed or approved by
the FDA, the EMEA or any other regulatory authority, and we expect that obtaining regulatory approval based on our current clinical trial data will be difficult as described below.
Without a successful additional trial or positive interim results from that additional trial, we expect a difficult
regulatory review from the FDA, which may preclude obtaining approval of our new drug application, or NDA, for a number of reasons: our trials failed to meet their primary endpoints and the FDA has taken the view that it will not favorably review
secondary endpoints on data absent achievement of primary endpoints; while gender-specific survival was pre-specified in the analysis plan, women over men gender-specific survival was not a pre-specified endpoint; and, while the FDA has recently
reviewed NDAs based on pooled analyses, none have been approved in the past. We are not pursuing approval from the FDA based on non-inferiority which is usually the basis for making a comparable survival claim.
A successful regulatory review from the EMEA is also not assured. While one
EMEA member country supported using a non-inferiority overall survival endpoint for each of the STELLAR first-line studies, the EMEA Scientific Advisory Working Group will need to agree on the statistical tests and methodologies used to support this
non-inferiority endpoint. The EMEA Scientific Advisory Working Group may not reach such an agreement and may not support submission to the EMEA for review and potential approval.
We have a substantial amount of debt.
We have outstanding over $233 million of debt as of November 30, 2005. Over $96 million of this debt comes due in 2008 and over $137 million comes due in
2010. Assuming the mandatory redemption right for the notes is not exercised, our annual interest expense, including the interest payable pursuant to the 6.75% convertible senior notes, will be over $13 million. Unless we generate substantial sales
from one of our potential products or raise substantial additional capital, we may not be able to repay this debt or the interest, liquidated damages or other payments with respect to our debt. Prior to this debt becoming due, we may engage in one
or more restructuring transactions which could involve, among other things, an effective increase in interest rates, alteration of terms or exchanges involving the issuance of additional shares of common stock or other arrangements which may dilute
or be adverse to the value of our common stock.
8
We are subject to extensive government regulation.
We are subject to rigorous and extensive regulation by the FDA in the United States and by comparable agencies in other
countries. Failure to comply with regulatory requirements could result in various adverse consequences, including possible delay in approval or refusal to approve a product, withdrawal of approved products from the market, product seizures,
injunctions, monetary penalties, or criminal prosecution.
Our
products may not be marketed in the United States until they have been approved by the FDA and may not be marketed in other countries until they have received approval from the appropriate agency. With the exception of TRISENOX, which we recently
divested to Cephalon, Inc., or Cephalon, none of our products have received approval. Obtaining regulatory approval requires substantial time, effort and financial resources, and we may not be able to obtain approval of any of our products on a
timely basis, or at all. If our products are not approved in a timely fashion, our business and financial condition may be adversely affected.
The next product for which we expect to request approval is XYOTAX. We intend to request that the FDA approve XYOTAX as first-line monotherapy for women
with advanced NSCLC who have poor performance status (PS2) based on data from a pooled analysis of two trials. We also plan to initiate an additional study of XYOTAX as first-line monotherapy in women and to have interim results available at the
time of FDA review. Based on feedback from the FDA, we expect that it will be difficult to obtain approval based on the data available from our existing trials, and we cannot be sure that XYOTAX will be approved based on this submission or on any
other submission in the future.
In addition, both before and
after approval, our contract manufacturers and our products are subject to numerous FDA requirements covering, among other things, testing, manufacturing, quality control, labeling, advertising, promotion, distribution and export. Manufacturing
processes must conform to current Good Manufacturing Practice, or 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.
We believe that while
we owned TRISENOX, it was prescribed by physicians largely for uses not approved by the FDA. Although physicians may lawfully prescribe pharmaceutical products, such as TRISENOX, for such off-label uses, promotion by us of such off-label uses is
unlawful. Some of our practices intended to make physicians aware of off-label uses of TRISENOX, without engaging in off-label promotion, could nevertheless have been construed as off-label promotion, and it is likely that some instances of
off-label promotion occurred in the past. We are in discussions with the U.S. Attorney for the Western District of Washington in connection with previous promotional practices. Although we have policies and procedures in place designed to assure
ongoing compliance with FDA requirements regarding off-label promotion, some non-compliant actions may nevertheless have occurred. Regulatory authorities could take enforcement action against us if they believe that we promoted TRISENOX for
off-label use.
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 our employees from participation in federal and state healthcare programs.
Although we have policies prohibiting violations of relevant regulations and statutes, unauthorized actions of our employees or consultants (including unlawful off-label promotion),
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or unfavorable interpretations of such regulations or statutes may result in third-parties or regulatory agencies bringing legal proceedings or enforcement
actions against us.
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 market. 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. Many
oncology-focused multinational corporations currently market or are developing taxanes, epothilones, and other cytotoxic agents, which inhibit cancer cells by a mechanism similar to taxanes, or similar products including, among others, Bristol-Myers
Squibb Co., which markets paclitaxel; Aventis, which markets docetaxel; Genentech and OSI Pharmaceuticals, which market Tarceva™; Genentech, which markets Avastin™, Lilly, which markets Alimta
®
, and American Pharmaceutical Partners, which markets Abraxane™. In addition,
several companies such as NeoPharm Inc. and Sonus Pharmaceuticals, are also developing novel taxanes and formulations which could compete with our products.
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Because pixantrone is intended to provide less toxic treatment to patients who have failed standard chemotherapy treatment, if pixantrone is brought to market, it is not expected to
compete directly with many existing chemotherapies. However, pixantrone will face competition from currently marketed anthracyclines, such as mitoxantrone (Novantrone
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), and new anti-cancer drugs with reduced toxicity that may be developed and marketed.
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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, less expensive, have fewer side effects or
to be easier to administer than ours. In any such case, sales of our products or eventual products would likely suffer and we might never recoup the significant investments we are making to develop these product candidates.
Uncertainty regarding third-party reimbursement and healthcare cost containment
initiatives may limit our returns.
The ongoing efforts of
governmental and third-party payors to contain or reduce the cost of healthcare may affect our ability to commercialize our products successfully. Governmental and other third-party payors are increasingly attempting to contain healthcare 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 healthcare 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.
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. The
Medicare Prescription Drug Improvement, and Modernization Act, or MMA, enacted December 2003, will affect reimbursement and purchases of prescription drugs, including cancer drugs. Implementation of the MMA and yet to be issued regulation could have
an adverse impact on sales of prescription drugs. While we cannot predict whether any other legislative or regulatory proposals will be adopted, the adoption of other proposals could make it difficult or impossible to sell our products.
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 acute promyelocytic leukemia, or APL, who have relapsed or failed
standard therapies, which we recently divested to Cephalon, all of our compounds currently are in research or development, and none have been submitted for marketing approval.
Prior to commercialization, each product candidate requires significant additional research, development and preclinical
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 preclinical testing or clinical trials,
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fail to receive necessary regulatory approvals,
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be difficult to manufacture on a scale necessary for commercialization,
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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. 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 any of our license agreements for intellectual property underlying XYOTAX, pixantrone
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 University of Vermont, Hoffman La Roche and others, including the
intellectual property relating to pixantrone. 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 and CT-2106.
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 adequately protect 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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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 to biodegradable polymers. For example, XYOTAX is paclitaxel, the active ingredient in Taxol
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, one of the world’s best selling cancer drugs, linked to polyglutamate. We may not receive a patent for all of our polymer-drug conjugates and we may be challenged by the holder of
a patent covering the underlying drug and/or methods for its use or manufacture.
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 United States 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 a patent position or to determine the scope and
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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. Any
adverse outcome in litigation with respect to the infringement or validity of any patents owned by third-parties 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 unsuccessful, could cause us to
pay substantial damages and prohibit us from selling our products.
We attempt to monitor patent filings but have not conducted an exhaustive search for patents that may be relevant to our products and product candidates in an effort to guide the design and development of our products to avoid infringement.
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 and attorney’s fees 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. Moreover, third-parties may challenge the patents
that have been issued or licensed to us. 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.
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.
We may not be able to continue to purchase the materials necessary to produce XYOTAX, including paclitaxel, in adequate volume and quality. Paclitaxel is
derived from certain varieties of yew trees. Supply of paclitaxel is controlled by a limited number of companies. Paclitaxel is available and we purchase it from several sources. We purchase the raw material polyglutamic acid from a single source on
a purchase order basis. Should the polyglutamic acid purchased from our sources prove to be insufficient in quantity or quality, should a supplier fail to deliver in a timely fashion or at all, or should these relationships terminate, we may not be
able to obtain a sufficient supply from alternate sources on acceptable terms, or at all.
Our dependence on third-party manufacturers means that we do not always have sufficient control over the manufacture of our products.
We do not currently have internal analytical laboratory or manufacturing facilities to allow the testing or production of
drug products in compliance with cGMPs. Because we do not directly control our suppliers, these vendors may not be able to provide us with finished product when we need it.
We will be dependent upon these third-parties to supply us in a timely manner with products manufactured in compliance with
cGMPs or similar manufacturing standards imposed by foreign regulatory authorities where our products will be tested and/or marketed. While the FDA and other regulatory authorities maintain oversight for cGMP compliance of drug manufacturers,
contract manufacturers may at times violate cGMPs. The FDA and other regulatory authorities may take action against a contract manufacturer who violates cGMPs. One of our products under development,
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XYOTAX, has a complex manufacturing process, which may prevent us from obtaining a sufficient supply of drug product for the clinical trials and commercial
activities currently planned or underway on a timely basis, if at all. The active pharmaceutical ingredient and finished product for pixantrone are both manufactured by a single vendor.
If we do not successfully develop additional products, we may be unable to generate significant revenue or become profitable.
We divested our commercial product, TRISENOX, that
received marketing approval for relapsed or refractory APL. XYOTAX, pixantrone and CT-2106 are currently in clinical trials and may not be successful. Our STELLAR phase III clinical trials for XYOTAX for the treatment of non-small cell lung cancer
failed to meet their primary endpoints. 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. 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 by the regulatory authorities.
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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.
If we are unable to 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 XYOTAX, pixantrone and CT-2106.
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 take longer to complete our clinical trials than we expect, or we may not be able
to complete them at all.
Before regulatory approval for
any potential product can be obtained, we must undertake extensive clinical testing on humans to demonstrate the safety and efficacy of the product. 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.
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We may not obtain authorization to permit product candidates that are already in the preclinical
development phase to enter the human clinical testing phase. Authorized preclinical 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 preclinical 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 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 or for other reasons. 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 cooperative 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, need to perform more or larger clinical
trials than planned or experience delays in any of our present or planned clinical trials, including the phase II and phase III clinical trials of pixantrone, our development costs may increase and/or our ability to commercialize our product
candidates may be adversely affected. If delays or costs are significant, our financial results and our ability to commercialize our product candidates may be adversely affected.
If we fail to establish and maintain collaborations or if our partners do not perform, we may be 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 entered into an agreement with the Gynecologic Oncology Group to perform a phase III trial of
XYOTAX in patients with ovarian cancer. 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
several of our product candidates upon novel technologies that we are using to develop drugs for the treatment of cancer. These technologies have not been proven. Furthermore, preclinical 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.
As a result of our merger with Novuspharma, we are required to comply with the regulatory structure of Italy, which could result in
administrative challenges.
As a result of our merger with
Novuspharma, our operations need to comply not only with applicable laws of and rules of the United States, including Washington law and the rules and regulations of the SEC and the Nasdaq National Market, but also the European Union legal system
and the Republic of Italy, including the rules and regulations of CONSOB and Borsa Italiana, which collectively regulate companies listed on Italy’s public markets such as the Nuovo Mercato. Conducting our operations in a manner that complies
with all applicable laws and rules will require us to devote additional time and resources to regulatory compliance matters. For example, the process of seeking to understand and comply with the laws of each country, including tax, labor and
regulatory laws, might require us to incur the expense of engaging additional outside counsel, accountants and other professional advisors and might result in delayed business initiatives as we seek to ensure that each new initiative will comply
with all regulatory regimes.
As a result of our merger with Novuspharma, we
are subject to additional legal duties, additional operational challenges and additional political and economic risks related to our operations in Italy.
As a result of our merger with Novuspharma, a portion of our business is based in Italy. We are subject to duties and risks arising from doing business
in Italy, such as:
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Italian employment law, including collective bargaining agreements negotiated at the national level and over which we have no control;
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European data protection regulations, under which we will be unable to send private personal data, including many employment records and some clinical trial data, from our Italian
offices to our U.S. offices until our U.S. offices self-certify their adherence to the safe harbor framework established by the U. S. Department of Commerce in consultation with the European Commission;
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tariffs, customs, duties and other trade barriers; and
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capital controls, terrorism and other political risks.
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We are also subject to the following operational challenges, among others, as a result of our merger with Novuspharma and having a portion of our business
and operations based in Italy:
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effectively pursuing the clinical development and regulatory approvals of all product candidates;
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successfully commercializing products under development;
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coordinating research and development activities to enhance introduction of new products and technologies;
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coalescing the Italian business culture with our own and maintaining employee morale; and
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maintaining appropriate uniform standards, controls, procedures and policies relating to financial reporting and employment related matters, and the conduct of development
activities that comply with both U.S. and Italian laws and regulations.
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We may not succeed in addressing these challenges, risks and duties, any of which may be exacerbated by the geographic separation of our operations in the United States and in Italy. These risks related to doing
business in Italy could harm the results of our operations.
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, 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 international, 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
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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 and by disrupting activities through protests and other means. To the extent the
activities of these groups are successful, our business could be materially harmed by delaying or interrupting our research and development activities.
Our operations in Italy make us subject to increased risk regarding currency exchange rate fluctuations.
As a result of our merger with Novuspharma and our consequent operations in
Italy, we are exposed to risks associated with foreign currency transactions insofar as we might desire to use U.S. dollars to make contract payments denominated in euros or vice versa. As the net positions of our foreign currency transactions might
fluctuate, our earnings might be negatively affected. In addition, we are exposed to risks associated with the translation of euro-denominated financial results and accounts into U.S. dollars. Our reporting currency will remain as the U.S. dollar;
however, a portion of our consolidated financial obligations will arise in euros. In addition, the carrying value of some of our assets and liabilities will be affected by fluctuations in the value of the U.S. dollar as compared to the euro. Changes
in the value of the U.S. dollar as compared to the euro might have an adverse effect on our reported results of operations and financial condition.
The shares we issued pursuant to the CAP Agreement may allow the Existing Holders to exert control or influence over us.
In conjunction with issuance of the notes, we also entered into a Conversion
and Placement Agreement, or CAP agreement, with two existing holders (the “Existing Holders”) of approximately $38.4 million of our outstanding 5.75% Convertible Senior Subordinated Notes and 4% Convertible Senior Subordinated Notes.
Pursuant to the terms of the CAP Agreement, the Existing Holders and/or their affiliates received 6,701,302 shares of our common stock and warrants exercisable for 6,500,000 shares of our common stock. As a result, the Existing Holders own or have
the right to acquire a substantial amount of our outstanding common stock and, as a result, could exert control or influence over us.
The shares we issued pursuant to the CAP Agreement could adversely affect our stock price and be dilutive to our existing shareholders.
Pursuant to the terms of the CAP Agreement, we issued 6,701,302 shares of
our common stock and warrants exercisable for 6,500,000 shares of our common stock to the Existing Holders and, if the notes are converted in full, an additional 31,190,340 shares of our common stock. These issuances could adversely effect the
trading price of our common stock and be dilutive to our existing shareholders.
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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 November 30, 2005 our stock price ranged from a low of $1.97 to a high of $10.85. 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 by us or others of results of preclinical testing and regulatory actions;
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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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developments or disputes concerning patent or other proprietary rights;
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developments in our relationships with collaborative partners;
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acquisitions or divestitures;
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litigation and government proceedings;
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adverse legislation, including changes in governmental regulation;
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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. In the case of our company, beginning in March 2005, several class action lawsuits were instituted against CTI, James Bianco and Max Link and a derivative action lawsuit was filed against CTI’s full board of directors. See the
section in our Quarterly Report on Form 10-Q for the period ending September 30, 2005 under the heading “Legal Proceedings.” As a result of these lawsuits, we could incur substantial legal fees and our management’s attention
and resources could be diverted from operating our business in order to respond to the litigation.
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Anti-takeover provisions in our charter documents, our shareholder rights plan, and under Washington law could make
removal of incumbent management or an acquisition of us, which may be beneficial to shareholders, more difficult.
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, which imposes restrictions on some transactions between a corporation and
certain significant shareholders.
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 Our Notes
The notes are senior to our existing indebtedness and subordinated to the liabilities of our subsidiaries.
The notes are senior in right of payment to our 5.75% Convertible
Subordinated Notes due 2008, our 5.75% Convertible Senior Subordinated Notes due 2008 and our 4% Convertible Senior Notes due 2010. The notes are unsecured and equal in right of payment to all of our other existing senior debt. 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 any secured 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 also will be effectively subordinated to all liabilities, including trade payables and lease obligations, of our subsidiaries.
The indenture governing the notes restricts the incurrence certain 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.
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We anticipate that from time to time we will incur additional debt, including senior indebtedness. See
“Description of Notes—Ranking.”
We may be unable to
repurchase or redeem the notes.
At maturity, the entire
outstanding principal amount of the notes will become due and payable. On April 30, 2006, each noteholder shall have the right to cause us to redeem in cash, at par but excluding any accrued and unpaid interest through the redemption date, up
to 30% of the aggregate principal amount of the notes on a pro rata basis. We have agreed to hold in escrow out of net proceeds of the initial offering an amount equal to the maximum aggregate amount necessary to fund such redemptions. Upon any
conversion of the notes, we will be required to pay holders of the notes so converted a make-whole payment in an amount equal to $337.50 per $1,000 principal amount of the notes so converted less the amount of interest paid on such notes prior to
the conversion date. 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, upon mandatory redemption, upon conversion 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 or redemptions of the notes. If the maturity date or change in control occurs at a time when our other arrangements prohibit us from repurchasing
or redeeming 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 or redeem the notes. In that case, our failure to repurchase or redeem 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. In such a circumstance, we may not have sufficient cash available to repay such senior debt or pay any penalties required by these notes.
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.
There is no public market for the
notes and restrictions on transfer of the notes and the common stock issuable upon conversion of the notes may significantly impair the liquidity of the notes.
The notes were sold to the initial purchaser pursuant to an exemption from registration under the Securities Act and
applicable state or foreign securities laws and neither the notes nor the common stock issuable upon conversion of the notes may be resold by purchasers unless the notes and the common stock issuable upon conversion of the notes are subsequently
registered under the Securities Act or an exemption for the registration requirements of the Securities Act and applicable estate or foreign securities laws is available for such resale.
Prior to the sale of the notes offered by this prospectus, there has been no public market for any of the notes offered by
this prospectus, and there can be no assurance as to:
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the liquidity of any such market that may develop
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the ability of the holders to sell their notes or
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the price at which the holder would be able to sell their notes
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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.
The initial purchaser has
advised us that they intend to make a market in the notes. The initial purchaser is 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 purchaser. 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 may not be rated or may receive a lower rating than anticipated.
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. Significant fluctuations in the market price of our common stock underlying the notes may occur in response to various factors and events,
including, among other things:
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announcements by us or others of results of preclinical testing and regulatory actions;
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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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developments or disputes concerning patent or other proprietary rights;
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developments in our relationships with collaborative partners;
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acquisitions or divestitures;
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litigation and government proceedings;
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adverse legislation, including changes in governmental regulation;
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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.
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SPECIAL NOTE 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 contained in and incorporated by reference into this prospectus when
evaluating an investment in our common stock. This prospectus and the documents incorporated by reference into this prospectus include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes
of these provisions, including:
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any projections of earnings, revenues or other financial items;
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any statements of the plans and objectives of management for future operations;
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any statements concerning proposed new products or services;
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any statements regarding future operations, plans, regulatory filings or approvals;
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any statements on plans regarding proposed or potential clinical trials or new drug filing strategies;
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any statements concerning proposed new products or services, any statements regarding pending or future mergers or acquisitions; and
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any statements regarding future economic conditions or performance, and any statement of assumptions underlying any of the foregoing.
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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 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.
This prospectus contains and incorporates by reference market data, industry
statistics and other data that have been obtained from, or compiled from, information made available by third parties. We have not independently verified their data.
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ACCOUNTING CONSIDERATIONS
We are
currently evaluating the accounting treatment related to our convertible senior notes offering, whose terms are described under the caption “The Offering”, and CAP agreement, including related registration rights. The impact of this
accounting treatment will be reflected in our financial results for the fourth quarter of 2005 to be included in our Annual Report on Form 10-K for the year ending December 31, 2005.
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 6.75%
Convertible Senior Notes due October 31, 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 the registration rights agreement, including definitions of certain terms used in the
indenture or the registration rights agreement.
General
The notes are our general, unsecured obligations. The notes are senior in
right of payment, which means that they rank in right of payment equal to certain of our indebtedness as described below, but are senior in right of payment to our 5.75% Convertible Subordinated Notes due 2008, our 5.75% Convertible Senior
Subordinated Notes due 2008 and our 4% Convertible Senior Subordinated Notes due 2010. We are required to repay the full principal amount of the notes on October 31, 2010, unless they are previously converted, redeemed or repurchased.
The notes bear interest at the annual rate of 6.75% from the
date of issuance of the notes. We will pay interest twice a year, on each April 30 and October 31, beginning April 30, 2006, 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 March 31 or September 30, as the case may be, which we refer to as a regular record date. Interest will be calculated on the
basis of a 360-day year consisting of twelve 30-day months.
Interest on the notes is payable, at our option, in cash, registered common stock or some combination of cash and registered common stock having a fair market value equal to the interest payment due. For the purposes of payment in
registered common stock, the fair market value of our common stock shall be equal to 95% of its volume-weighted average price for the five consecutive trading days ending on the trading day immediately preceding the interest payment date.
You may convert the notes into shares of our common stock at
any time before the close of business on October 31, 2010, unless the notes have been previously redeemed or repurchased. The initial conversion rate for the notes is 380.37 shares of common stock per $1,000 principal amount of notes. This
conversion rate is equivalent to a conversion price of approximately $2.63 per share. The conversion rate is subject to adjustment as described below. Holders of notes submitted for repurchase are entitled to convert the notes up to and including
the business day immediately preceding the date fixed for repurchase.
On April 30, 2006, you shall have the right to cause us to redeem in cash up to 30% of the aggregate principal amount of the notes you hold. Such redemption will be at par and will exclude any accrued and unpaid interest through the
redemption date. Any such interest not paid to you upon redemption will be forfeited to us. We shall hold in escrow, out of the net proceeds of the initial offering, an amount equal to the aggregate amount necessary to fund any such redemptions.
Upon any conversion of the notes, we will pay to you an amount
equal to $337.50 per $1,000 principal amount of your notes so converted, less the amount of any interest paid on such notes prior to the conversion date. This payment may be made in cash, registered common stock or some combination of cash and
registered common stock having a fair market value equal to the interest payment due. For the purposes of payment in registered common stock, the fair market value of our common stock shall be
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equal to 95% of its volume-weighted average price for the five consecutive trading days ending on the trading day immediately preceding the conversion date.
If we experience a change in control, as described below, you
will 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.
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 on the notes will be 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 will be 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 will be 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 will not be 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).
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 payments of interest on, and the redemption or repurchase price of, the global note 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 or in shares of Common Stock on each payment date.
We have been informed that, with respect to any payment of interest on, principal of, or repurchase price of, the global
note, 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 are the responsibility of those
participants, as is now the case with securities held for the accounts of customers registered in “street name.”
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.
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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 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, will 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 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 repurchase unless we default in making the payment due upon
repurchase. In each case, the initial conversion rate is equal to 380.37 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $2.63 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 is attached to the indenture and 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 will be 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
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payment in lieu of any 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 will not be 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 will receive the interest payable on such note on the next interest payment date. To correct for this resulting overpayment of interest, we will 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 will not be 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.
In addition, if we distribute rights or warrants (other than those referred to in clause (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 will be 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 “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.
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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) other such all cash distributions to all holders of our common stock 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 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.
We will have the
option to redeem all, but not less than all, of the notes if the closing price per share of our common stock has exceeded 125% of the conversion price then in effect for at least 20 trading days within any 30-consecutive trading day period, provided
that for each day during such 30 trading day period a shelf registration statement was in effect with respect to the resale of the shares of our common stock underlying these notes. Such redemption shall be payable in shares of registered common
stock valued at the conversion price then in effect.
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 of this prospectus entitled “Description of Capital Stock” for
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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 will not be 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 will, without the consent of the holder of any note, become 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 will be 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 will not be made for a merger that does not result in any reclassification, conversion, exchange or cancellation of our common stock.
Ranking
The payment of the principal of, and premium, if any, and interest on the notes, and any amounts payable upon the repurchase
of the notes, is equal in right of payment to the extent set forth in the indenture to the payment of our senior debt, as defined in the indenture.
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
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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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our 4% Convertible Senior Subordinated Notes due 2010;
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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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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.
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The indenture limits our ability and the ability of our subsidiaries to incur certain future
indebtedness.
Negative Covenants
We have agreed that we will not, and will not permit any of our subsidiaries
to, incur or suffer to exist (i) any indebtedness that is structurally senior or senior by its terms to these notes, or (ii) secured indebtedness, in an aggregate principal amount for both clauses (i) and (ii) exceeding
$10,000,000 unless, in the case of clause (ii) only, these notes are equally and ratably secured with such secured indebtedness; provided, however, that liens or encumbrances in favor of strategic partners granted in connection with
biopharmaceutical licensing and/or partnering arrangements are not subject to this restriction.
We have also agreed that, prior to March 31, 2006, we will not (i) issue any preferred equity or debt security convertible into or exchangeable
for common stock, or (ii) refinance, retire or exchange any of our existing 5.75% Convertible Subordinated Notes due 2008, 5.75% Convertible Senior Subordinated Notes due 2008 or 4% Convertible Senior Subordinated Notes due 2010. After
March 31, 2006, if we retire, refinance or exchange our existing 5.75% Convertible Subordinated Notes due 2008, 5.75% Convertible Senior Subordinated Notes due 2008 or 4% Convertible Senior Subordinated Notes due 2010 by issuing new
indebtedness, we have agreed that such newly issued indebtedness will have a maturity date later than the maturity date of these notes.
Notwithstanding any of the above restrictions, we are permitted to (a) grant securities convertible into or exchangeable for our common stock
pursuant to our existing stock option or stock purchase plans and may issue common stock upon the conversion, exercise or exchange of such securities, (b) issue common stock upon the conversion, exercise or exchange of any convertible,
exercisable or exchangeable security outstanding on the date hereof, and (c) issue common stock and securities convertible into or exercisable or exchangeable for shares of our common stock pursuant to the terms of notes or other agreements in
existence as of November 4, 2005.
Blocker Provision
We will not (i) effect any conversion of any of these notes, and no
holder will have the right to convert any portion of these notes, or (ii) make any interest payment or make-whole payment in shares of our common stock in respect of any of these notes, in either case to the extent that after giving effect to
such conversion or payment a holder would beneficially own 9.5% or more of the number of shares of our common stock outstanding immediately after giving effect to such conversion or payment. To the extent that this blocker provision prevents us from
issuing to a holder sufficient shares of our common stock to satisfy in full any conversion or interest or make-whole payment obligation, we shall issue to such holder a number of zero strike price warrants equal to the number of shares of our
common stock that we are precluded by the terms of this blocker provision from issuing to such holder. Such zero strike price warrants shall have an expiration date of October 31, 2010 and will themselves contain provisions similar to this
blocker provision.
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Mandatory Redemption
On April 30, 2006, upon providing at least five days written notice to us, each holder of an outstanding note shall have the right to cause us to
redeem in cash, at par but excluding any accrued and unpaid interest through the redemption date, up to 30% of the aggregate principal amount of the notes on a pro rata basis. Any such interest not paid to such holder upon redemption shall be
forfeited to us.
Up to and including April 30, 2006, we
shall hold in escrow out of the net proceeds of the initial offering an amount equal to the aggregate amount necessary to fund any such redemptions.
Repurchase at Option of Holders Upon a Change in Control
If a change in control occurs, you will 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
(including any additional interest then due) and premiums, if any, 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 registered common stock to be valued at 95% of the average of the volume weighted average price per share of our common stock for the five consecutive trading days ending on the trading day immediately preceding 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 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 or the trustee 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 will be 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
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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 closing 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 allowing any person or entity to exercise 50% of the total voting power of all shares of capital stock entitled to vote generally
in the elections of directors, 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 either (i) any person or entity having its nominees who are not
supported by the then current Board of Directors constitute a majority of the Board of Directors or (ii) 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.
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 will be 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.
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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 would 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, we may not have
sufficient cash available to repay such senior debt and repurchase the notes in cash, absent a waiver. 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. Any such default may, in turn, cause a default under any then
outstanding senior debt.
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.
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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 will not be 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 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 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 purchaser. 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 and upon exercise of certain warrants, 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 45 days following the date the notes were originally issued, a shelf registration statement covering resales of the registrable securities;
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use our best efforts to cause the shelf registration statement to be declared effective under the Securities Act on or prior to 90 days following the date the notes were originally
issued, 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 best efforts to keep effective the shelf registration statement until the earlier of:
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all record holders of registrable securities are able to sell all registrable securities immediately without restriction pursuant to Rule 144(k) under the Securities Act or any
successor rule thereto,
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all registrable securities registered under the shelf registration statement have been sold, or
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all registrable securities have ceased to be outstanding.
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Notwithstanding any postponement of the effectiveness of the shelf registration statement, we are required to pay additional interest at a rate per annum
of an additional one-half of one percent of the principal amount of the notes then outstanding if (i) the shelf registration statement is not declared effective by the SEC on or prior to 90 days following the date the notes were originally
issued, (ii) the shelf registration statement ceases to be effective, other than due to suspension period (as discussed below) and we fail to file and have declared effective a post-effective amendment to make such shelf registration statement
effective within 5 business days, (iii) the suspension periods (as discussed below) exceed 60 calendar days in any 12 month calendar period, or (iv) we fail to timely comply with any of our obligations under clauses (ii) and
(iii) above, provided that such failure is not solely due to a holder of the notes to deliver a completed and signed notice and questionnaire. Such additional interest shall be imposed from and including the day following the failure to comply
with any of our obligations under clauses (i) through (iv) above, to but excluding the day on which such failure is cured.
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.
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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 calendar days in any 12 month calendar period and not exceed 30 consecutive calendar days in any 12 month period. 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.
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 is 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 agreements. We will mail a notice and questionnaire to
obtain certain information regarding the holders for inclusion in this prospectus.
No holder of registrable securities will be 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 will be 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. Holders of registrable securities will, however, have at least 20 calendar days from the date on which the notice and questionnaire is first received by them to return a completed and signed notice and
questionnaire to us.
Beneficial owners of registrable
securities who have not returned a notice and questionnaire by the questionnaire deadline described above may receive another notice and questionnaire from us upon request. When we receive a completed and signed notice and questionnaire prior to the
effective time of the registration statement, we will include the registrable securities covered thereby in the shelf registration statement, subject to restrictions on the timing and number of supplements to the shelf registration statement
provided in the registration rights agreement.
We agree in the
registration rights agreement to use our best 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
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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.
Governing Law
The
indenture, the notes and the registration rights agreement will be 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 will be U.S. Bank National Association. If an event of default occurs, and is continuing,
the trustee will be 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 will be 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 November 2005, the initial purchasers informed us that they intended to make a market in the notes offered
hereby. However, the initial purchasers are not obligated to do so and any such market making activity may be terminated at any time without notice to the holders of the notes. The notes are eligible for trading in The PORTAL Market. 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.
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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 200,000,000 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 November 30, 2005, there were 71,841,860 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding.
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:
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restricting dividends on the common stock;
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diluting the voting power of the common stock;
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impairing the liquidation rights of the common stock; or
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delaying or preventing a change in control of the company without further action by the shareholders.
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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.
No
shares of preferred stock are outstanding, and we have no present plans to issue any shares of preferred stock.
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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.11 and 23B.12 of the Washington Business Corporation Act (the WBCA) permits a merger, sale of assets or liquidation of the company, subject to certain requirements. In
addition, Chapter 23B.12 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 Amended and 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 Amended and 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 Amended and Restated Articles of Incorporation or Amended and Restated Bylaws,
or a contract with the company. Further, our Amended and Restated 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). The shareholder rights plan expires on November 11, 2006. In
connection with the 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.
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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 or which is paid as interest on the notes. This discussion is
based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, Internal Revenue Service (“IRS”) rulings and judicial decisions now in effect, all of which are subject to change (possibly, with
retroactive effect) or different interpretations. 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. In addition, this discussion is limited to purchasers of notes who
will 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 U.S. 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 United States under an applicable income tax treaty), (ii) an
entity taxed as a corporation for U.S. federal income tax purposes 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) a trust if it (a) is subject to the primary supervision of a court within the United States and one or more U.S. persons have authority to control all substantial decisions of the trust or (b) has a
valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. A “Non-U.S. Holder” is any beneficial holder of a note or common stock other than a U.S. Holder or a foreign or domestic entity taxed as a
partnership for U.S. federal income tax purposes.
If a
partnership (including for this purpose any entity, domestic or foreign, treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of the notes or common stock, 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 that is a
partnership, and partners in such partnership, should consult their own 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 or which is paid as
interest on the notes.
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Interest
As described above, the notes provide that we may pay stated interest on the notes by delivering shares of our common stock equal to the number obtained
by dividing the interest due by 95% of the average of the volume weighted average price per share of our common stock price for each of the five consecutive trading days immediately preceding the interest payment date. If we elect this option, the
amount of interest received by a U.S. Holder of a note on any interest payment date may not exactly equal the note’s stated return. It is possible that the IRS could seek to analyze the U.S. federal income tax consequences of owning a note
under Treasury Regulations governing contingent payment debt instruments (the “Contingent Payment Debt Regulations”). As discussed below under “Potential Contingent Payment Debt Treatment,” we intend to take the position that the
Contingent Payment Debt Regulations do not apply to the notes. The discussion in this section assumes such regulations do not apply to the notes.
The stated interest on the notes will be includable in a U.S. Holder’s gross income as ordinary income for U.S. federal income tax purposes at the
time it is paid or accrued in accordance with the U.S. Holder’s regular method of tax accounting. In addition, if any interest is paid in our common stock, a U.S. Holder’s interest income will be equal to the fair market value of the stock
received on the payment date.
Potential Contingent Payment Debt
Treatment
For purposes of the Contingent Payment Debt
Regulations, a payment is not a contingent payment if the payment is subject to a remote or incidental contingency. A contingency is “remote” if there is a remote likelihood that the contingency will occur. A contingency is
“incidental” if the potential amount of the payment under all reasonably anticipated market conditions is insignificant relative to the total expected payments on the debt instrument. Payments on a debt instrument are not contingent merely
because the instrument is convertible into stock of the issuer.
We intend to take the position that the possibility of payment of one or more interest payments in stock is incidental. The IRS could, however, adopt a different position and assert that contingent original issue discount should be imputed
on the notes, and such position could potentially be sustained. If such position were sustained, 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. If we actually do exercise our option to pay in stock, the notes may be deemed reissued with a new payment
schedule which could have a similar result of increasing the amount includible in income by U.S. Holders.
Our determination that a contingency is incidental is generally binding on all holders. 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.
Liquidated Damages
If we do not comply with our obligations under the registration rights
agreement, such non-compliance may result in the payment of predetermined additional amounts referred to as additional interest or liquidated damages in the manner described under the caption “Description of the Notes—Registration
Rights.” If the amount or timing of any payments on a note is contingent, the note could be subject to special rules set forth in the Contingent Payment Debt Regulations that apply to debt
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instruments that provide for contingent payments (“contingent debt instruments”). We believe that the possibility of liquidated damages is remote
and, accordingly, the notes should not be treated as contingent debt instruments. For purposes of filing tax or information returns with the IRS, we will not treat the notes as contingent debt instruments or as having original issue discount. 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 Our Common Stock
A U.S. Holder generally will not recognize any income, gain or loss upon
conversion of a note into our common stock and fractional shares, if any, except with respect to cash received in lieu of a fractional share of common stock. 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, which will generally be equal to the amount paid for the note (as adjusted, as
discussed below) plus any amounts paid in connection with a conversion representing interest at the time of such conversion (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.
Sale, Exchange, Repurchase, 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 for our common
stock), repurchase solely for cash, 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 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 and less any amortized premium (as discussed below), plus
any market discount previously included into income. Subject to the market discount rules (also discussed below), any such gain or loss recognized on the sale, exchange, repurchase solely for cash, 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 solely 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 a U.S. Holder exchanges notes in connection with a change
of control, and we deliver a combination of cash and common stock in satisfaction of our repurchase obligation, assuming that the
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notes are “securities” for U.S. federal income tax purposes, a U.S. Holder will generally not recognize loss, but will generally recognize capital
gain, if any, on the notes so exchanged in an amount equal to the lesser of the amount of (i) gain “realized” (i.e., the excess, if any, of the fair market value of the common stock received upon exchange plus cash received over the
adjusted tax basis in the notes tendered in exchange therefor) or (ii) cash received. Such gain will generally be long-term if the U.S. Holder’s holding period in respect of such note is more than one year. A U.S. Holder’s tax basis
in the common stock received should generally equal the adjusted tax basis in notes tendered in exchange therefore, decreased by the cash received, and increased by an amount of gain recognized. A U.S. Holder’s holding period in the common
stock received upon exchange of notes will include the holding period of the notes so exchanged. 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. It is not entirely clear whether the notes constitute “securities” for this purpose and holders of notes should consult their own tax advisors in this regard.
Market Discount
U.S. Holders who did not purchase notes at the original issue price as part of their original issuance may be affected by
the market discount provisions of the Code. For this purpose, and subject to a de minimis exception, the market discount on a note generally will equal the amount, if any, by which the stated redemption price at maturity of the note (which is its
stated principal amount) exceeds a U.S. Holder’s adjusted tax basis in the note when purchased. Subject to a limited exception, these provisions generally require that if a U.S. Holder acquires a note at a market discount, such holder would
include as ordinary income upon the disposition, conversion into common stock, retirement or gift of that note an amount equal to the lesser of (i) the gain realized upon the disposition, conversion into common stock or retirement or, in the
case of a gift, the appreciation in the notes, and (ii) the accrued market discount on that note at the time of disposition, conversion into common stock, maturity or gift, unless such U.S. Holder elects to include accrued market discount in
income over the remaining life of the note. The election to include market discount in income over the life of the note, once made, applies to all market discount obligations acquired on or after the first taxable year to which the election applies
and may not be revoked without the consent of the IRS. In general, market discount will be treated as accruing on a straight-line basis over the remaining term of the note at the time of acquisition, or, at a U.S. Holder’s election, under a
constant yield method. If a U.S. Holder acquires a note at a market discount and does not elect to include accrued market discount in income over the life of the note, such holder may be required to defer the deduction of a portion of the interest
on any indebtedness incurred or maintained to purchase or carry the note until maturity or until the note is disposed of in a taxable transaction. The rules regarding market discount are complex, and U.S. Holders should consult their own tax
advisors regarding the application of these rules to their particular circumstances.
Premium
If a U.S. Holder purchases a
note at a premium over its stated principal amount, plus accrued interest, such holder generally may elect to amortize that premium from the purchase date to the note’s maturity date under a constant yield method. Amortizable premium, however,
will not include any premium attributable to a note’s conversion feature. The premium attributable to the conversion feature is the excess, if any, of the note’s purchase price over what the note’s fair market value would be if there
were no conversion feature. Amortized premium, which reduces a U.S. Holder’s basis in the note, can only offset interest income on a note and may not be deducted against other income. The election to amortize premium on a constant yield method,
once made, applies to all debt obligations held or subsequently acquired by a U.S. Holder on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the IRS. The rules regarding
premium are
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complex, and U.S. Holders should consult their own tax advisors regarding the application of these rules to their particular circumstances.
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 or as interest paid on 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 before
January 1, 2009, 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 provided certain holding period
requirements are satisfied.
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 our earnings and profits or assets, 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 in our earnings and profits or assets 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.
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.
Backup Withholding and Information Reporting
Information with respect to interest on the notes, dividends paid on our common stock and proceeds from the sale or other disposition of the notes and our common stock may be required to be reported to U.S. Holders
and to the IRS. This obligation, however, does not apply with respect to payments to certain U.S. Holders, including corporations and tax-exempt organizations.
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A U.S. Holder may be subject to backup withholding (currently at a rate of 28%) with respect to interest
paid on the notes, distributions paid on our common stock, or with respect to proceeds received from a sale or other disposition of the notes or our common stock. Backup withholding will not apply, however, if the U.S. Holder (i) is a
corporation or comes within certain other exempt categories and, when required, demonstrates such fact or (ii) provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with
applicable backup withholding rules. To establish status as an exempt person, a U.S. Holder will generally be required to provide certification on IRS Form W-9.
U.S. Holders should consult their own tax advisor regarding their qualification for an exemption from backup withholding and
the procedures of obtaining such an exemption, if applicable. The backup withholding tax is not an additional tax and taxpayers may use amounts withheld as a credit against their U.S. federal income tax liability or may claim a refund as long as
they timely provide certain information to the IRS.
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, interest, 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.
Interest
Payments of interest to nonresident persons or entities are generally subject to U.S. federal income tax at a rate of 30
percent, collected by means of withholding by the payor. Payments of interest on the notes to most Non-U.S. Holders, however, should qualify as “portfolio interest,” and thus will be exempt from the withholding tax, if such holders certify
their nonresident status as described below. The portfolio interest exception will not apply to payments of interest to a Non-U.S. Holder that:
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owns, actually or constructively, at least 10 percent of the total combined voting power of all classes of our stock entitled to vote, or
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is a “controlled foreign corporation” that is related, directly or indirectly, to us.
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Even if the portfolio interest exception does not apply, payments of interest to a nonresident person or entity might not be
subject to withholding tax at a 30 percent rate, or might be subject to withholding tax at a reduced rate, under the terms of a tax treaty between the U.S. and the Non-U.S. Holder’s country of residence.
The portfolio interest exception, entitlement to treaty benefits and several
of the special rules for Non-U.S. Holders described below apply only if the Non-U.S. Holder certifies its nonresident status. A Non-U.S. Holder can generally meet this certification requirement by providing an accurate and complete Form W-8BEN or
appropriate substitute or successor form under penalties of perjury to us or our paying agent. The portfolio interest exception, described above, may not apply if the interest is U.S. trade or
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business income. In such case, a Non-U.S. Holder will be subject to U.S. federal income tax on receipt of interest that is U.S. trade or business income;
and, if the Non-U.S. Holder is a corporation, a U.S. branch profits tax equal to 30 percent of its “effectively connected earnings and profits,” subject to adjustments, unless the holder qualifies for an exemption from such tax or a lower
tax rate under an applicable treaty.
Liquidated Damages
As described under “Description of the
Notes—Registration Rights,” we may be required to pay holders additional amounts as a result of a registration default. It is possible that such payments might be subject to U.S. federal withholding tax at a rate of 30 percent or lower
treaty rate, if applicable. Each Non-U.S. Holder that is considering the purchase of notes should consult its tax advisor regarding the tax considerations that relate to the potential payment of liquidated damages or other contingencies.
Dividends
In general, dividends paid or constructive dividends deemed 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 our common stock and fractional shares, if any.
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,
Repurchase, 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 (other than a conversion of notes into our common stock and fractional shares, if any),
repurchase, 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
51
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
Information may be required
to be reported to Non-U.S. Holders and to the IRS concerning the amount of any interest paid on the notes and any dividends paid on our common stock. Under current U.S. federal income tax law, backup withholding tax (at the rate of 28%) will not
apply to interest payments on the notes and dividend payments on our common stock if the required certifications of exempt status are received, provided in each case that the payor, including a bank or its paying agent, as the case may be, does not
have actual knowledge or reason to know that the payee is a nonexempt person.
Under the Treasury regulations, payments on the sale, exchange or other disposition of notes or our common stock effected through a foreign office of a broker to its customer generally are not subject to information
reporting or backup withholding. However, if the broker is a U.S. person, a controlled foreign corporation for U.S. federal income tax purposes, a foreign person 50% or more of whose gross income is effectively connected with a U.S. trade or
business for a specified three-year period, a foreign partnership with significant U.S. ownership or, if at any time during its taxable year, the foreign partnership is engaged in a U.S. trade or business, or a U.S. branch of a foreign bank or
insurance company, then information reporting will be required, unless the broker has in its records documentary evidence that the beneficial owner of the payment is not a U.S. person or is otherwise entitled to an exemption, and the broker has no
actual knowledge that the beneficial owner is not entitled to an exemption. Backup withholding may apply if the sale is subject to information reporting and the broker has actual knowledge that the beneficial owner is a U.S. person.
The information reporting and backup withholding rules will apply to payments
effected at a U.S. office of any U.S. or foreign broker, unless the broker has in its records documentary evidence that the beneficial owner of the payment is not a U.S. person or is otherwise entitled to an exemption, and the broker has no actual
knowledge that the beneficial owner is not entitled to an exemption.
Non-U.S. Holders should consult their own tax advisors regarding the application of withholding and backup withholding in their particular circumstances and the availability of and procedure for obtaining an exemption from withholding,
information reporting and backup withholding under the current Treasury regulations. Backup withholding does not represent an additional income tax. Any amounts withheld from a payment to a holder under the backup withholding rules will be allowed
as a credit against the Non-U.S. Holder’s U.S. federal income tax liability and may entitle the holder to a refund, provided that the required information or returns are timely furnished by such holder to the IRS.
The preceding discussion of certain U. S. federal income tax consequences
is for general information only and is not tax advice. Accordingly, each investor should consult its own tax advisor as to particular tax consequences to it of purchasing, holding and disposing of the notes and the common stock, including the
applicability and effect of any state, local or foreign tax laws, and of any proposed changes in applicable laws.
52
SELLING SECURITYHOLDERS
We
originally issued the notes in a private placement in November 2005. 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. We issued warrants to purchase common stock to the initial purchaser as compensation for services provided in the offering of the notes. We are registering the notes and the common stock issuable upon conversion of the notes or
exercise of the warrants offered by this prospectus on behalf of the selling securityholders named in the table below. The selling securityholders may from time to time offer and sell any or all of the notes and the common stock issuable upon
conversion of the notes or exercise of warrants being registered.
The following table contains information as of December 15, 2005, with respect to the selling securityholders and the principal amount of notes and the number of shares of common stock issuable upon conversion of the notes or exercise
of warrants beneficially owned by each selling securityholder that may be offered using this prospectus. We prepared this table based on the information supplied to us by the selling securityholders named in the table.
Any selling securityholder that is identified as a broker-dealer will be
deemed to be an “underwriter” within the meaning of Section 2(11) of the Securities Act, unless such selling securityholder obtained the security as compensation for services. In addition, any affiliate of a broker-dealer will be deemed to
be an “underwriter” within the meaning of Section 2(11) of the Securities Act, unless such selling securityholder purchased in the ordinary course of business and, at the time of its purchase of the security to be resold, did not have any
agreements or understandings, directly or indirectly, with any person to distribute the security. As a result, any profits on the sale of securities by selling securityholders who are deemed to be “underwriters” and any discounts,
commissions or concessions received by any such broker-dealers who are deemed to be “underwriters” will be deemed to be underwriting discounts and commissions under the Securities Act. Selling securityholders who are deemed to be
“underwriters” will be subject to prospectus delivery requirements of the Securities Act and to certain statutory liabilities, including, but not limited to, those under Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the
Exchange Act.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
Aristeia International Limited
|
|
$
|
3,010,000
|
|
3.7
|
%
|
|
1,144,914
|
|
|
1,144,914
|
|
|
—
|
|
—
|
|
Aristeia Partners LP
|
|
$
|
490,000
|
|
*
|
|
|
186,382
|
|
|
186,382
|
|
|
—
|
|
—
|
|
Bruce Fund, Inc.
|
|
$
|
1,000,000
|
|
1.2
|
%
|
|
380,370
|
|
|
380,370
|
|
|
—
|
|
—
|
|
CRT Capital Group LLC(3)
|
|
$
|
3,500,000
|
|
4.3
|
%
|
|
1,681,295
|
(4)
|
|
1,681,295
|
(4)
|
|
—
|
|
—
|
|
JMG Capital Partners, LP
|
|
$
|
1,000,000
|
|
1.2
|
%
|
|
380,370
|
|
|
380,370
|
|
|
—
|
|
—
|
|
JMG Triton Offshore Fund, Ltd.
|
|
$
|
1,000,000
|
|
1.2
|
%
|
|
380,370
|
|
|
380,370
|
|
|
—
|
|
—
|
|
Merced Partners Limited Partnership
|
|
$
|
1,500,000
|
|
1.8
|
%
|
|
570,555
|
|
|
570,555
|
|
|
—
|
|
—
|
|
Professional Life & Casualty
|
|
$
|
500,000
|
|
*
|
|
|
190,185
|
|
|
190,185
|
|
|
—
|
|
—
|
|
Quattro Distressed Opportunities Fund LP
|
|
$
|
400,000
|
|
*
|
|
|
152,148
|
|
|
152,148
|
|
|
—
|
|
—
|
|
Quattro Fund Ltd.
|
|
$
|
1,000,000
|
|
1.2
|
%
|
|
380,370
|
|
|
380,370
|
|
|
—
|
|
—
|
|
Quattro Multistrategy Masterfund LP
|
|
$
|
600,000
|
|
*
|
|
|
228,222
|
|
|
228,222
|
|
|
—
|
|
—
|
|
Tamarack International Ltd
|
|
$
|
500,000
|
|
*
|
|
|
190,185
|
|
|
190,185
|
|
|
—
|
|
—
|
|
Tang Capital Partners, LP
|
|
$
|
7,500,000
|
|
9.2
|
%
|
|
2,852,775
|
|
|
2,852,775
|
|
|
—
|
|
—
|
|
Any other holder of notes or future transferee, pledgee, donee or successor of any holder(4)(5)
|
|
$
|
60,000,000
|
|
73.2
|
%
|
|
22,822,200
|
|
|
22,822,200
|
|
|
—
|
|
—
|
|
(1)
|
Assumes conversion of all of the holder’s notes at a conversion price of approximately $2.63 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 71,841,860 shares of common stock outstanding as of November 30, 2005. 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)
|
This selling securityholder identified itself as a registered broker-dealer. This selling securityholder has represented to us that (a) the notes and the 1,331,295 shares of common
stock issuable upon conversion of the notes shown above as being offered by such selling securityholder were purchased by such selling securityholder in the ordinary course of business and, at the time of such purchase, such selling securityholder
had no arrangements or understandings, directly or indirectly, with any person to distribute such shares of our common stock, and (b) that 350,000 shares of the common stock underlying warrants exercisable for $3.50 per share shown above as being
offered by such selling stockholder were obtained as compensation for services.
|
|
(4)
|
Assumes the exercise of all of the holder’s warrants to purchase 350,000 shares of common stock at an exercise price of $3.50 per share of common stock.
|
|
(5)
|
Information about other selling securityholders will be set forth in prospectus supplements, if required.
|
|
(6)
|
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.
|
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
53
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.
54
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.
55
From time to time the selling securityholders may engage in short sales, short sales against the box,
puts and calls and other hedging transactions in our securities, and may sell and deliver their shares of our common stock in connection with such transactions or in settlement of securities loans. These transactions may be entered into with
broker-dealers or other financial institutions.
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.
Our common stock trades on the Nasdaq National Market under
the symbol “CTIC.”
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.
56
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 O’Melveny & Myers LLP, San Francisco, California.
EXPERTS
Grant Thornton LLP,
independent registered public accountants, have audited our consolidated financial statements and schedule included in our Annual Report on Form 10-K for the year ended December 31, 2004, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Such consolidated financial statements and schedule are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
With respect to the unaudited interim
financial information for the periods ended June 30, 2005 and 2004, incorporated by reference in this prospectus, Grant Thornton LLP has reported that they have applied limited procedures in accordance with the standards of the Public Company
Accounting Oversight Board (United States) for a review of such information. However, their separate report included in the company’s quarterly report on Form 10-Q for the quarter ended June 30, 2005, and incorporated by reference herein,
states that they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review
procedures applied. The accountants are not subject to the liability provisions of section 11 of the Securities Act of 1933 for their report on the unaudited interim financial information because that report is not a “report” or a
“part” of the registration statement prepared or certified by the accountants within the meaning of sections 7 and 11 of the Securities Act of 1933.
Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statements and schedule at
December 31, 2003, and for each of the two years in the period ended December 31, 2003, included in our Annual Report on Form 10-K for the year ended December 31, 2004, as set forth in their report, which is incorporated by reference
in this prospectus and elsewhere in the registration statement. Our consolidated 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.
57
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 1-800-SEC-0330. 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.
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.
SEC rules allow us to “incorporate by reference” into this
prospectus the information we file with the SEC. 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 SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act until the offering is complete:
|
|
•
|
|
our Annual Report on Form 10-K for the fiscal year ended December 31, 2004;
|
|
|
•
|
|
our Proxy Statement on Schedule 14A for our 2005 Annual Meeting of Shareholders dated April 20, 2005;
|
|
|
•
|
|
our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005;
|
|
|
•
|
|
our Quarterly Report on Form 10-Q for the quarter ended June 30, 2005;
|
|
|
•
|
|
our Quarterly Report on Form 10-Q for the quarter ended September 30, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on January 6, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on April 1, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on April 18, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on June 7, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on June 14, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on June 29, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on July 22, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on August 22, 2005;
|
58
|
|
•
|
|
our Current Report on Form 8-K filed on September 2, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on October 14, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on October 19, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on October 21, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on November 3, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on November 10, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K/A filed on November 10, 2005;
|
|
|
•
|
|
our Current Report on Form 8-K filed on November 28, 2005; and
|
|
|
•
|
|
The description of our preferred stock purchase rights contained in our Registration Statement on Form 8-A/A filed with the SEC on January 10, 2003 (No. 001-12465), including
any amendment or reports filed for the purpose of updating that description.
|
In addition, we also incorporate by reference into this prospectus additional information that we may subsequently file with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act prior to the termination of the offering. These documents include Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.
Notwithstanding the foregoing, unless specifically stated to the contrary,
none of the information that we disclose under Items 2.02 or 7.01 of any Current Report on Form 8-K that we may from time to time furnish to the Securities and Exchange Commission will be incorporated by reference into, or otherwise included in,
this prospectus.
We are subject to the information and
reporting requirements of the Exchange Act, and file periodic reports, proxy statements and we make available to our stockholders annual reports containing audited financial information for each year and quarterly reports for the first three
quarters of each fiscal year containing unaudited interim financial information.
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 in the prospectus 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 Elliott Avenue West, Suite 400
Seattle, Washington 98119
(206) 282-7100
59
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 November 2005) are as follows:
|
|
|
|
|
|
Securities and Exchange Commission registration fee
|
|
$
|
8,861
|
|
Trustee’s fees and expenses
|
|
|
11,250
|
|
Accounting fees and expenses
|
|
|
75,000
|
|
Legal fees and expenses
|
|
|
881,000
|
|
Miscellaneous
|
|
|
30,000
|
|
|
|
|
|
|
Total
|
|
$
|
1,006,111
|
|
|
|
|
|
|
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.
60
The following exhibits are filed herewith or incorporated by reference herein:
|
|
|
|
|
Exhibit
Number
|
|
Exhibit Title
|
|
3.1(1)
|
|
Registrant’s Amended and Restated Articles of Incorporation.
|
|
|
|
|
3.2(2)
|
|
Registrant’s Amended and Restated Bylaws.
|
|
|
|
|
4.1
|
|
Indenture, dated as of November 4, 2005, by and between Cell Therapeutics, Inc. and U.S. Bank National Association.
|
|
|
|
|
4.2
|
|
Form of Note (included in Exhibit 4.1).
|
|
|
|
|
4.3(3)
|
|
Registration Rights Agreement, dated as of November 4, 2005, by and between Cell Therapeutics, Inc. and the initial purchaser set forth therein.
|
|
|
|
|
5.1
|
|
Opinion of O’Melveny & Myers, LLP.
|
|
|
|
|
12.1
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
|
|
|
15.1
|
|
Letter Regarding Unaudited Financial Information
|
|
|
|
|
23.1
|
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
|
|
|
|
|
23.2
|
|
Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm.
|
|
|
|
|
23.3
|
|
Consent of O’Melveny & Myers, LLP (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 Current Report on Form 8-K filed June 4, 2004.
|
|
(2)
|
Incorporated by reference to Appendix H to the Registrant’s Registration Statement on Form S-4 (No. 333-106906).
|
|
(3)
|
Incorporated by reference to exhibits to the Registrant’s Current Report on Form 8-K filed November 10, 2005.
|
(a) 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. 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 in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no
61
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), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the registration statement
is on Form S-3 or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the 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;
(b) The undersigned Registrant hereby undertakes 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 Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to
be the initial
bona fide
offering thereof.
(c) Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the 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 Act and will be governed by the final adjudication of such issue.
62
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 December 16, 2005.
|
|
|
|
|
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
/ P
HILLIP
M.
N
UDELMAN
Phillip M. Nudelman,
Ph.D.
|
|
Chairman of the Board
|
|
December 16, 2005
|
|
|
|
|
|
/
S
/ J
AMES
A.
B
IANCO
James A. Bianco,
M.D.
|
|
President, Chief Executive Officer and Director (Principal Executive Officer)
|
|
December 16, 2005
|
|
|
|
|
|
/
S
/ L
OUIS
A.
B
IANCO
Louis A.
Bianco
|
|
Executive Vice President, Finance and Administration (Principal Financial Officer and Principal Accounting Officer)
|
|
December 16, 2005
|
63
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/
S
/ J
OHN
H.
B
AUER
John H.
Bauer
|
|
Director
|
|
December 16, 2005
|
|
|
|
|
|
/
S
/ V
ARTAN
G
REGORIAN
Vartan Gregorian,
Ph.D.
|
|
Director
|
|
December 16, 2005
|
|
|
|
|
|
/
S
/ M
ARY
O’N
EIL
M
UNDINGER
Mary O’Neill Mundinger,
DrPH
|
|
Director
|
|
December 16, 2005
|
|
|
|
|
|
/
S
/ J
ACK
W.
S
INGER
Jack W. Singer,
M.D.
|
|
Director
|
|
December 16, 2005
|
64
EXHIBIT INDEX
|
|
|
|
|
Exhibit
Number
|
|
Exhibit Title
|
|
3.1(1)
|
|
Registrant’s Amended and Restated Articles of Incorporation.
|
|
|
|
|
3.2(2)
|
|
Registrant’s Amended and Restated Bylaws.
|
|
|
|
|
4.1
|
|
Indenture, dated as of November 4, 2005, by and between Cell Therapeutics, Inc. and U.S. Bank National Association.
|
|
|
|
|
4.2
|
|
Form of Note (included in Exhibit 4.1).
|
|
|
|
|
4.3(3)
|
|
Registration Rights Agreement, dated as of November 4, 2005, by and between Cell Therapeutics, Inc. and the initial purchaser set forth therein.
|
|
|
|
|
5.1
|
|
Opinion of O’Melveny & Myers, LLP.
|
|
|
|
|
12.1
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
|
|
|
15.1
|
|
Letter Regarding Unaudited Financial Information
|
|
|
|
|
23.1
|
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
|
|
|
|
|
23.2
|
|
Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm.
|
|
|
|
|
23.3
|
|
Consent of O’Melveny & Myers, LLP (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 Current Report on Form 8-K filed June 4, 2004.
|
|
(2)
|
Incorporated by reference to Appendix H to the Registrant’s Registration Statement on Form S-4 (No. 333-106906).
|
|
(3)
|
Incorporated by reference to exhibits to the Registrant’s Current Report on Form 8-K filed November 10, 2005.
|
65
Exhibit 4.1
CELL THERAPEUTICS, INC.,
as
Company
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
INDENTURE
Dated as of November 4, 2005
6.75%
CONVERTIBLE SENIOR NOTES DUE 2010
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
ARTICLE ONE
|
|
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
|
|
2
|
|
|
|
|
SECTION 1.1 Definitions
|
|
2
|
|
|
|
|
SECTION 1.2 Compliance Certificates and Opinions
|
|
16
|
|
|
|
|
SECTION 1.3 Form of Documents Delivered to the Trustee
|
|
17
|
|
|
|
|
SECTION 1.4 Acts of Holders of Securities
|
|
17
|
|
|
|
|
SECTION 1.5 Notices, Etc., to Trustee and Company
|
|
19
|
|
|
|
|
SECTION 1.6 Notice to Holders of Securities; Waiver
|
|
19
|
|
|
|
|
SECTION 1.7 Effect of Headings and Table of Contents
|
|
20
|
|
|
|
|
SECTION 1.8 Successors and Assigns
|
|
20
|
|
|
|
|
SECTION 1.9 Separability Clause
|
|
20
|
|
|
|
|
SECTION 1.10 Benefits of Indenture
|
|
20
|
|
|
|
|
SECTION 1.11 Governing Law
|
|
21
|
|
|
|
|
SECTION 1.12 Legal Holidays
|
|
21
|
|
|
|
|
SECTION 1.13 Conflict with Trust Indenture Act
|
|
21
|
|
|
|
|
SECTION 1.14 Counterparts
|
|
21
|
|
|
|
|
|
ARTICLE TWO
|
|
THE SECURITIES
|
|
22
|
|
|
|
|
SECTION 2.1 Form Generally
|
|
22
|
|
|
|
|
SECTION 2.2 Title and Terms
|
|
22
|
|
|
|
|
SECTION 2.3 Denominations
|
|
23
|
|
|
|
|
SECTION 2.4 Execution, Authentication, Delivery and Dating
|
|
23
|
|
|
|
|
SECTION 2.5 Global Securities; Temporary Securities
|
|
24
|
|
|
|
|
SECTION 2.6 Registration, Registration of Transfer and Exchange; Restrictions on Transfer
|
|
26
|
|
|
|
|
SECTION 2.7 Mutilated, Destroyed, Lost or Stolen Securities
|
|
28
|
|
|
|
|
SECTION 2.8 Payment of Interest; Interest Rights Preserved
|
|
29
|
|
|
|
|
SECTION 2.9 Persons Deemed Owners
|
|
30
|
|
|
|
|
SECTION 2.10 Cancellation
|
|
30
|
|
|
|
|
SECTION 2.11 Computation of Interest
|
|
30
|
|
|
|
|
SECTION 2.12 CUSIP Numbers
|
|
30
|
-i-
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
ARTICLE THREE
|
|
SATISFACTION AND DISCHARGE
|
|
31
|
|
|
|
|
SECTION 3.1 Satisfaction and Discharge of Indenture
|
|
31
|
|
|
|
|
SECTION 3.2 Application of Trust Money
|
|
32
|
|
|
|
|
|
ARTICLE FOUR
|
|
REMEDIES
|
|
32
|
|
|
|
|
SECTION 4.1 Events of Default
|
|
32
|
|
|
|
|
SECTION 4.2 Acceleration of Maturity; Rescission and Annulment
|
|
34
|
|
|
|
|
SECTION 4.3 Collection of Indebtedness and Suits for Enforcement by Trustee
|
|
35
|
|
|
|
|
SECTION 4.4 Trustee May File Proofs of Claim
|
|
35
|
|
|
|
|
SECTION 4.5 Trustee May Enforce Claims without Possession of Securities
|
|
36
|
|
|
|
|
SECTION 4.6 Application of Money Collected
|
|
36
|
|
|
|
|
SECTION 4.7 Limitation on Suits
|
|
37
|
|
|
|
|
SECTION 4.8 Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert
|
|
37
|
|
|
|
|
SECTION 4.9 Restoration of Rights and Remedies
|
|
37
|
|
|
|
|
SECTION 4.10 Rights and Remedies Cumulative
|
|
38
|
|
|
|
|
SECTION 4.11 Delay or Omission Not Waiver
|
|
38
|
|
|
|
|
SECTION 4.12 Control by Holders of Securities
|
|
38
|
|
|
|
|
SECTION 4.13 Waiver of Past Defaults
|
|
38
|
|
|
|
|
SECTION 4.14 Undertaking for Costs
|
|
39
|
|
|
|
|
SECTION 4.15 Waiver of Stay, Usury or Extension Laws
|
|
39
|
|
|
|
|
|
ARTICLE FIVE
|
|
THE TRUSTEE
|
|
39
|
|
|
|
|
SECTION 5.1 Certain Duties and Responsibilities
|
|
39
|
|
|
|
|
SECTION 5.2 Notice of Defaults
|
|
40
|
|
|
|
|
SECTION 5.3 Certain Rights of Trustee
|
|
41
|
|
|
|
|
SECTION 5.4 Not Responsible for Recitals or Issuance of Securities
|
|
42
|
|
|
|
|
SECTION 5.5 May Hold Securities, Act as Trustee under Other Indentures
|
|
42
|
|
|
|
|
SECTION 5.6 Money Held in Trust
|
|
42
|
|
|
|
|
SECTION 5.7 Compensation and Reimbursement
|
|
42
|
|
|
|
|
SECTION 5.8 Corporate Trustee Required; Eligibility
|
|
43
|
|
|
|
|
SECTION 5.9 Resignation and Removal; Appointment of Successor
|
|
43
|
-ii-
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
SECTION 5.10 Acceptance of Appointment by Successor
|
|
45
|
|
|
|
|
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business
|
|
45
|
|
|
|
|
SECTION 5.12 Authenticating Agents
|
|
45
|
|
|
|
|
SECTION 5.13 Disqualification; Conflicting Interests
|
|
47
|
|
|
|
|
SECTION 5.14 Preferential Collection of Claims Against Company
|
|
47
|
|
|
|
|
|
ARTICLE SIX
|
|
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
|
|
47
|
|
|
|
|
SECTION 6.1 Company May Consolidate, Etc., Only on Certain Terms
|
|
47
|
|
|
|
|
SECTION 6.2 Successor Substituted
|
|
48
|
|
|
|
|
|
ARTICLE SEVEN
|
|
SUPPLEMENTAL INDENTURES
|
|
48
|
|
|
|
|
SECTION 7.1 Supplemental Indentures without Consent of Holders of Securities
|
|
48
|
|
|
|
|
SECTION 7.2 Supplemental Indentures with Consent of Holders of Securities
|
|
49
|
|
|
|
|
SECTION 7.3 Execution of Supplemental Indentures
|
|
50
|
|
|
|
|
SECTION 7.4 Effect of Supplemental Indentures
|
|
50
|
|
|
|
|
SECTION 7.5 Reference in Securities to Supplemental Indentures
|
|
51
|
|
|
|
|
SECTION 7.6 Notice of Supplemental Indentures
|
|
51
|
|
|
|
|
|
ARTICLE EIGHT
|
|
COVENANTS
|
|
51
|
|
|
|
|
SECTION 8.1 Payment of Principal, Premium and Interest
|
|
51
|
|
|
|
|
SECTION 8.2 Maintenance of Offices or Agencies
|
|
51
|
|
|
|
|
SECTION 8.3 Money for Security Payments to Be Held in Trust
|
|
52
|
|
|
|
|
SECTION 8.4 Existence
|
|
53
|
|
|
|
|
SECTION 8.5 Statement by Officers as to Default
|
|
53
|
|
|
|
|
SECTION 8.6 Delivery of Certain Information
|
|
54
|
|
|
|
|
SECTION 8.7 Payment in Registered Common Stock
|
|
54
|
|
|
|
|
SECTION 8.8 Issuance of Additional Relevant Securities
|
|
55
|
|
|
|
|
SECTION 8.9 Incurrence of Indebtedness
|
|
55
|
|
|
|
|
SECTION 8.10 [Reserved]
|
|
56
|
|
|
|
|
SECTION 8.11 Liquidated Damages
|
|
56
|
|
|
|
|
|
ARTICLE NINE
|
|
MAKE-WHOLE PROVISION
|
|
56
|
|
|
|
|
SECTION 9.1 Make-Whole Provision
|
|
56
|
-iii-
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
ARTICLE TEN
|
|
CONVERSION OF SECURITIES
|
|
57
|
|
|
|
|
SECTION 10.1 Conversion Privilege and Conversion Rate
|
|
57
|
|
|
|
|
SECTION 10.2 Exercise of Conversion Privilege
|
|
58
|
|
|
|
|
SECTION 10.3 Fractions of Shares
|
|
59
|
|
|
|
|
SECTION 10.4 Adjustment of Conversion Rate
|
|
59
|
|
|
|
|
SECTION 10.5 Notice of Adjustments of Conversion Rate
|
|
64
|
|
|
|
|
SECTION 10.6 Notice of Certain Corporate Action
|
|
65
|
|
|
|
|
SECTION 10.7 Company to Reserve Common Stock
|
|
66
|
|
|
|
|
SECTION 10.8 Taxes on Conversions
|
|
66
|
|
|
|
|
SECTION 10.9 Covenant as to Common Stock
|
|
66
|
|
|
|
|
SECTION 10.10 Cancellation of Converted Securities
|
|
66
|
|
|
|
|
SECTION 10.11 Provision in Case of Consolidation, Merger or Sale of Assets
|
|
66
|
|
|
|
|
SECTION 10.12 Responsibility of Trustee for Conversion Provisions
|
|
67
|
|
|
|
|
|
ARTICLE ELEVEN
|
|
RANKING
|
|
68
|
|
|
|
|
|
ARTICLE TWELVE
|
|
REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER UPON A CHANGE IN CONTROL
|
|
68
|
|
|
|
|
SECTION 12.1 Right to Require Repurchase
|
|
68
|
|
|
|
|
SECTION 12.2 Conditions to the Company’s Election to Pay the Repurchase Price in Common Stock
|
|
69
|
|
|
|
|
SECTION 12.3 Notices; Method of Exercising Repurchase Right, Etc.
|
|
69
|
|
|
|
|
|
ARTICLE THIRTEEN
|
|
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE
|
|
72
|
|
|
|
|
SECTION 13.1 Company to Furnish Trustee Names and Addresses of Holders
|
|
72
|
|
|
|
|
SECTION 13.2 Preservation of Information
|
|
73
|
|
|
|
|
SECTION 13.3 No Recourse Against Others
|
|
73
|
|
|
|
|
SECTION 13.4 Reports by Trustee
|
|
73
|
|
|
|
|
SECTION 13.5 Reports by Company
|
|
74
|
|
|
|
|
|
ARTICLE FOURTEEN
|
|
REDEMPTION OF SECURITIES
|
|
74
|
|
|
|
|
SECTION 14.1 Right of Redemption
|
|
74
|
|
|
|
|
SECTION 14.2 Applicability of Article
|
|
75
|
|
|
|
|
SECTION 14.3 Election to Redeem; Notice to Trustee
|
|
76
|
-iv-
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
SECTION 14.4 Selection by Trustee of Securities to Be Redeemed
|
|
76
|
|
|
|
|
SECTION 14.5 Notice of Redemption
|
|
76
|
|
|
|
|
SECTION 14.7 Deposit of Redemption Price
|
|
77
|
|
|
|
|
SECTION 14.8 Securities Payable on Redemption Date
|
|
78
|
|
|
|
|
SECTION 14.9 Securities Redeemed in Part
|
|
78
|
|
|
|
|
SECTION 14.10 Conversion Arrangement on Call for Redemption
|
|
79
|
-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 November 4, 2005, 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 6.75% Convertible Senior 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.
-2-
“
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.
“
Agent Members
” means a member of, or a participant in, the Depositary.
“
Aggregate Current Market Price
” has the meaning
specified in
Section 10.4(e)
.
“
American
Depository Shares
” means US. Dollar denominated forms of equity ownership held in deposit in a custodian bank and evidenced by physical certificates of ownership (“American Depositary Receipts”) issued by a U.S. bank.
“
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.
“
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 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 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’
-3-
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.
“
CAP Agreement
” means the Conversion
and Placement Agreement dated as of October 31, 2005 by and among the Company and the Existing Noteholders (as such term is defined in the CAP Agreement), as such agreement may be amended from time to time.
“
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;
-4-
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.
“
Closing Price
” means, with respect to the Common Stock on any day, the closing sale price regular way on such day or, in the case where no such sale takes place on such day, the average of the reported closing bid
and asked prices, regular way, in each case on the Nasdaq National Market or New York Stock Exchange, as applicable, or, if the Common Stock is not listed or admitted to trading on such National Market or Exchange, on the principal national security
exchange or quotation system on which such security is quoted or listed or admitted to trading, or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the average of the closing bid and asked
prices of the Common Stock on the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similar generally accepted reporting service, or if not so available, in such manner as furnished by any
New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose, or if no bid or asked price is available a price determined in good faith by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution.
“
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)
.
-5-
“
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)
.
“
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.$1,000 divided by the Conversion Rate.
“
Conversion Date
” means the date on which both the
Securities and the duly signed and completed notice have been delivered to the Trustee.
“
Conversion Rate
” has the meaning specified in
Section 10.1
.
“
Conversion Shares
” has the meaning specified in
Section 10.4(m)
.
“
Corporate Trust Office
” means the office of the
Trustee at which at any particular time its corporate trust business shall be principally administered (which at the date of this Indenture is located at 633 West Fifth Street, 24
th
Floor, Los Angeles, CA 90071, Attn: Corporate Trust Services (Cell Therapeutics, Inc. – 6.75% Convertible Senior Notes due 2010)).
“
Corporation
” means a corporation, company,
association, joint-stock company or business trust.
“
Defaulted Interest
” has the meaning specified in
Section 2.8
.
“
Depositary
” means, with respect to any Registered Securities, a clearing agency that is registered as such under the Exchange Act
and is designated by the Company to act as Depositary for such Registered Securities (or any successor securities clearing agency so registered).
“
Deposited Funds
” has the meaning specified in
Section 14.7
.
“
Distribution Date
” has the meaning specified in
Section 10.4(m)
.
“
Dollar
”
or “
U.S.$
” 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.
-6-
“
DTC
” means The Depository Trust Company, a New York corporation.
“
Election Form
” has the meaning specified in
Section 4.5(b)
.
“
Event of
Default
” has the meaning specified in
Section 4.1
.
“
Exchange Act
” means the United States Securities Exchange Act of 1934 (or any successor statute), as amended from time to time.
“
Existing 2002 Senior Subordinated Notes
” means the Company’s 5.75% Convertible Senior
Subordinated Notes due June 15, 2008, issued under the Existing 2002 Senior Subordinated Notes Indenture.
“
Existing 2002 Senior Subordinated 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 2003 Senior Subordinated Notes
” means the Company’s 4% Convertible Senior Subordinated Notes due July 1, 2010, issued under the Existing 2003 Senior Subordinated Notes Indenture.
“
Existing 2003 Senior Subordinated Notes Indenture
”
means the Indenture dated as of June 23, 2003, between the Company and U.S. Bank National Association.
“
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.
“
Fair Market Value
” with respect to the Common Stock
shall be determined by the Company and shall be equal to 95% of the Volume Weighted Average Price for the five (5) consecutive Trading Days immediately preceding the relevant payment date.
“
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.
“
Indebtedness
” 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,
-7-
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 GAAP, (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 Indebtedness 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, obligations under the
Equipment Leasing Arrangement, dated as of October 1, 2001, between Citiflight, Inc. and Cell Therapeutics Corporate Development, Inc., and obligations owed to a Person specified in clause (11) of the definition of Permitted Lien in
connection with the licensing and/or partnering arrangement referred to therein.
“
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.
-8-
“
Interest Payment Date
” means the Stated Maturity of an installment of interest
on the Securities.
“
Lien
” means, with
respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind with respect to such asset.
“
Liquidated Damages
” means the obligation to pay additional interest provided for in Section 7 of the Registration Rights
Agreement.
“
Mandatory Election Procedures
”
has the meaning specified in
Section 14.11(b)
.
“
Mandatory Redemption
” has the meaning specified in
Section 14.1(b)
.
“
Mandatory Redemption Date
” has the meaning specified in
Section 14.1(b)
.
“
Mandatory Redemption Election
” has the meaning
specified in
Section 14.5(b)
.
“
Mandatory Redemption Holder
” has the meaning specified in
Section 14.1(b)
.
“
Mandatory Redemption Limit
” has the meaning specified in
Section 14.1(b)
.
“
Mandatory Redemption Price
”
has the meaning
specified in
Section 14.1(b)
.
“
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, conversion, exercise of the repurchase right set forth in
Article Twelve
or otherwise.
“
Member
” means any member of, or participant in, the Depositary.
“
New Rights Plan
” has the meaning specified in
Section 10.4(d)
“
Non-electing Share
” has the meaning specified in
Section 10.15
.
“
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.
“
Optional
Redemption
” has the meaning specified in
Section 14.1
.
-9-
“
Optional Redemption Date
” has the meaning specified in
Section 14.1
.
“
Optional Redemption Price
” has the
meaning specified in
Section 14.1
.
“
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 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; 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 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.
“Paying Agent Agreement
” means the Agreement to
Provide Paying Agent Services for Cell Therapeutics, Inc. dated November 4, 2005 between Cell Therapeutics, Inc. and U.S. Bank National Association.
-10-
“
Permitted Lien
” means the following types of Liens:
|
|
(1)
|
Liens imposed by law for taxes, fees, assessments or other governmental charges or levies that are not yet due and payable or are being contested in good faith by appropriate
proceedings as to which the Company or its Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP;
|
|
|
(2)
|
carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, vendors’ or lessors’ Liens (and deposits to obtain the release of such Liens),
set-off rights and other like Liens imposed by law (or contract, to the extent that such contractual Liens are similar in nature and scope to Liens imposed by law), in each case arising in the ordinary course of business and securing obligations
that either (a) are not overdue by more than 60 days or (ii) are being contested in good faith by appropriate proceedings as to which the Company or its Subsidiaries shall have set aside on its books such reserves as may be required
pursuant GAAP;
|
|
|
(3)
|
Liens incurred and pledges and deposits made in the ordinary course of business in connection with workers’ compensation, disability or unemployment insurance, old-age
pensions, retiree health benefits and other similar plans or programs and other social security laws or regulations;
|
|
|
(4)
|
deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in
each case in the ordinary course of business;
|
|
|
(5)
|
(a) easements, covenants, conditions, restrictions, zoning restrictions, building codes, land use laws, leases, subleases, licenses, rights of way, minor irregularities in, or lack
of, title and similar encumbrances affecting real property, (b) with respect to any lessee’s or licensee’s interest in real or personal property, mortgages, liens, rights and obligations and other encumbrances arising by, through or
under any owner, lessor or licensor thereof, with or without the lessee’s or licensee’s consent and (c) leases, licenses, rights and obligations in connection with patents, copyrights, trademarks, tradenames and other intellectual
property, in each case that do not secure the payment of borrowed money (other than, with respect to any lessee’s or licensee’s interest in real or personal property, mortgages, liens, rights and obligations and other encumbrances arising
by, through or under any owner, lessor or licensor thereof) to the extent, in the case of each of clauses (a), (b) and (c), that the Liens referred to therein do not, in the aggregate, materially detract from the value of the affected property
as used by the Company and its Subsidiaries in the ordinary course of business taken as a whole or materially interfere with the ordinary conduct of the business of the Company and its Subsidiaries taken as a whole;
|
|
|
(6)
|
Liens in favor of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods;
|
-11-
|
|
(7)
|
any interest or title of a lessor under any capitalized lease obligation; provided, however, that such Liens do not extend to any property or assets which is not leased property
subject to such capitalized lease obligation;
|
|
|
(8)
|
Liens securing purchase money indebtedness incurred in the ordinary course of business; provided, however, that (a) such purchase money indebtedness shall not exceed the
purchase price or other cost of such property or equipment and shall not be secured by any property or equipment of the Company or any Subsidiary of the Company other than the property and equipment so acquired and (b) the Lien securing such
purchase money indebtedness shall be created within 90 days of such acquisition;
|
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(9)
|
Liens securing interest swap obligations which interest swap obligations relate to Indebtedness that is otherwise permitted under the indenture;
|
|
|
(10)
|
Liens securing Indebtedness under currency agreements;
|
|
|
(11)
|
Liens in favor of Strategic Partners in connection with a biopharmaceutical licensing and/or partnering arrangement;
|
|
|
(12)
|
judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the
review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired;
|
|
|
(13)
|
Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created
for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
|
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(14)
|
Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and
proceeds thereof;
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(15)
|
banker’s Liens, rights of setoff and similar Liens with respect to cash and Cash Equivalents on deposit in one or more bank accounts in the ordinary course of business; and
|
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|
(16)
|
Liens arising from filing Uniform Commercial Code financing statements regarding leases.
|
“
Permitted Senior Debt
” has the meaning specified in
Section 11.1
.
“
Person
” means a natural person, Corporation, limited
liability company, partnership, joint venture, trust, estate, unincorporated organization or government or any agency or political subdivision thereof.
-12-
“
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.
“
Purchased Shares
” has the meaning specified in
Section 10.3(f)
.
“
Purchasers
” has the meaning specified in
Section 14.10
.
“
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
” means either a Mandatory Redemption Date or an Optional Redemption Date.
“
Redemption Price
” means either an Optional Redemption Price or a Mandatory Redemption Price.
“
Refinance
” means to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to issue new Indebtedness in exchange or replacement for, certain existing indebtedness.
“
Registered Common Stock
” means Common Stock that does not require registration or approval under any federal securities law or,
if applicable, the securities laws of any state where a holder is located, before such shares are freely transferable without being subject to transfer restrictions under the Securities Act or for which such registration is completed pursuant to a
Shelf Registration Statement or otherwise.
“
Registered Securities
” has the meaning specified in
Section 2.1
.
“
Registrable Securities
” has the meaning specified in the Registration Rights Agreement.
“
Registration Rights Agreement
” means the
Registration Rights Agreement dated the date hereof, by and between the Company and CRT Capital Group LLC.
-13-
“
Regular Record Date
” for interest payable in respect of any Registered Security
on any Interest Payment Date means the March 31 and the September 30 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date.
“
Relevant Security
” has the meaning specified in
Section 8.8
.
“
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.
“
Rights Plan
” has the meaning specified in
Section 10.4(d)
.
“
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
.
“
Secured Indebtedness
” means Indebtedness secured by a Lien other than a Permitted Lien.
“
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
.
“
Shelf Registration
Statement
” has the meaning specified in the Registration Rights Agreement.
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“
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.
“
Strategic Partner
” means
(i) a pharmaceutical or biotechnology company with book equity of at least U.S.$200,000,000, (ii) a pharmaceutical or biotechnology company with sales of at least U.S.$150,000,000, or (iii) a publicly traded, or division or
subdivision of a publicly traded, pharmaceutical or biotechnology company with market capitalization in excess of U.S.$200,000,000.
“
Subsidiary
” means a Person 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 Person 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 Day
” 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.
“
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.
-15-
“
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.”
“
Volume Weighted Average Price
” means, with respect
to the Common Stock of the Company, for any day the volume weighted average price per share of Common Stock as displayed on Bloomberg on the Nasdaq National Market from 9:30 a.m. to 4:00 p.m. (New York City time) on that day (or if such volume
weighted average price is not available, the market value of one share on such day as the Company determines in good faith using a volume weighted method).
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.
-16-
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
-17-
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.
(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 10 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 30
th
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 10
th
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
-18-
proxies) having joined therein on or prior to the 90
th
day after such record date, such notice, declaration or direction shall automatically and without any action by any Person be cancelled 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 (Cell Therapeutics, Inc. – 6.75% Convertible Senior
Notes Due 2010), and shall be deemed given when received; or
(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
-19-
writing and mailed, first-class postage prepaid, to each Holder of a Security affected by such 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
.
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.
-20-
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, Repurchase Date, Redemption 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 or Redemption 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.
-21-
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 incorporated into 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.$82,000,000 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
,
10.2
,
12.3(e)
, or
14.8
.
The Securities shall be known and designated as the “6.75% Convertible
Senior Notes due 2010” of the Company. Their Stated Maturity shall be October 31, 2010 and they shall bear interest on their principal amount from November 4, 2005, payable semiannually in arrears on April 30 and October 31
in each year, commencing April 30, 2006, at the rate of 6.75% per annum until the principal thereof is due and at the rate then in effect on any overdue principal 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
.
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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 Redemption Price or the Repurchase Price, as applicable, 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 shall not be redeemable at
the option of the Company except pursuant to
Article Fourteen
.
Up to an aggregate of 30% of the Securities shall be subject to mandatory redemption on a pro rata basis at the option of each of the Holders pursuant to
Article Fourteen
. The Securities shall not be redeemable at the option of the
Company other than pursuant to
Article Fourteen
.
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 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 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.
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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 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
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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.
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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
,
10.2
,
12.3(e)
or
14.8
(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.
(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
-26-
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, bearing a Restricted Securities Legend, 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 a 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 (at the request
of the Holder) 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
(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
.
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(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.
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.
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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, at the option of the Company, in immediately available funds, Registered Common Stock or some combination of immediately available funds or Registered Common Stock as provided in the Security 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. For the purpose of any interest payment in Registered Common Stock, whether in whole or in part, such payment will have a Fair
Market Value equal to the interest payment due on the Interest Payment Date and shall be subject to the restrictions on issuance as set forth in Section 8.7 herein.
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).
(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
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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, repurchase, redemption, 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 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 repurchase and that reliance may be placed only on the serial or other identification numbers printed on the Securities, and any such 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.
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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 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;
and the Company, in the case of clause (i) or (ii) 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, and interest, if any, on such Securities not theretofore delivered to the Trustee for cancellation, to the date of such deposit (in the case of Securities that have
become due and payable) or to the Stated Maturity; and
(b) the
Company has paid or caused to be paid all other sums payable hereunder by the Company; and
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(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 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
, the obligations of the Company and the Trustee and the rights of the Holders under
Article Four
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
.
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, 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.
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; 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; or
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(c) failure by the Company to give the Company Notice in accordance with
Section 12.3
; or
(d) default in the performance, or breach, of any covenant of
the Company or any Subsidiary 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
), or in the payment of Liquidated Damages when due, 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 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 aggregate 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 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
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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 and unpaid interest and Liquidated
Damages 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 and unpaid interest and Liquidated Damages
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, if any, on all Securities;
(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 any Liquidated Damages then due; 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.
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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 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 by the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such
Securities for principal, premium, if any, and interest on any overdue principal, premium, 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.
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, 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
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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.
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, 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, and interest,
respectively; and
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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 the like, 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 aggregate 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
(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 repurchase or redemption, on the Repurchase Date or the Redemption Date, respectively), 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
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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.
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 or the
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Repurchase Price 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 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, or interest on any Security on or after the respective Stated Maturity or Maturities expressed
in such Security (or, in the case of repurchase, on or after the Repurchase Date) 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.
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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.
(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
.
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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 determines 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, 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
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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.
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
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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.
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
.
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(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.
(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.
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(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, 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
-45-
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 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.
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By:
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U.S. BANK NATIONAL ASSOCIATION,
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By:
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, as
Authenticating Agent
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By
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Authorized Signature
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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.
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
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(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
.
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 guarantee or 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 adversely affect the interests of
the Holders of Securities in any material respect); or
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(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
(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 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) 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 any repurchase or redemption, on or after the Repurchase Date or the Redemption Date, respectively); or
(3) except as permitted by
Section 10.11
, adversely affect the right to convert any Security as provided in
Article
Ten
; or
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(4) modify the provisions of this Indenture with respect to the ranking of the Securities
in a manner adverse to the Holders of any Securities; or
(5) 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
(6) 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;
(7) 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; or
(8) release all or substantially all of the collateral securing the Securities, except in accordance with the terms of this Indenture.
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.
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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.
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 or shares of Common Stock 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 U.S. Bank Trust National Association, an Affiliate of the Trustee, or any 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
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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 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 such Paying Agent(s) 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
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(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, 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, or interest on any Security that remains unclaimed for
two years after the date when each payment of such principal, premium, 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
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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.
SECTION 8.6
Delivery of Certain Information
.
The Company will deliver to the Trustee within 15 days after the filing of the same with the Commission, copies of the
quarterly and annual reports and of the information, documents and other reports, if any, which the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the Commission, to the extent permitted, and provide the Trustee and Holders with such annual reports and such information, documents
and other reports specified in Sections 13 and 15(d) of the Exchange Act,
provided
that the Company need not file such reports or other information if, and so long as, it would not be required to do so pursuant to Rule 12h-5 under the
Exchange Act. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable
from information contained therein.
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).
SECTION 8.7
Payment in Registered Common Stock
.
To the extent payment in Common Stock (or zero-strike warrants convertible into Common Stock, as provided below, in lieu
thereof) is permitted under the provisions of this Indenture, such payment can only be made in the form of Registered Common Stock (or in the case of zero-strike warrants in lieu thereof, such Registered Common Stock is reserved in sufficient
amounts so as to be available and delivered upon exercise thereof). Notwithstanding any provision of the Indenture or the Securities, in no event shall the Company be allowed to
-54-
make any payment, whether in whole or in part, in such shares of Registered Common Stock or effect any conversion pursuant to Article Ten of this Indenture
if the Holder provides notice to the Company at least five (5) Business Days prior to the date of such payment or conversion stating that, or if the Company reasonably believes that, were such Holder to receive such payment in Registered Common
Stock or participate in such conversion, the Holder would become the beneficial owner (as such term is defined in Rule 13d 3 of the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended, or any other applicable
provision under any federal securities laws, rules or regulations that may govern what constitutes a beneficial owner for purposes of determining reporting obligations and/or a person’s or entity’s constituting an affiliate of the Company)
of 9.5% or more of the shares of Common Stock immediately following such payment or conversion; provided, however, for any Holder to be so obligated to deliver such notice to the Company, he/she must first have received written notice from the
Company five (5) days in advance of the date such Holder is required thereafter to provide his/her notice to the Company, in which the Company indicates that it intends to make such payment or effect a conversion either in full or in part in
Registered Common Stock, as well as the details of such respective amounts to be paid in such forms. Thereafter, if the Holder fails to deliver back to the Company its notice in a timely manner as required above and the Company makes such a payment
or effects such a conversion, the Holder shall return the shares of Registered Common Stock to the Company and the Company shall either (i) make such payment in immediately available funds or (ii) issue to the Holder a number of zero
strike price warrants equal to the number of shares of our common stock that the Company is precluded by the terms of this Section 8.7 from issuing to such Holder, in addition to any other amount to be paid hereunder. Any such zero strike price
warrants shall have an expiration date of October 31, 2010 and will themselves contain restrictions on issuance similar to this Section 8.7.
SECTION 8.8
Issuance of Additional Relevant Securities
.
Prior to January 1, 2006, the Company (i) will not, directly or indirectly, issue, offer, sell, agree to issue,
offer or sell, solicit offers to purchase, grant any call option, warrant or other right to purchase, purchase any put option or other right to sell, pledge, borrow or otherwise dispose of any Common Stock or any security convertible into, or
exercisable or exchangeable for, Common Stock (a “
Relevant Security
”), (ii) will not establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” (in
each case within the meaning of Rule 16a-1 under of the Exchange Act) with respect to any Relevant Security, and (iii) will not otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or
in part, any economic consequence of ownership of a Relevant Security, whether or not such transaction is to be settled by delivery of Relevant Securities, other securities, cash or other consideration, other than the Securities, the issuance of the
Conversion Shares, and the Company’s issuance of Common Stock upon (1) the conversion or exchange of convertible or exchangeable securities outstanding on the date hereof in accordance with the terms thereof; (2) the exercise of
options outstanding on the date hereof; (3) the exercise of warrants outstanding on the date hereof; (4) the grant to and exercise of options by, or the issuance and sale of shares to, employees, directors and consultants as approved by
the compensation committee of the Board of Directors of the Company; (5) to a Strategic Partner(s) in connection with a biopharmaceutical licensing and/or partner arrangement; and (6) in order to effect the CAP Agreement.
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SECTION 8.9
Incurrence of Indebtedness
.
The Company will not, and will not permit any of its Subsidiaries to, incur
or suffer to exist (i) Indebtedness that is structurally senior or senior by its terms to the Securities or (ii) Secured Indebtedness, in an aggregate principal amount for both (i) and (ii) exceeding $10,000,000, unless, in the
case of (ii) only, the Securities are equally and ratably secured with such Secured Indebtedness in excess of such $10,000,000 limit; provided that Liens in favor of Strategic Partners granted in connection with biopharmaceutical licensing
and/or partnering arrangements shall not be subject to these restrictions.
Prior to March 31, 2006, the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly (i) issue any Indebtedness or preferred equity or debt security convertible or
exchangeable into Common Stock or (ii) Refinance the Existing Subordinated Notes, the Existing 2002 Senior Subordinated Notes and the Existing 2003 Senior Subordinated Notes.
If, after March 31, 2006, the Company or its Subsidiaries Refinances the Existing Subordinated Notes, the Existing 2002
Senior Subordinated Notes and the Existing 2003 Senior Subordinated Notes by issuing Indebtedness, it will only do so if such newly issued preferred equity or debt securities convertible or exchangeable into Common Stock has a Maturity date later
than the Stated Maturity of the Securities.
SECTION 8.10
[Reserved]
.
SECTION 8.11
Liquidated
Damages
.
If Liquidated Damages are payable by the
Company pursuant to Section 7 of the Registration Rights Agreement, the Company shall deliver to the Trustee a certificate to that effect stating (i) the amount of such Liquidated Damages per $1,000 principal amount of the Notes that are
payable, (ii) the facts and calculations supporting the determination of such amount and (iii) the date on which such damages are payable. Unless and until an officer or representative of the Trustee receives such a certificate, the
Trustee may assume without inquiry that no Liquidated Damages are payable.
ARTICLE NINE
MAKE-WHOLE PROVISION
SECTION 9.1
Make-Whole Provision
.
Upon the conversion of any
Security in accordance with
Article Ten
, the Company will pay to the Holders cash or Registered Common Stock, or a combination of cash and Registered Common Stock, with respect to the Security so converted, in an amount equal to $337.50 per
$1,000 principal amount of the Securities, less the amount of any interest paid on the Securities before the Conversion Date. For purposes of any such payment in Registered Common Stock,
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the value of such Registered Common Stock will be 95% of the Volume Weighted Average Price for the five (5) Trading Days immediately preceding the
Conversion Date. The issuance of Registered Common Stock will be subject to the restrictions on issuance as set forth in
Section 8.7
herein.
ARTICLE TEN
CONVERSION OF SECURITIES
SECTION 10.1
Conversion Privilege and Conversion Rate
.
Subject to and upon compliance with the provisions of this Article, at the option of the Holder thereof, any Security or any portion of the principal
amount thereof that is U.S.$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 October 31, 2010, unless the Security has
been previously repurchased, redeemed or automatically converted, subject, in the case of conversion of any Global Security, to any Applicable Procedures. In case the Holder of a Security exercises his right to require the Company to repurchase or
redeem 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 Repurchase Date or Redemption Date, as applicable, unless the
Company defaults in making the payment due upon repurchase (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 380.37 shares of Common Stock for each U.S.$1,000 principal amount of Securities. The Conversion Rate shall be adjusted in certain instances as provided in this
Article Ten
.
This conversion privilege is subject to the restrictions on issuance
contained in Section 8.7 herein.
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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 is to be repurchased or redeemed on a Repurchase Date or Redemption Date, respectively, 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 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 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 pursuant to
Section 10.6(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
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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.
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 Closing Price 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.
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(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 a 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 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
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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 (whether or not the rights have separated from the Common Stock at the time 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
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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 (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
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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 Volume
Weighted Average Price for the Trading 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.
(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 Closing Price 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
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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.
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, 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
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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.
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
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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.
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
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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, 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 other 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 herein or in any supplemental indenture 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
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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 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
RANKING.
The Securities will rank pari passu in right of payment with all existing and future senior Indebtedness. The Securities
will be senior to our Existing Subordinated Notes, our Existing 2002 Senior Subordinated Notes and our Existing 2003 Senior Subordinated Notes. The Securities will also effectively be senior in right of payment to the liabilities of our
Subsidiaries.
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, 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 and
Liquidated Damages, if any, accrued to, but excluding, 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 30
th
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 Holder has delivered the notice provided in proviso (ii) above. Such right to require the
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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 Registered Common Stock or in a combination of cash and Registered 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.
SECTION 12.2
Conditions to the Company’s Election to Pay the Repurchase Price in Common Stock
.
Subject to the restrictions on issuance contained in Section 8.7 herein, the Company may elect to pay the Repurchase Price by delivery of shares of
Registered 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 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.
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SECTION 12.3
Notices; Method of Exercising Repurchase Right, Etc
.
(a) On or before the 30
th
day after the occurrence of a Change in Control, the Company or, at the request and expense of the Company on or before the 30
th
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 or a combination thereof,
(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.
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 30
th
day (or
such greater period as may be required by applicable law) after the date of the
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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.
(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
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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
.
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
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(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.
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
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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).
ARTICLE FOURTEEN
REDEMPTION OF SECURITIES
SECTION 14.1
Right of Redemption
.
(a) Optional Redemption by Company.
All, but not less than all, Securities are subject to redemption at the
option of the Company (an “
Optional Redemption
”) at any time before October 31, 2010 (the “
Optional Redemption Date
”), upon not less than five (5) days notice to the Holders prior to the
Optional Redemption Date specified in such notice at a redemption price (the “
Optional Redemption Price
”) equal to 100% of the principal amount, together, in each case, with accrued and unpaid interest and Liquidated Damages,
if any, to, but excluding, the Optional Redemption Date, if (a) the closing price of the Company’s Common Stock has exceeded 125% 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 Optional Redemption, and (b) the Shelf Registration Statement is effective and available for use for each day within such 30 Trading Day period, unless registration
is no longer required for resale of the Securities. Upon any Optional Redemption, the Company may pay to the Holder Registered Common Stock with respect to the Securities called for Optional Redemption, including any Security converted after the
date of the notice of Optional Redemption and prior to the date of the Optional Redemption. For purposes of any such payment in Registered Common Stock, the value of such Registered Common Stock will be based upon the Conversion Price then in
effect. The Securities shall not be redeemable at the option of the Company other than pursuant to this
Article Fourteen
.
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(b) Mandatory Redemption at Option of Holders.
Subject to the limitations set forth in this Article Fourteen, on
April 30, 2006 (or if not a Business Day, the next Business Day) (the “
Mandatory Redemption Date
”), each Holder shall have the right to cause the Company to redeem up to 30% of such Holder’s Securities at the
Redemption Price (“
Mandatory Redemption
”); provided that such Holder (a
“
Mandatory Redemption Holder
”) shall have provided the Company and the Depositary with a properly executed Mandatory Redemption
notice, in accordance with
Section 14.6
, not less than 5 days prior to the Mandatory Redemption Date. Such Mandatory Redemption shall be at a redemption price equal to 100% of the principal amount of such Securities validly tendered by
such Holder for Mandatory Redemption, excluding any accrued and unpaid interest through and following the Mandatory Redemption Date, if any (“
Mandatory Redemption Price
”). Any Securities converted or sold after the date of
the notice of Mandatory Redemption shall not be validly tendered for Mandatory Redemption and shall not be eligible for Mandatory Redemption.
If the aggregate principal amount of securities validly tendered and not properly withdrawn at the Mandatory Redemption Date exceeds thirty percent
(30%) of the aggregate offering price of the Securities (such amount being equal to U.S.$24,600,000) (the
“
Mandatory Redemption Limit
”)
, the Company shall only redeem an aggregate principal amount of Securities equal to
the Mandatory Redemption Limit allocated among the tendering Mandatory Redemption Holders on a pro rata basis based on the aggregate amount of the Securities tendered.
SECTION 14.2
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 Fourteen
.
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SECTION 14.3
Election to Redeem; Notice to Trustee
.
In case of any redemption pursuant hereto, the Company shall, at least three
(3) Business Days prior to the applicable Redemption Date (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date.
SECTION 14.4
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 (3) Business Days prior to the date that the notice described in
Section 14.5
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 unconverted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption.
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 14.5
Notice of Redemption
.
(a) Notice of Optional Redemption.
Notice of Optional Redemption shall be given in the manner provided in
Section 1.6
to all Holders of Securities in the case of an Optional Redemption by the Company. All notices of Optional Redemption shall identify the Securities to be redeemed (including CUSIP numbers) and shall state:
(i) the Optional Redemption Date,
(ii) the Optional Redemption Price,
(iii) that on the Optional Redemption Date the Optional
Redemption Price, 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,
(iv) 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
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(v) the place or places where such Securities are to be surrendered for payment of the
Optional Redemption Price.
If any of the Securities to be
redeemed is in the form of a Global Security, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depositary applicable to redemptions.
Notice of Optional Redemption of Securities 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 Optional Redemption received by the Trustee shall be given by the Trustee to the Paying Agent in the name of and at the expense of the Company.
(b) Notice of Mandatory Redemption.
On or before April 1, 2006, the Company shall provide each Holder:
(i) in the manner provided in
Section 1.6, written notice of such Holder’s Mandatory Redemption right, and
(ii) a form of election pursuant to which such Holder may tender all or a portion of its Securities for a Mandatory Redemption (a
“
Mandatory Redemption Election
”), in a form acceptable to the Company, DTC and the Paying Agent (an “
Election Form
”), which shall include, among other things, instructions as to the place or places
where and manner in which such Securities are to be surrendered for payment of the Mandatory Redemption Price.
SECTION 14.7
Deposit of Redemption Price
.
(a) Deposit of Optional Redemption Price.
Not less than one (1) Business Day prior to any Optional 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 Optional Redemption Date) sufficient to pay the Optional Redemption Price of, and
(except if the Optional Redemption Date shall be an Interest Payment Date) accrued or unpaid interest and Liquidated Damages on, all the Securities that are to be redeemed on that date other than any Securities called for Optional Redemption on that
date that have been converted prior to the date of such deposit.
If any Security called for Optional Redemption is converted, any money deposited with the Trustee or so segregated and held in trust for the Optional 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.
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(b) Deposit of Mandatory Redemption Price.
Pursuant to the terms of the Paying Agent Agreement, U.S. Bank National Association shall act as the Paying Agent in
connection with the Mandatory Redemption. Upon the issuance of the Securities hereunder, there shall have been deposited funds (the
“
Deposited Funds
”)
with the Paying Agent in an amount equal to the Mandatory Redemption
Limit. On or prior to the Mandatory Redemption Date, the Company will instruct the Paying Agent to pay to each Holder electing to participate in the Mandatory Redemption, subject to the Mandatory Redemption Limit, an amount equal to such
Holder’s Mandatory Redemption Price in cash. Any Deposited Funds remaining after all payments are made with respect to Securities tendered in the Mandatory Redemption, including any accrued interest on the funds, shall, pursuant to the terms of
the Paying Agent Agreement, be returned to the Company after the Mandatory Redemption Date.
SECTION 14.8
Securities Payable on Redemption Date
.
Notice of redemption having been given as aforesaid, the Securities to be so redeemed shall, on the applicable 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 any applicable accrued interest) such Securities shall cease to bear interest. Upon surrender of
any Securities for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price together with any applicable accrued and unpaid interest and Liquidated Damages up to but not including 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 14.9
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 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.
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SECTION 14.10
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 applicable Redemption Date, an amount not less than the applicable Redemption Price, together with interest accrued and unpaid to such Redemption Date, of such Securities. Notwithstanding anything to the contrary contained in this
Article Fourteen
, the obligation of the Company to pay the applicable Redemption Price, together with any applicable interest accrued and unpaid to and Liquidated Damages, but not including, 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 Fourteen
) 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.
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
A. B
IANCO
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Name: James A. Bianco
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Title: President & 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
ARK
O
SWALD
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Name: Park Oswald
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Title: Vice President
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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) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (2) 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 (3) 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 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
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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) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (2) 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 (3) 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 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.]
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[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.]
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CELL THERAPEUTICS, INC.
6.75% CONVERTIBLE SENIOR NOTE DUE OCTOBER 31, 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 $
in the aggregate at any time, [by adjustments made on the records of the Trustee hereinafter referred
to in accordance with the Indenture)]]
on October 31, 2010, unless repurchased or redeemed on an earlier date, and to pay interest thereon, from November 4, 2005, 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 April 30 and October 31 in each year (each, an “
Interest Payment Date
”), commencing April 30, 2006, at the rate of 6.75% 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 March 31 and September 30 (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 10 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 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 instructions in writing to the Trustee no later
than 15 days prior to the relevant payment
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date) maintained by the payee. Defined terms used but not defined herein shall have the meaning ascribed to them in the Indenture.
Payment of interest or Liquidated Damages on this Security may be made at the
option of the Company as follows: (i) 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, or (ii) in shares of Registered Common Stock, the fair
market value which shall be determined by the Company and shall be equal to 95% of the Volume Weighted Average Price for each of the five consecutive Trading Days immediately preceding the Interest Payment Date.
To the extent payment in Common Stock (or zero-strike warrants convertible
into Common Stock) is permitted by the provision herein and in the Indenture, such payment can only be made in the form of Registered Common Stock (or in the case of zero-strike warrants in lieu thereof, such Registered Common Stock is reserved in
sufficient amounts so as to be available and delivered upon exercise thereof). Notwithstanding any provision of herein or in the Indenture, in no event shall the Company be allowed to make any payment, whether in whole or in part, in such shares of
Registered Common Stock or effect any conversion pursuant to Article Ten of the Indenture if the Holder provides notice to the Company at least five (5) Business Days prior to the date of such payment or conversion stating that, or if the Company
reasonably believes that, were such Holder to receive such payment in Registered Common Stock or participate in such conversion, the Holder would become the beneficial owner (as such term is defined in Rule 13d-3 of the rules and regulations
promulgated under the Securities Exchange Act of 1934, as amended, or any other applicable provision under any federal securities laws, rules or regulations that may govern what constitutes a beneficial owner for purposes of determining reporting
obligations and/or a person’s or entity’s constituting an affiliate of the Company) (a “
Beneficial Owner
”) of 9.5% or more of the shares of Common Stock immediately following such payment were it to receive such
payment or conversion; provided, however, for any Holder to be so obligated to deliver such notice to the Company, he/she must first have received written notice from the Company five (5) days in advance of the date such Holder is required
thereafter to provide his/her notice to the Company, in which the Company indicates that it intends to make such payment or effect a conversion either in full or in part in Registered Common Stock, as well as the details of such respective amounts
to be paid in such forms. Thereafter, if the Holder fails to deliver back to the Company its notice in a timely manner similar and the Company makes such a payment or effects such a conversion, the Holder shall return the shares of Registered Common
Stock to the Company and the Company shall either (i) make such payment in immediately available funds or (ii) issue to the Holder a number of zero strike price warrants equal to the number of shares of our common stock that the Company is precluded
by the terms of the Indenture from issuing to such Holder, in addition to any other amount to be paid hereunder. Any such zero strike price warrants shall have an expiration date of October 31, 2010 and will themselves contain similar restrictions
on issuance.
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
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respective authorized signatories, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
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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This is one of the
Securities referred to in the within-mentioned Indenture.
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U.S. BANK NATIONAL ASSOCIATION,
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 “6.75% Convertible
Senior Notes due October 31, 2010” (herein called the “
Securities
”), limited in aggregate principal amount to U.S.$82,000,000, issued and to be issued under an Indenture dated as of November 4, 2005 (herein
called the “
Indenture
”) between the Company and U.S. Bank National Association, 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 and the Holders of the Securities and of the
terms upon which the Securities are, and are to be, authenticated and delivered. To the extent any provision of this Security conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. 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.
All, but not less than all, of the Securities are subject to
redemption at the option of the Company at any time before October 31, 2010 (“
Optional Redemption
”), upon not less than five (5) days notice to the Holders prior to the redemption date specified in such notice (the
“
Optional Redemption Date”
) at a redemption price (the “
Optional Redemption Price
”) equal to 100% of the principal amount, together, in each case, with accrued and unpaid interest and Liquidated
Damages, if any, to, but excluding, the Optional Redemption Date, if (a) the closing price of the Company’s Common Stock has exceeded 125% 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 Optional Redemption, and (b) the Shelf Registration Statement is effective and available for use for each day within such 30 Trading Day period,
unless registration is no longer required for resale of the Securities. Upon any Optional Redemption, the Company may pay to the Holder Registered Common Stock with respect to the Securities called for Optional Redemption, including any Security
converted after the date of the notice of Optional Redemption and prior to the date of the Optional Redemption. For purposes of any such payment in Registered Common Stock, the value of such Registered Common Stock will be based upon the Conversion
Price then in effect. The Securities shall not be redeemable at the option of the Company other than pursuant to
Article Fourteen
of the Indenture.
Subject to the limitations set forth in
Article Fourteen
of the Indenture, on April 30, 2006 (or if not a Business Day, the next Business Day) (the
“
Mandatory Redemption Date
”), each Holder shall have the right to cause the Company to redeem up to 30% of the aggregate principal amount of such Holder’s Securities at the Redemption Price (“
Mandatory
Redemption
”); provided that such Holder (a “
Mandatory
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Redemption Holder
”) shall have provided the Company and the Depositary with a properly executed Mandatory Redemption notice, in accordance
with the provisions of
Section 14.6
of the Indenture, not less than 5 days prior to the Mandatory Redemption Date. Such Mandatory Redemption shall be at a redemption price equal to 100% of the principal amount of such Securities validly
tendered by such Holder for Mandatory Redemption, excluding any accrued and unpaid interest through and following the Mandatory Redemption Date, if any (“
Mandatory Redemption Price
”). Any Securities converted or sold after
the date of the notice of Mandatory Redemption shall not be validly tendered for Mandatory Redemption and shall not be eligible for Mandatory Redemption.
If the aggregate principal amount of securities validly tendered and not properly withdrawn at the Mandatory Redemption Date exceeds thirty percent
(30%) of the aggregate offering price of the Securities (such amount being equal to U.S.$24,600,000) (the “
Mandatory Redemption Limit
”), the Company shall only redeem an aggregate principal amount of Securities equal to
the Mandatory Redemption Limit allocated among the tendering Mandatory Redemption Holders on a pro rata basis based on the aggregate amount of the Securities tendered.
Pursuant to the terms of the Paying Agent Agreement, U.S. Bank National Association shall act as the Paying Agent in
connection with the Mandatory Redemption. Upon the issuance of the Securities hereunder, there shall have been deposited funds (the “
Deposited Funds
”) with the Paying Agent in an amount equal to the Mandatory Redemption
Limit. On or prior to the Mandatory Redemption Date, the Company will instruct the Paying Agent to pay to each Holder electing to participate in the Mandatory Redemption, subject to the Mandatory Redemption Limit, an amount equal to such
Holder’s Mandatory Redemption Price in cash. Any Deposited Funds remaining after all payments are made with respect to Securities tendered in the Mandatory Redemption, including any accrued interest on the funds, shall, pursuant to the terms of
the Paying Agent Agreement, be returned to the Company after the Mandatory Redemption Date.
On or before April 1, 2006, the Company shall provide each Holder: (i) in the manner provided in Section 1.6, written notice of such Holder’s Mandatory Redemption right, and (ii) a form of
election pursuant to which such Holder may tender all or a portion of its Securities for a Mandatory Redemption (a “
Mandatory Redemption Election
”), in a form acceptable to the Company, DTC and the Paying Agent (an
“
Election Form
”), which shall include, among other things, instructions as to the place or places where and manner in which such Securities are to be surrendered for payment of the Mandatory Redemption Price.
In any case where the due date for the payment of the principal of, premium,
if any, interest or Liquidated Damages, if any, on any Security or the last day on which a Holder of a Security has a right to convert its 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, or interest or delivery for conversion of such Security need not be
A-8
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 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 after the original issue date of the Securities and on or before the close of business on October 31, 2010, or in
case the Holder of this Security has exercised his right to require the Company to repurchase or redeem 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 repurchase or redemption) not after, the close of business on the Business Day immediately preceding the Repurchase Date or the Redemption Date, as applicable, 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 the initial Conversion Rate per U.S.$1,000 principal amount of Securities (or at the current adjusted Conversion Rate, if any adjustment has been made as provided in the Indenture) by surrender of this Security, duly endorsed or assigned
to the Company or in blank. 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 or a portion thereof is repurchasable or redeemable, on a Repurchase Date or a Redemption Date, respectively, 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 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. 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 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 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
of the Indenture, 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
A-9
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 pursuant to
Section 10.6(m)
of the Indenture will
be deemed to satisfy the Company’s obligation to pay the principal amount of the 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 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.
Upon
the conversion of any Security in accordance with
Article Ten
of the Indenture, the Company will pay to the Holders cash or Registered Common Stock, or a combination of cash and Registered Common Stock, with respect to the Security so
converted, in an amount equal to $337.50 per U.S.$1,000 principal amount of the Securities, less the amount of any interest paid on the Securities before the Conversion Date. For purposes of any such payment in Registered Common Stock, the value of
such Registered Common Stock will be 95% of the Volume Weighted Average Price for the five (5) Trading Days immediately preceding the Conversion Date. The issuance of Registered Common Stock will be subject to the restrictions on issuance as
set forth in Section 8.7 in the Indenture.
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
A-10
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 November 4, 2005 (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 45 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 best efforts to cause such Shelf Registration Statement to be declared effective by the
Commission on or before 90 days after the first date of original issuance of the Securities, 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 best 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, (2) all of the Holders of Registrable Securities are able to sell all Registrable Securities immediately without restriction pursuant to Rule 144(k) under the Securities
Act or any successor rule thereto, or (3) all Registrable Securities have ceased to be outstanding. Pursuant to the Registration Rights Agreement, if the Company fails to have the Shelf Registration Statement declared effective on or prior to the
90th day following the initial issuance of the Securities or to keep the Shelf Registration Statement effective thereafter and certain other circumstances as described in the Registration Rights Agreement, the Company has agreed to pay additional
interest for the duration of such failure, from and including the date of such failure at a rate of 0.50% per year on the principal amount of the Securities then outstanding.
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
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conditions provided in the Indenture, by delivery of shares of Registered Common Stock or in a combination of cash and Registered Common Stock, having a Fair
Market Value Equal to the Repurchase Price.
Notwithstanding
any provision of this Security or the Indenture, the Holder shall not have the right to convert the Securities in whole or in part if as a result of such exercise, the Holder would thereby become the Beneficial Owner of 9.5% or more of the shares of
Common Stock immediately following conversion of the Securities.
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 repurchase, redemption or conversion of this Security in part only, a new Registered Security or Registered Securities for the
unrepurchased, unredeemed or unconverted portion hereof will be issued in the name of the Holder hereof.]
[The following paragraph shall appear in each Global Security:
In the event of a deposit or withdrawal of an interest in this Security, including an exchange, transfer, repurchase,
redemption 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.]
If an Event of Default shall occur and be continuing, the principal of all
the Securities, together with accrued and unpaid interest, if any, and Liquidated Damages, if any, to the date of declaration, may be declared due and payable in the manner and with the effect provided in the Indenture.
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
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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 not less than 25% in aggregate 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, redeem or repurchase 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.
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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.
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 the principal amount of this Security set forth below 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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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.$1,000) below designated, into shares of Common Stock in accordance with the terms of the Indenture referred to in this Security and directs that such shares, together with a check in payment for any fractional
share and any Securities representing any unconverted principal amount hereof, be delivered to and be registered in the name of the undersigned unless a different name has been indicated below. If shares of Common Stock or Securities are to be
registered in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any amount required to be paid by the undersigned on account of interest accompanies this Security.
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Dated: ____________________
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Signature
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If shares or Registered Securities are to be registered in the name of a Person other than the Holder, please print such Person’s name and address:
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If only a portion of the Securities is to be converted, please indicate:
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1. Principal amount to be converted:
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U.S.$_______________________
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(any integral multiple of U.S.$1,000)
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Address
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2. Principal amount and denomination of Registered Securities representing unconverted principal amount to
be issued:
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Social Security or other Taxpayer
Identification Number,
if any
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Amount: U.S.$_________________
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Signature Guaranteed
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