-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, StnH+QUKJC+3MyACTM6RTagFG7FDZQZcmLYbYfaPSUV7XnpJQ09notnE/w36OqPo 4QDhOh+lUTW+vjMt6MzjIw== 0000950153-03-001480.txt : 20030804 0000950153-03-001480.hdr.sgml : 20030804 20030804172101 ACCESSION NUMBER: 0000950153-03-001480 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20030804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDICIS PHARMACEUTICAL CORP CENTRAL INDEX KEY: 0000859368 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 521574808 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-107089 FILM NUMBER: 03821470 BUSINESS ADDRESS: STREET 1: 8125 NORTH HAYDEN ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 BUSINESS PHONE: 2125992000 MAIL ADDRESS: STREET 1: 8125 NORTH HAYDEN ROAD CITY: SCOTTSDALE STATE: AZ ZIP: 85258 S-4/A 1 p68012a2sv4za.txt S-4/A As filed with the Securities and Exchange Commission on August 4, 2003 Registration No. 333-107089 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------ AMENDMENT NO. 2 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------ MEDICIS PHARMACEUTICAL CORPORATION (Exact Name of Registrant as Specified in Its Charter)
DELAWARE 3571 52-1574808 (State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.) Incorporation or Organization) Classification Code Number)
8125 NORTH HAYDEN ROAD SCOTTSDALE, ARIZONA 85258-2463 (602) 808-8800 (Address, Including Zip Code, and Telephone Number Including Area Code, of Registrant's Principal Executive Offices) JONAH SHACKNAI CHAIRMAN AND CHIEF EXECUTIVE OFFICER MEDICIS PHARMACEUTICAL CORPORATION 8125 NORTH HAYDEN ROAD SCOTTSDALE, ARIZONA 85258-2463 (602) 808-8800 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service) ------------------------------ Copies to: STEPHEN E. OLDER AKIN GUMP STRAUSS HAUER & FELD LLP 590 MADISON AVENUE NEW YORK, NEW YORK 10022-2524 (212) 872-1000 ------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As promptly as possible upon effectiveness of this Registration Statement. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, 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(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] 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. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION DATED AUGUST 4, 2003 PROSPECTUS [MEDICIS LOGO] OFFER TO EXCHANGE 1.5% CONTINGENT CONVERTIBLE SENIOR NOTES DUE 2033 FOR ALL OUR OUTSTANDING 2.5% CONTINGENT CONVERTIBLE SENIOR NOTES DUE 2032 (CUSIP NOS. 584 690 AA 9 AND 584 70K AA 2) We, Medicis Pharmaceutical Corporation, are offering to exchange $1,230 in principal amount of our 1.5% Contingent Convertible Senior Notes Due 2033, or the New Notes, for each $1,000 in principal amount of our 2.5% Contingent Convertible Senior Notes Due 2032, or the Old Notes, that is properly tendered and accepted for exchange on the terms set forth in this prospectus and in the accompanying Letter of Transmittal, which we refer to together as the exchange offer. See page 38 for how to tender Old Notes. The exchange offer is subject to important conditions, including that at least $200 million in principal amount of the Old Notes have been validly tendered and not withdrawn on the expiration of the exchange offer. The exchange offer will expire at 5:00 p.m., New York City time, on August 13, 2003, the expiration date, unless we extend it. We will announce any extensions by press release or other permitted means no later than 9:00 a.m., New York City time on the day after expiration of the exchange offer. You may withdraw any Old Notes tendered until the expiration of the exchange offer. The terms of the New Notes are similar to the terms of the Old Notes, but have a different interest rate, conversion rate, maturity date and other important terms as described in this prospectus. See page 10 of this prospectus for a summary comparison of the Old Notes to the New Notes. The Old Notes are traded on The Portal(SM) Market of the National Association of Securities Dealers, Inc. and the market price for $1,000 in principal amount of Old Notes was $1,172.50 on July 15, 2003. Our Class A common stock is traded on the New York Stock Exchange, or NYSE, under the symbol "MRX". On July 15, 2003 the closing price for our Class A common stock on the NYSE was $57.00 per share. THE EXCHANGE OFFER IS DESCRIBED IN DETAIL IN THIS PROSPECTUS, AND WE URGE YOU TO READ IT CAREFULLY, INCLUDING THE SECTION TITLED "RISK FACTORS," BEGINNING ON PAGE 13 OF THIS PROSPECTUS, FOR A DISCUSSION OF FACTORS THAT YOU SHOULD CONSIDER BEFORE YOU DECIDE TO PARTICIPATE IN THE EXCHANGE OFFER. NEITHER OUR BOARD OF DIRECTORS NOR ANY OTHER PERSON IS MAKING ANY RECOMMENDATION AS TO WHETHER YOU SHOULD CHOOSE TO EXCHANGE YOUR OLD NOTES FOR NEW NOTES. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------------- The Co-Dealer Managers for the exchange offer are: DEUTSCHE BANK SECURITIES THOMAS WEISEL PARTNERS LLC The date of this prospectus is - , 2003. THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT MEDICIS THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS DOCUMENT. THIS INFORMATION IS AVAILABLE WITHOUT CHARGE TO SECURITY HOLDERS UPON WRITTEN OR ORAL REQUEST TO OFFICE OF INVESTOR RELATIONS, MEDICIS PHARMACEUTICAL CORPORATION, 8125 NORTH HAYDEN ROAD, SCOTTSDALE, ARIZONA 85258-2463, (602) 808-8800. IN ORDER TO OBTAIN TIMELY DELIVERY, SECURITY HOLDERS MUST REQUEST THE INFORMATION NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE, OR AUGUST 6, 2003, UNLESS EXTENDED. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus, including the section entitled "The Company" and "Risk Factors," contains forward-looking statements that anticipate results based upon management's plans that are subject to uncertainties. Forward-looking statements give our current expectations or forecasts of future events. These statements may be identified by use of the words "expects," "plans," "anticipates," "believes," "estimates" and similar words used in conjunction with discussions of future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings and financial results. Forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many factors mentioned in this prospectus--for example, governmental regulation and competition in our industry--will be important in determining future results. No forward-looking statement can be guaranteed, and actual results may vary materially from those anticipated in any forward-looking statement. We undertake no obligation to update any forward-looking statement. i SUMMARY This summary does not contain all the information you should consider before exchanging your Old Notes for the New Notes. You should read this entire prospectus carefully, as well as those additional documents to which we refer you. See "Where You Can Find More Information." References in this prospectus to "Medicis", "we", "us", "our", "the company" and "our company" refer to Medicis Pharmaceutical Corporation and its subsidiaries unless otherwise specified. OUR EXCHANGE OFFER We have summarized the terms of the exchange offer in this section. Before you decide whether to tender your Old Notes in the exchange offer, you should read the detailed description of the exchange offer under "The Exchange Offer" for further information. Terms of the Exchange Offer........... We are offering to exchange $1,230 in principal amount of New Notes for each $1,000 in principal amount of our Old Notes accepted for exchange. New Notes will be issued in denominations of $1,000 and any integral multiple of $1,000. Any fractional New Notes will be settled in cash. You may tender all, some or none of your Old Notes. Expiration Date; Extension; Termination........................... The exchange offer and your withdrawal rights will expire at 5:00 p.m. New York City time, on August 13, 2003, or any subsequent date to which we extend it. We may extend the expiration date for any reason; we will announce any extensions by press release or other permitted means no later than 9:00 a.m., New York City time, the day after the previously scheduled expiration date. You must tender your Old Notes prior to the expiration date if you wish to participate in the exchange offer. We have the right to: - extend the period during which the exchange offer is open and retain all tendered Old Notes, subject to your right to withdraw your tendered Old Notes; or - waive any condition or otherwise amend the terms of the exchange offer in any respect, prior to the expiration date, other than the condition that the registration statement be declared effective. Conditions to the Exchange Offer...... The exchange offer is subject to: - the registration statement and any post-effective amendment to the registration statement covering the New Notes being effective under the Securities Act of 1933, as amended, or the Securities Act; - at least $200 million in aggregate principal amount of the Old Notes being validly tendered and not withdrawn by the expiration of the exchange offer; and 1 - other customary conditions. Please read the section titled "The Exchange Offer--Conditions to the Exchange Offer," beginning on page 36 of this prospectus, for more information. Withdrawal Rights..................... You may withdraw a tender of your Old Notes by delivering a written notice of withdrawal to Deutsche Bank Trust Company Americas, the exchange agent, at any time before the exchange offer expires. If you change your mind, you may retender your Old Notes by again following the exchange offer procedures before the exchange offer expires. You may also withdraw a tender of your Old Notes after the expiration of 40 business days from the commencement date of the exchange offer if your tender has not yet been accepted for payment. Procedures for Tendering Old Notes.... If you hold Old Notes through a broker, dealer, commercial bank, trust company or other nominee, you should contact that person promptly if you wish to tender your Old Notes. Tenders of your Old Notes will be effected by book-entry transfers through The Depository Trust Company. If you hold your Old Notes through a broker, dealer, commercial bank, trust company or other nominee, you may also comply with the procedures for guaranteed delivery. Please do not send letters of transmittal to us. You should send those letters to Deutsche Bank Trust Company Americas, the exchange agent, at the address set forth on page 67 of this prospectus. The exchange agent can answer your questions regarding how to tender your Old Notes. Acceptance of Old Notes............... If all the conditions to the exchange offer are satisfied or waived prior to the expiration date, we will accept all Old Notes properly tendered and not withdrawn prior to the expiration of the exchange offer and will issue the New Notes promptly after the expiration date. We will issue New Notes in exchange for Old Notes that are accepted for exchange only after receipt by the exchange agent of either a timely book-entry confirmation of transfer of Old Notes into the exchange agent's DTC account or a properly completed and executed letter of transmittal. Our oral or written notice of acceptance to the Exchange Agent will be considered our acceptance of the exchange offer. Accrued Interest on Old Notes......... On December 4, 2003 you will receive an interest payment in an amount equal to the sum of: (i) the accrued but unpaid interest on the Old Notes, at an annual interest rate of 2.5%, from 2 and including June 4, 2003 through the expiration date of the exchange offer; and (ii) the accrued but unpaid interest on the New Notes, at an annual interest rate of 1.5%, from and including the first day after the expiration date of the exchange offer to, but excluding, December 4, 2003. Amendment of the Exchange Offer....... We reserve the right not to accept any of the Old Notes tendered and to otherwise interpret or modify the terms of the exchange offer, provided that we will comply with applicable laws that require us to extend the period during which notes may be tendered or withdrawn as a result of changes in the terms of or information relating to the exchange offer. Consequences of not Exchanging Old Notes................................. If you do not exchange your Old Notes in the exchange offer, the liquidity of the trading market for Old Notes not tendered for exchange, or tendered for exchange but not accepted, could be significantly reduced to the extent that Old Notes are tendered and accepted for exchange in the exchange offer. Use of Proceeds; Fees and Expenses of the Exchange Offer.................... We will not receive any cash proceeds from the exchange offer. Old Notes that are properly tendered and exchanged pursuant to the exchange offer will be retired and canceled. We estimate that the total fees and expenses of the exchange offer will be approximately $8.5 million. Tax Consequences...................... Although the exchange will be a recapitalization transaction in which gain is not ordinarily recognized, U.S. persons will be required to recognize any gain to the extent of the fair market value of the excess of the principal amount of the New Notes over the principal amount of the Old Notes. No loss will be recognized on the exchange. Any such gain will be treated as ordinary interest income. Non-U.S. persons who exchange their Old Notes will qualify for an exemption from U.S. withholding tax on any such gain provided that certain conditions are met. Please see the section titled "Material United States Federal Income Tax Considerations" beginning on page 59 of this prospectus. Deciding Whether to Participate in the Exchange Offer........................ Neither we nor our officers or directors make any recommendation as to whether you should tender or refrain from tendering all or any portion of your Old Notes in the exchange offer. Further, we have not authorized anyone to make any such recommendation. You must make your own decision as to whether you should tender 3 your Old Notes in the exchange offer and, if so, the aggregate amount of Old Notes to tender after reading this prospectus, including the "Risk Factors" and the letter of transmittal and consulting with your advisors, if any, based on your own financial position and requirements. Exchange Agent........................ Deutsche Bank Trust Company Americas Information Agent..................... D.F. King & Co., Inc. Co-Dealer Managers.................... Deutsche Bank Securities Inc. and Thomas Weisel Partners LLC. Risk Factors.......................... You should consider carefully the matters described under "Risk Factors," beginning on page 13 of this prospectus as well as other information set forth in this prospectus and in the accompanying letter of transmittal before you decide to participate in the exchange offer. 4 NEW NOTES Issuer................................ Medicis Pharmaceutical Corporation. New Notes Offered..................... Up to $492 million in aggregate principal amount of 1.5% Contingent Convertible Senior Notes Due 2033. Maturity.............................. June 4, 2033. Ranking............................... The New Notes will be our senior unsecured obligations. The New Notes will rank senior in right of payment to all of our existing and future subordinated indebtedness and will rank equal in right of payment to all of our existing and future senior unsecured liabilities, including any unexchanged Old Notes. We are not restricted by the indenture governing the New Notes from incurring additional indebtedness, and we and our subsidiaries have significant ability to incur liens. Interest Payment Dates................ June 4 and December 4 beginning December 4, 2003. Contingent Interest................... We will pay contingent interest during any six-month period from June 4 to December 3 and from December 4 to June 3, with the initial six-month period commencing June 4, 2008, if the average trading price of the New Notes per $1,000 in principal amount for the five trading day period ending on the third trading day immediately preceding the first day of the applicable six-month period equals $1,200 or more. During any period when contingent interest is payable, it will be payable at a rate equal to 0.5% per annum. Conversion Rights..................... Holders may surrender New Notes for conversion into shares of our Class A common stock prior to the maturity date in the following circumstances: - during any quarter commencing after September 30, 2003, if the closing sale price of our Class A common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the quarter preceding the quarter in which the conversion occurs, is more than 120% of the conversion price per share of our Class A common stock on that 30th trading day; - if we have called the New Notes for redemption; - during the five trading day period immediately following any nine consecutive trading 5 day period in which the closing price per $1,000 in principal amount of the New Notes for each day of such period was less than 95% of the product of the closing sale price of our Class A common stock on that day multiplied by the number of shares of our Class A common stock issuable upon conversion of $1,000 in principal amount of the New Notes; or - upon the occurrence of specified corporate transactions described under "Description of the New Notes--Conversion Rights." Conversion Price; Adjustments......... Holders may convert any outstanding New Notes into shares of our Class A common stock at the initial conversion price of $77.52 per share, which is equal to approximately 12.8998 shares per $1,000 in principal amount of New Notes. The conversion price may be adjusted for certain transactions affecting our Class A common stock as described under "Description of the New Notes--Conversion Rate Adjustments", but it will not be adjusted for accrued interest. In addition, prior to June 11, 2008, we will adjust the conversion price if we declare a dividend or distribution to all or substantially all of the holders of Class A common stock to the extent such dividend or distribution is payable in cash and is greater than $0.05 per issued and outstanding share of Class A common stock per fiscal quarter. See "Description of the New Notes--Conversion Rate Adjustment." Upon conversion, the holder will not receive any cash payment representing accrued and unpaid interest, including contingent interest, if any. Optional Redemption................... We may redeem some or all of the New Notes at any time on or after June 11, 2008, at a price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest, including contingent interest, if any, up to but not including the date of redemption, payable in cash. Repurchase of Notes at the Option of the Holder............................ You may require us to repurchase your New Notes on June 4, 2008, 2013 and 2018 for a purchase price equal to 100% of the principal amount of the New Notes on the repurchase date, plus accrued and unpaid interest, including contingent interest, if any, up to but not including the date of repurchase, payable in cash. See "Description of the New Notes--Repurchase of New Notes at the Option of the Holder." 6 Change in Control..................... When a change in control, as that term is defined in "Description of the New Notes--Right to Require Purchase of New Notes upon a Change in Control", occurs, you will have the right to require us to repurchase your New Notes at a purchase price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest, including contingent interest, if any, up to but not including the date of repurchase, payable in cash. 7 THE COMPANY We are a leading specialty pharmaceutical company focusing primarily on developing and marketing drugs in the U.S. for the treatment of dermatological, pediatric and podiatric conditions and the marketing of dermal aesthetic enhancement products in Canada. We believe that annual U.S. pharmaceutical sales in the dermatological, pediatric and podiatric markets exceed $10 billion. We have built our business by executing a four-part growth strategy. This strategy consists of growing existing core brands, developing new products and important product line extensions, entering into strategic collaborations and acquiring complementary products, technologies and businesses. We offer a broad range of drugs addressing various conditions including acne, fungal infections, asthma, rosacea, hyperpigmentation, photoaging, psoriasis, eczema, skin and skin-structure infections, seborrheic dermatitis and cosmesis (improvement in the texture and appearance of skin). We currently offer 15 branded products. Our core brands, DYNACIN(R), LOPROX(R), LUSTRA(R), OMNICEF(R), ORAPRED(R), PLEXION(R) and TRIAZ(R), account for substantially all of our revenue. Most of our core brands enjoy market leadership in the segments in which they compete. Because of the significance of these brands to our business, we concentrate our sales and marketing efforts in promoting them to physicians in our target markets. We also sell a number of other products, all of which are profitable, but which are considered less critical to our business. In March 2003, we expanded into the dermal aesthetic market through our acquisition of the exclusive U.S. and Canadian rights to market, distribute and commercialize the dermal restorative product lines known as RESTYLANE(R), PERLANE(TM) and RESTYLANE(R) Fine Lines from Q-Med AB, a Swedish biotechnology/medical device company and its affiliates, collectively Q-Med. The RESTYLANE(R), PERLANE(TM) and RESTYLANE(R) Fine Lines products are currently being sold in over 60 countries by Q-Med, but are not yet approved for use in the U.S. We offer RESTYLANE(R), PERLANE(TM) and RESTYLANE(R) Fine Lines in Canada for treating fine lines and wrinkles, shaping facial contours, correcting deep facial folds and enhancing the appearance and fullness of lips. In countries where they are currently marketed, RESTYLANE(R), PERLANE(TM) and RESTYLANE(R) Fine Lines are injectable, transparent, non-animal stabilized hyaluronic acid gels, which require no patient sensitivity tests in advance of product administration. These transparent, injectable products have varying gel particle sizes which provide physicians in countries where the products are approved with flexibility in treating fine lines and wrinkles, shaping facial contours, correcting deep facial folds and enhancing the appearance and fullness of lips. In countries where the products are currently marketed, pre-packaged glass syringes provide physicians with various options to treat nasolabial folds, glabellar lines, periorbital lines, perioral lines, vermillion borders, lips, chins, cheeks, smile lines, worry lines and oral commissures. In the U.S., the FDA regulates these products as medical devices. A pre-market approval application for RESTYLANE(R) was filed with the FDA in June 2002 and is currently under review. While we cannot speculate on any expected date of approval by the FDA, or the indications that may be approved, we believe it is possible that an approval could be received by the end of 2003. We anticipate that applications for PERLANE(TM) and RESTYLANE(R) Fine Lines will be submitted during our fiscal year 2004 and fiscal year 2005, respectively. In addition to our expansion into the dermal aesthetic market in March 2003, in November 2001, we expanded into the pediatric market through our merger with Ascent Pediatrics, Inc., or Ascent. Ascent markets products to U.S.-based pediatricians, including an oral treatment for children with asthma and other inflammatory respiratory conditions. Since the merger, this sales force has introduced three of our core dermatological brands to high prescribing pediatricians. Our dedicated sales force, consisting of 179 employees as of June 30, 2003, focuses on high prescribing dermatologists, pediatricians and podiatrists. Since a relatively small number of physicians is responsible for writing a majority of prescriptions, we believe that the size of our sales force is appropriate to reach our target physicians. Our dermatology sales force consists of 8 97 employees who regularly call on approximately 5,000 dermatologists and 3,000 podiatrists. Our pediatric sales force, which became part of Medicis following the merger with Ascent, consists of approximately 70 employees who call on approximately 12,000 pediatricians. We also have four national account managers who regularly call on managed care organizations, large retail chains, insurance carriers and related organizations. We are in the process of hiring a dermal aesthetic sales force in preparation for FDA approval of RESTYLANE(R). Our dermal aesthetic sales force currently consists of eight employees, which we expect to increase to 37 upon commercial launch of RESTYLANE(R) in the U.S. Our principal executive offices are located at 8125 North Hayden Road, Scottsdale, Arizona 85258-2463. Our telephone number is (602) 808-8800. Our Class A common stock is traded on the NYSE under the symbol "MRX". For additional information concerning our company, please see "Where You Can Find More Information" on page 66 of this prospectus. 9 SUMMARY COMPARISON OF THE OLD NOTES TO THE NEW NOTES The following comparison of the terms of the Old Notes to the terms of the New Notes is only a summary. For a more detailed description of the terms of the New Notes, please see "Description of the New Notes". For a more detailed description of the differences between the Old Notes and the New Notes, please see "Comparison Between the Terms of the Old Notes and the New Notes".
OLD NOTES NEW NOTES ------------------------------ ------------------------------ Issuer............................... Medicis Pharmaceutical Medicis Pharmaceutical Corporation. Corporation. Notes Offered........................ $400 million in aggregate Up to $492 million in principal amount of 2.5% aggregate principal amount of Contingent Convertible Senior 1.5% Contingent Convertible Notes Due 2032 issued under an Senior Notes Due 2033 to be Indenture dated as of June 4, issued under a new Indenture 2002 between our company and between our company and Deutsche Bank Trust Company Deutsche Bank Trust Company Americas, as trustee. Americas, as trustee. Interest Payment Dates............... Payable on June 4 and December Same terms as the Old Notes. 4 of each year. Interest............................. 2.5% per annum in cash. 1.5% per annum in cash. Contingent Interest.................. 0.5% per annum after June 4, 0.5% per annum after June 4, 2007. 2008. Maturity............................. June 4, 2032. June 4, 2033. Conversion Rights.................... Holders of the Old Notes may Holders of the New Notes may convert their Old Notes into convert their New Notes into shares of our Class A common shares of our Class A common stock prior to the maturity stock prior to the maturity date in the following date in the following circumstances: circumstances: - during any quarter - same terms as the Old Notes, commencing after June 30, except that (i) the New 2003, if the closing sale Notes cannot be converted price of our Class A common prior to any quarter stock for at least 20 commencing after September trading days in the period 30, 2003, and (ii) the of 30 consecutive trading closing sale price of our days ending on the last Class A common stock must trading day of the quarter exceed 120% of the preceding the quarter in conversion price during such which the conversion occurs, period. is more than 110% of the conversion price for the Old Notes on that 30th trading day. - if we have called the Old - same terms as the Old Notes. Notes for redemption. - during the five trading day - same terms as the Old Notes. period immediately following any nine consecutive trading day period in which the trading price per $1,000 in principal amount of the Old Notes for each day of such period was less than 95% of the product of the closing sale price of our Class A
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OLD NOTES NEW NOTES ------------------------------ ------------------------------ common stock on that day multiplied by the number of share of our Class A common stock issuable upon conversion of $1,000 in principal amount of the Old Notes. - upon the occurrence of - same terms as the Old Notes. specified corporate transactions. Conversion Price..................... The Old Notes may be converted Same terms as the Old Notes, into our Class A common stock except that (i) the initial at the initial conversion conversion price per share for price per share of $58.10. the New Notes will be $77.52. This represents a conversion This represents a conversion rate of approximately 17.2117 rate of approximately 12.8998 shares of our Class A common shares of our Class A common stock per $1,000 in principal stock per $1,000 in principal amount of Old Notes. The amount of New Notes and (ii) conversion price may be prior to June 11, 2008, we adjusted for certain will adjust the conversion transactions affecting our price if we declare a dividend Class A common stock, but will or distribution to all or not be adjusted for accrued substantially all of the interest. Upon conversion, the holders of our Class A common holder will not receive any stock to the extent such cash payment representing dividend or distribution is accrued and unpaid interest, payable in cash and is greater including contingent interest, than $0.05 per issued and if any. outstanding share of Class A common stock per fiscal quarter. See "Description of the New Notes--Conversion Rate Adjustment". Optional Redemption of the Notes..... At any time on or after June Same terms as the Old Notes, 11, 2007, the Old Notes are except the New Notes will be redeemable at our option, in redeemable at our option at whole at any time, or in part any time on or after June 11, from time to time, on not less 2008. than 20 days nor more than 60 days' notice, at a price equal to 100% of the principal amount of the Old Notes, plus accrued and unpaid interest, including contingent interest, if any, up to but not including the date of redemption, payable in cash. Repurchase of the Notes at the Option A holder of Old Notes has the Same terms as the Old Notes, of the Holder...................... right to require us to except the purchase dates for purchase all or a portion of the New Notes will be June 4, such holder's Old Notes on 2008, 2013 and 2018. June 4, 2007, 2012 and 2017. We will repurchase the Old Notes for an amount of cash equal to 100% of the principal amount of the Old Notes on the date of
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OLD NOTES NEW NOTES ------------------------------ ------------------------------ purchase, plus accrued and unpaid interest including contingent interest, if any, up to but not including the date of repurchase, payable in cash. Events of Default.................... - Default in the payment of Same terms as the Old Notes. principal, or default for 30 days in payment of any interest (including contingent interest); - Failure to pay when due, within 15 days of a written notice, the principal of indebtedness for money borrowed by us or our subsidiaries in excess of $20 million, or the acceleration of that indebtedness that is not withdrawn within 15 days of the written notice; - Failure to cure within 60 days a default in performance or breach of any of the covenants in the Old Indenture; or - Certain events of bankruptcy, insolvency or reorganization. Transfer Restrictions................ We have filed a Registration At the closing of the exchange Statement on Form S-3 for the offer, the New Notes will be resale of the Old Notes; registered under the however unless the Old Notes Securities Act and, so long as have been resold pursuant to not held by affiliates, will that Registration Statement or be freely tradable. the supplements thereto, the Old Notes may only be offered or sold in transactions exempt from, or not subject to, the registration requirements of the Securities Act.
12 RISK FACTORS You should carefully consider the risks described below before you decide to exchange your Old Notes for the New Notes. The risks and uncertainties set forth below are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business and results of operations. If any of the following risks actually occur they could materially and adversely affect our business, financial condition or operating results. In that case, the trading price of our Class A common stock could decline which in turn could result in a decline in the trading price of the New Notes or the loss of all or a part of your investment. RISKS RELATING TO THE EXCHANGE OFFER IF AN ACTIVE MARKET FOR THE NEW NOTES FAILS TO DEVELOP OR IS NOT SUSTAINED, THE TRADING PRICE AND LIQUIDITY OF THE NEW NOTES COULD BE MATERIALLY AND ADVERSELY AFFECTED. Prior to the exchange offer, there has been no trading market for the New Notes. Each of the dealer managers, Deutsche Bank Securities Inc. and Thomas Weisel Partners LLC has advised us that it currently intends to make a market in the New Notes. However, neither Deutsche Bank Securities Inc. nor Thomas Weisel Partners LLC is obligated to make a market and may discontinue this market-making activity at any time without notice. The liquidity of the trading market for the New Notes will depend in part on the level of participation of the holders of Old Notes in the exchange offer. The greater the participation in the exchange offer, the greater the liquidity of the trading market for the New Notes and the lesser the liquidity of the trading market for the Old Notes not tendered in the exchange offer. As a result, we cannot assure you that any market for the New Notes will develop or, if one does develop, that it will be maintained. If an active market for the New Notes fails to develop or be sustained, the trading price and liquidity of the New Notes could be materially adversely affected. IF YOU DO NOT EXCHANGE YOUR OLD NOTES, THERE MAY BE A SUBSTANTIALLY SMALLER PUBLIC TRADING MARKET FOR YOUR OLD NOTES AND THE MARKET PRICE OF YOUR OLD NOTES MAY DECLINE. If the exchange offer is consummated, the trading and the liquidity of the market for the Old Notes may be significantly limited. As a result, the unexchanged Old Notes may trade at a discount to the price at which they would trade if the transactions contemplated by this prospectus were not consummated, subject to prevailing interest rates, the market for similar securities and other factors. We cannot assure you that an active market in the unexchanged Old Notes will exist or be maintained and we cannot assure you as to the prices at which the unexchanged Old Notes may be traded. OUR BOARD OF DIRECTORS HAS NOT MADE A RECOMMENDATION WITH REGARD TO WHETHER OR NOT YOU SHOULD TENDER YOUR NOTES IN THE EXCHANGE OFFER NOR HAS OUR COMPANY OBTAINED A THIRD-PARTY DETERMINATION THAT THE EXCHANGE OFFER IS FAIR TO HOLDERS OF THE OLD NOTES. We have designed the New Notes to have terms substantially similar to the Old Notes. The exchange offer has been unanimously approved by our board of directors. We are not, however, making a recommendation whether holders of Old Notes should exchange their notes. We have not retained and do not intend to retain any unaffiliated representative to act solely on behalf of the holders for purposes of negotiating the terms of the exchange offer and/or preparing a report concerning the fairness of the exchange offer. We cannot assure holders of the Old Notes that the value of the New Notes received in the exchange offer will in the future equal or exceed the value of the Old Notes tendered and we do not take a position as to whether you ought to participate in the exchange offer. 13 YOU SHOULD CONSIDER THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF EXCHANGING YOUR OLD NOTES FOR NEW NOTES IN THE EXCHANGE OFFER. Any gain recognized on the exchange will be treated as ordinary interest income and not as capital gain for U.S. federal income tax purposes. Interest income generally is subject to a higher rate of tax than capital gain. No loss will be recognized on the exchange. Please see the section titled "Material United States Federal Income Tax Considerations" beginning on page 59 of this prospectus. You should consult your tax advisor as to the U.S. federal, state, local and any foreign tax consequences of exchanging your Old Notes. DUE TO THE HIGHER CONVERSION PRICE OF THE NEW NOTES, IF YOU PARTICIPATE IN THE EXCHANGE OFFER, YOU WILL RECEIVE FEWER SHARES OF OUR CLASS A COMMON STOCK UPON CONVERSION AND YOUR ABILITY TO CONVERT INTO OUR CLASS A COMMON STOCK MAY BE DELAYED. The per share conversion price for the New Notes is $77.52, while the per share conversion price for the Old Notes is $58.10. As a result, upon conversion, if you own $1,000 in principal amount of new notes, you will receive, assuming no fractional shares will be issued, 12 shares of our Class A common stock, while a holder of unexchanged Old Notes would receive 17 shares. Moreover, if you wish to convert your Old Notes into our Class A common stock, the closing share price of our Class A common stock must exceed 110% of the per share conversion price of the Old Notes, or $63.91, for a specified trading period. Alternatively, in order to convert the New Notes into our Class A common stock the closing share price of our Class A common stock must exceed 120% of the per share conversion price of the New Notes, or $93.02, for the same trading period. Therefore, depending on market conditions, by tendering your Old Notes for New Notes you will likely delay your opportunity to convert your notes into shares of our Class A Common Stock until the stock price reaches a trading range that exceeds the level required to convert the Old Notes into our shares. RISKS RELATED TO OUR BUSINESS OUR REPORTED EARNINGS PER SHARE MAY BE MORE VOLATILE BECAUSE OF THE CONVERSION FEATURES OF THE NEW NOTES AND ANY UNEXCHANGED NOTES. The New Notes and any unexchanged Old Notes may be converted into our Class A common stock if, during the trading periods specified in the Indentures governing the New Notes and the Old Notes, the closing sale price of our Class A common stock is more than 120% and 110% of the respective conversion price per share of our Class A common stock. Prior to the conversion of the New Notes and the unexchanged Old Notes, the shares of Class A common stock underlying these securities are not included in the calculation of basic or fully diluted earnings per share. In the event the New Notes or the Old Notes are convertible, earnings per share would be expected to decrease as a result of the inclusion of the underlying shares of Class A common stock in our diluted earnings per share calculations. Volatility in our stock price could cause this condition to be met in one quarter and not in a subsequent quarter, increasing the volatility of diluted earnings per share. WE CANNOT ASSURE YOU THAT THE FDA WILL APPROVE RESTYLANE(R) IN A TIMELY FASHION OR AT ALL. In March 2003, we completed our acquisition of the rights to market, distribute and commercialize the dermal filler product lines known as RESTYLANE(R), PERLANE(TM) and RESTYLANE(R) Fine Lines in the U.S. and Canada. The products are approved for sale in Canada. A pre-market approval application for RESTYLANE(R) was filed with the FDA in June 2002 and is currently under review. We cannot assure you that the FDA approval of RESTYLANE(R) will occur by the end of 2003, which we currently anticipate, if at all. If we experience delays in obtaining FDA approval or if the FDA does not approve RESTYLANE(R) at all, our financial performance could be materially and negatively affected. In addition, in countries where RESTYLANE(R) is currently 14 marketed, no patient sensitivity tests are required in advance of product administration. We cannot assure you that the FDA will approve RESTYLANE(R) without a sensitivity test requirement, or for the same indications as approved in other countries. Even if the FDA does approve RESTYLANE(R), we cannot assure you that the FDA will approve supplements to the pre-market approval of PERLANE(TM) and RESTYLANE(R) Fine Lines in a timely fashion, or for the same indications as approved in other countries, or at all. WE CANNOT ASSURE YOU OUR DERMAL AESTHETIC ENHANCEMENT PRODUCTS WILL ACHIEVE WIDESPREAD ACCEPTANCE. We cannot assure you that we will be able to achieve market acceptance of our dermal aesthetic enhancement products. This market is very competitive and some of our competitors have been competing in this market for a significant period of time. Additionally, we expect that new competitors will be entering this market over the next few years. If we are unable to anticipate, identify or to react to competitive products or if changing preferences of consumers in the dermal aesthetic enhancement marketplace shift to other treatments for the treatment of fine lines and wrinkles, shaping facial contours, correcting deep facial folds and enhancing the appearance and fullness of lips, we may experience difficulties in achieving market acceptance or may experience a decline in demand for RESTYLANE(R), PERLANE(TM) and RESTYLANE(R) Fine Lines. In addition, the popular media may produce negative reports on the efficacy, safety or side effects of these products, which could negatively impact consumer perceptions of the product and negatively influence market acceptance or cause a decline in demand. We cannot assure you that consumers will prefer RESTYLANE(R), PERLANE(TM) and RESTYLANE(R) Fine Lines over other treatment options, or that we will be able to respond in a timely manner to changes in consumer preferences. WE CANNOT ASSURE YOU THAT WE WILL EFFECTIVELY INTEGRATE OUR DERMAL AESTHETIC ENHANCEMENT PRODUCTS INTO OUR EXISTING BUSINESS OR THAT OUR MARKETING EFFORTS OF THE RESTYLANE(R) PRODUCT WILL BE SUCCESSFUL. We will not be able to achieve the benefits of the acquisition of RESTYLANE(R) unless we are able to integrate the operations of the dermal aesthetic enhancement products with our existing products. We cannot assure you that this will occur. Moreover, the integration of these operations requires substantial attention from management and any diversion of management's attention could impact our operations. In anticipation of the commercial launch of RESTYLANE(R) in the U.S. we are expending significant resources. We will not see any revenue associated with that investment until commercial sales of RESTYLANE(R) begin, if at all. Although we have experience in the sales and marketing of dermatological, pediatric and podiatric products, we have no such experience in the dermal aesthetic enhancement market. We cannot assure you that we will be able to hire and retain personnel with experience in the dermal aesthetic enhancement market or execute our business plan with respect to this market segment. The continued effectiveness, or persistence, of RESTYLANE(R) correlates directly with the physician's injection technique at the time of administration. We are prevented from conducting patient-based training of physicians in the U.S. until the FDA has approved RESTYLANE(R). Accordingly if immediately following the commercial launch of RESTYLANE(R) patients experience a lack of persistence due to non-optimal administration by physicians, future sales of RESTYLANE(R) could be adversely impacted. WE COULD EXPERIENCE DIFFICULTIES IN OBTAINING SUPPLIES OF RESTYLANE(R), PERLANE(TM) AND RESTYLANE(R) FINE LINES. The manufacturing process to create bulk non-animal stabilized hyaluronic acid necessary to produce RESTYLANE(R), PERLANE(TM) and RESTYLANE(R) Fine Lines is technically complex and requires significant lead-time. Any failure by us to accurately forecast demand for finished product could result in an interruption in the supply of RESTYLANE(R), PERLANE(TM) and RESTYLANE(R) Fine Lines and a resulting decrease in sales of the products. In addition, because of the lead time 15 associated with obtaining a supply of RESTYLANE(R) following FDA approval, we may not be in a position to immediately launch and sell products in the U.S. We depend exclusively on Q-Med for our supply of RESTYLANE(R), PERLANE(TM) and RESTYLANE(R) Fine Lines. There are currently no alternative suppliers of these products. Q-Med has committed to supply RESTYLANE(R) to us under a perpetual license that is subject to customary conditions and our delivery of specified milestone payments. Q-Med manufactures RESTYLANE(R), PERLANE(TM) and RESTYLANE(R) Fine Lines at its facility in Uppsala, Sweden. We cannot be certain that Q-Med will be able to meet our current or future supply requirements. Any impairment of Q-Med's manufacturing capacities could significantly affect our inventories and our supply of products available for sale. IF Q-MED IS UNABLE TO PROTECT ITS INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS WITH RESPECT TO OUR DERMAL AESTHETIC ENHANCEMENT PRODUCTS, OUR BUSINESS COULD SUFFER. RESTYLANE(R), PERLANE(TM) and RESTYLANE(R) Fine Lines currently have patent protection in the U.S. until 2015 and the exclusivity period of the license granted to us by Q-Med ends when the last patent covering the products expires. If the validity or enforceability of these patents is challenged, the cost to our company could be significant and our business may be harmed. If any such challenge is successful, Q-Med may be unable to supply products to us, we may be unable to market, distribute and commercialize the products or it may no longer be profitable for us to do so. WE DERIVE A MAJORITY OF OUR PRESCRIPTION VOLUME FROM OUR CORE BRANDED PRODUCTS, AND ANY FACTOR ADVERSELY AFFECTING THE PRESCRIPTION VOLUME RELATED TO THESE PRODUCTS COULD HARM OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS. We derive a majority of our prescription volume from our core branded products. We believe that the prescription volume of our core branded products will constitute the majority of our prescription volume for the foreseeable future. Accordingly, any factor adversely affecting our prescription volume related to our core products, individually or collectively, could harm our business, financial condition and results of operations. Many of our core branded products are subject to generic competition or may be in the near future. Each of our core branded products could be rendered obsolete or uneconomical by regulatory or competitive changes. Prescription volume related to our core branded products could also be adversely affected by other factors, including: - manufacturing or supply interruptions; - the development of new competitive pharmaceuticals and technological advances to treat the conditions addressed by our core branded products; - marketing or pricing actions by one or more of our competitors; - regulatory action by the FDA and other government regulatory agencies; - changes in the prescribing practices of dermatologists, pediatricians and/or podiatrists; - restrictions on travel affecting the ability of our sales force to market to prescribing physicians in person; - changes in the reimbursement or substitution policies of third-party payors or retail pharmacies; - product liability claims; and - the outcome of disputes relating to trademarks, patents, license agreements and other rights. 16 OUR OPERATING RESULTS AND FINANCIAL CONDITION MAY FLUCTUATE. Our operating results and financial condition may fluctuate from quarter to quarter and year to year depending upon the relative timing of events or uncertainties which may arise. The following events or occurrences, among others, could cause fluctuations in our financial performance from period to period: - changes in the amount we spend to develop, acquire or license new products, technologies or businesses; - untimely contingent research and development payments under our third-party product development agreements; - changes in the amount we spend to promote our products; - delays between our expenditures to acquire new products, technologies or businesses and the generation of revenues from those acquired products, technologies or businesses; - changes in treatment practices of physicians that currently prescribe our products; - changes in reimbursement policies of health plans and other similar health insurers, including changes that affect newly developed or newly acquired products; - increases in the cost of raw materials used to manufacture our products; - manufacturing and supply interruptions, including failure to comply with manufacturing specifications; - development of new competitive products by others; - the mix of products that we sell during any time period; - our responses to price competition; - expenditures as the result of legal actions; - market acceptance of our products; - the impairment and write-down of goodwill or other intangible assets; - implementation of new or revised accounting or tax rules or policies; - disposition of non-core products, technologies and other rights; - termination or expiration of, or the outcome of disputes relating to, trademarks, patents, license agreements and other rights; - increases in insurance rates for existing products and the cost of insurance for new products; - general economic and industry conditions, including changes in interest rates affecting returns on cash balances and investments, that affect customer demand; - seasonality of demand for our products; - our level of research and development activities; and - the election to expense stock options, if approved by our board of directors. WE DEPEND UPON OUR KEY PERSONNEL AND OUR ABILITY TO ATTRACT, TRAIN AND RETAIN EMPLOYEES. Our success depends significantly on the continued individual and collective contributions of our senior management team. We have not entered into employment agreements with any of our key managers, with the exception of our Chairman and Chief Executive Officer. The loss of the services of any member of our senior management or the inability to hire and retain experienced management personnel could harm our operating results. In addition, our future success depends 17 on our ability to hire, train and retain skilled employees. Competition for these employees is intense. WE MAY NOT BE ABLE TO IDENTIFY AND ACQUIRE PRODUCTS, TECHNOLOGIES AND BUSINESSES ON ACCEPTABLE TERMS, IF AT ALL, WHICH MAY CONSTRAIN OUR GROWTH. Our strategy for continued growth includes the acquisition of products, technologies and businesses. These acquisitions could involve acquiring other pharmaceutical companies' assets, products or technologies. In addition, we may seek to obtain licenses or other rights to develop, manufacture and distribute products. We cannot be certain that we will be able to identify suitable acquisition or licensing candidates or if any will be available on acceptable terms. Other pharmaceutical companies, with greater financial, marketing and sales resources than we have, have also tried to grow through similar acquisition and licensing strategies. Because of their greater resources, our competitors may be able to offer better terms for an acquisition or license than we can offer, or they may be able to demonstrate a greater ability to market licensed products. OUR CONTINUED GROWTH DEPENDS UPON OUR ABILITY TO DEVELOP NEW PRODUCTS. We have internally developed potential pharmaceutical compounds and agents. We also have acquired the rights to certain potential compounds and agents in various stages of development. We currently have a variety of new products in various stages of research and development and are working on possible improvements, extensions and reformulations of some existing products. These research and development activities, as well as the clinical testing and regulatory approval process, which must be completed before commercial quantities of these products can be sold, will require significant commitments of personnel and financial resources. Due to the limited financial resources available for research and development, we cannot assure you that we will be able to develop a product or technology in a timely manner, or at all. Delays in the research, development, testing or approval processes will cause a corresponding delay in revenue generation from those products. Regardless of whether these products are ever released to the market, the expense of such processes will have already been incurred. We reevaluate our research and development efforts regularly to assess whether our efforts to develop a particular product or technology are progressing at a rate that justifies our continued expenditures. On the basis of these reevaluations, we have abandoned in the past, and may abandon in the future, our efforts on a particular product or technology. We cannot assure you that any product we are researching or developing will ever be successfully released to the market. If we fail to take a product or technology from the development stage to market on a timely basis, we may incur significant expenses without a near-term financial return. We have in the past, and may in the future, supplement our internal research and development by entering into research and development agreements with other pharmaceutical companies. We may, upon entering into such agreements, be required to make significant upfront payments to fund the project. We cannot be sure, however, that we will be able to locate adequate research partners or that supplemental research will be available on terms acceptable to us in the future. If we are unable to enter into additional research partnership arrangements, we may incur additional costs to continue research and development internally or abandon certain projects. Even if we are able to enter into collaborations, we cannot assure you that these arrangements will result in successful product development or commercialization. WE DEPEND ON LICENSES FROM OTHERS, AND ANY LOSS OF SUCH LICENSES COULD HARM OUR BUSINESS, MARKET SHARE AND PROFITABILITY. We have acquired the rights to manufacture, use and/or market certain products, including certain of our core products. We also expect to continue to obtain licenses for other products and technologies in the future. Our license agreements generally require us to develop a market for the 18 licensed products. If we do not develop these markets, the licensors may be entitled to terminate these license agreements. We cannot be certain that we will fulfill all of our obligations under any particular license agreement for any variety of reasons, including insufficient resources to adequately develop and market a product, and lack of market development despite our diligence and lack of product acceptance. Our failure to fulfill our obligations could result in the loss of our rights under a license agreement. Our inability to continue the distribution of any particular licensed product could harm our business, market share and profitability. Also, certain products we license are used in connection with other products we own or license. A loss of a license in such circumstances could materially harm our ability to market and distribute these other products. Our growth and acquisition strategy depends upon the successful integration of licensed products with our existing products. Therefore, any loss, limitation or flaw in a licensed product could impair our ability to market and sell our products, delay new product development and introduction, and/or harm our reputation. These problems, individually or together, could harm our business and results of operation. WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS, AND IF WE LOSE ANY OF THEM, OUR BUSINESS COULD BE HARMED. Our customers include some of the nation's leading wholesale pharmaceutical distributors, such as AmerisourceBergen Corporation, Cardinal Health, Inc., McKesson Corporation, Quality King Distributors, and major drug chains. During fiscal year 2002, Quality King, Cardinal Health, McKesson and AmerisourceBergen accounted for 26.7%, 22.4%, 19.4% and 11.1%, respectively, of our net revenues. The loss of any of these customers' accounts or a reduction in their purchases could harm our business, financial condition or results of operations. In addition, we may face pricing pressure from our larger customers. The distribution network for pharmaceutical products has, in recent years, been subject to increasing consolidation. As a result, a few large wholesale distributors control a significant share of the market. In addition, the number of independent drug stores and small chains has decreased as retail consolidation has occurred. Further consolidation among, or any financial difficulties of, distributors or retailers could result in the combination or elimination of warehouses which may result in product returns to our company, cause a reduction in the inventory levels of distributors and retailers, or otherwise result in reductions in purchases of our products, any of which could harm our business, financial condition and results of operations. WE RELY ON OTHERS TO MANUFACTURE OUR PRODUCTS. Currently, we outsource all of our product manufacturing needs and do not manufacture any of our products. Typically, our manufacturing contracts are short-term. We are dependent upon renewing agreements with our existing manufacturers or finding replacement manufacturers to satisfy our requirements. As a result, we cannot be certain that manufacturing sources will continue to be available or that we can continue to outsource the manufacturing of our products on reasonable or acceptable terms. The underlying cost to us for manufacturing our products is established in our agreements with these outside manufacturers. Because of the short-term nature of these agreements, our expenses for manufacturing are not fixed and could change from contract to contract. If the cost of production increases, our gross margins could be negatively affected. In addition, we rely on outside suppliers to provide us with an adequate and reliable supply of our products on a timely basis. Any loss of a supplier or any difficulties that arise in the supply chain could significantly affect our inventories and supply of products available for sale. In some cases, we do not have alternative sources of supply for our products. In the event our primary suppliers are unable to fulfill our requirements for any reason, it could reduce our sales, margins 19 and market share, as well as harm our overall business and financial results. If we are unable to supply sufficient amounts of our products on a timely basis, our revenues and market share could decrease and, correspondingly, our profitability could decrease. Under several exclusive supply agreements, with certain exceptions, we must purchase most of our product supply from specific manufacturers. If any of these exclusive manufacturer or supplier relationships were terminated, we would be forced to find a replacement manufacturer or supplier. The FDA requires that all manufacturers used by pharmaceutical companies comply with the FDA's regulations, including the current Good Manufacturing Practices, or cGMP, regulations applicable to manufacturing processes. The cGMP validation of a new facility and the approval of that manufacturer for a new drug product may take a year or more before manufacture can begin at the facility. Delays in obtaining FDA validation of a replacement manufacturing facility could cause an interruption in the supply of our products. Although we have business interruption insurance covering the loss of income for up to 12 months, which may mitigate the harm to us from the interruption of the manufacturing or selling of our largest selling products caused by certain events, the loss of a manufacturer could still cause a significant reduction in our sales, margins and market share, as well as harm our overall business and financial results. OUR RELIANCE ON THIRD-PARTY MANUFACTURERS AND SUPPLIERS CAN BE DISRUPTIVE TO OUR INVENTORY SUPPLY. We and the manufacturers of our products rely on suppliers of raw materials used in the production of our products. Some of these materials are available from only one source and others may become available from only one source. Any disruption in the supply of raw materials or an increase in the cost of raw materials to our manufacturers could have a significant effect on their ability to supply us with our products. We try to maintain inventory levels that are no greater than necessary to meet our current projections. Any interruption in the supply of finished products could hinder our ability to timely distribute finished products. If we are unable to obtain adequate product supplies to satisfy our customers' orders, we may lose those orders and our customers may cancel other orders and stock and sell competing products. This in turn could cause a loss of our market share and reduce our revenues. WE CANNOT BE CERTAIN THAT SUPPLY INTERRUPTIONS WILL NOT OCCUR OR THAT OUR INVENTORY WILL ALWAYS BE ADEQUATE. Numerous factors could cause interruptions in the supply of our finished products including: - timing, scheduling and prioritization of production by our contract manufacturers; - labor interruptions; - changes in our sources for manufacturing; - the timing and delivery of domestic and international shipments; - our failure to locate and obtain replacement manufacturers as needed on a timely basis; and - conditions affecting the cost and availability of raw materials. FLUCTUATIONS IN DEMAND FOR OUR PRODUCTS CREATE INVENTORY MAINTENANCE UNCERTAINTIES. We typically experience greater revenues and, correspondingly, greater income during the last month of each fiscal quarter. We attempt to match our expenditures for inventory with these historical fluctuations in demand. However, if these demand patterns change or we experience even a short delay in delivery of inventory, revenue could be deferred or even lost if products are unavailable to meet peak demand. A deferral of revenue to a later period, or the loss of revenue completely, could cause significant period to period fluctuations in our operating results, as a 20 significant portion of our operating expenses are fixed in the short term. These fluctuations could result in our not meeting earnings expectations or result in operating losses for a particular period. OUR SUCCESS DEPENDS ON OUR ABILITY TO MANAGE OUR GROWTH. We recently experienced a period of rapid growth from both acquisitions and internal expansion of our operations. This growth has placed significant demands on our human and financial resources. We must continue to improve our operational, financial and management information controls and systems and effectively motivate, train and manage our employees to properly manage this growth. Even if these steps are taken, we cannot be sure that our recent acquisitions will be assimilated successfully into our business operations. If we do not manage this growth effectively, maintain the quality of our products despite the demands on our resources and retain key personnel, our business could be harmed. IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS, OUR BUSINESS COULD SUFFER. We believe that the protection of our trademarks and service marks is an important factor in product recognition and in our ability to maintain or increase market share. If we do not adequately protect our rights in our various trademarks and service marks from infringement, their value to us could be lost or diminished. If the marks we use are found to infringe upon the trademark or service mark of another company, we could be forced to stop using those marks and, as a result, we could lose the value of those marks and could be liable for damages caused by an infringement. The patents and patent applications in which we have an interest may be challenged as to their validity or enforceability. Challenges may result in potentially significant harm to our business. The cost of responding to these challenges and the inherent costs to defend the validity of our patents, including the prosecution of infringements and the related litigation, could be substantial. Such litigation also could require a substantial commitment of our management's time. We are pursuing several U.S. patent applications, although we cannot be sure that any of these patents will ever be issued. We also have acquired rights under certain patents and patent applications in connection with our licenses to distribute products and by assignment of rights to patents and patent applications from certain of our consultants and officers. These patents and patent applications may be subject to claims of rights by third parties. If there are conflicting claims to the same patent or patent application, we may not prevail and, even if we do have some rights in a patent or application, those rights may not be sufficient for the marketing and distribution of products covered by the patent or patent application. The ownership of a patent or an interest in a patent does not always provide significant protection. Others may independently develop similar technologies or design around the patented aspects of our technology. We only conduct patent searches to determine whether our products infringe upon any existing patents when we think such searches are appropriate. As a result, the products and technologies we currently market, and those we may market in the future, may infringe on patents and other rights owned by others. If we are unsuccessful in any challenge to the marketing and sale of our products or technologies, we may be required to license the disputed rights, if the holder of those rights is willing, or to cease marketing the challenged products, or to modify our products to avoid infringing upon those rights. A claim or finding of infringement regarding one of our products could harm our business, financial condition and results of operations. The costs of responding to infringement claims could be substantial and could require a substantial commitment of our management's time. The expiration of patents may expose our products to additional competition. For example, our patent covering BUPHENYL(R) expires in 2004. We also rely upon trade secrets, unpatented proprietary know-how and continuing technological innovation in developing and manufacturing many of our core products. We require 21 all of our employees, consultants and advisors to enter into confidentiality agreements prohibiting them from taking or disclosing our proprietary information and technology. Nevertheless, these agreements may not provide meaningful protection for our trade secrets and proprietary know-how if they are used or disclosed. Despite all of the precautions we may take, people who are not parties to confidentiality agreements may obtain access to our trade secrets or know-how. In addition, others may independently develop similar or equivalent trade secrets or know-how. IF WE BECOME SUBJECT TO PRODUCT LIABILITY CLAIMS, OUR EARNINGS AND FINANCIAL CONDITION COULD SUFFER. We are exposed to risks of product liability claims from allegations that our products resulted in adverse effects to the patient or others. These risks exist even with respect to those products that are approved for commercial sale by the FDA and manufactured in facilities licensed and regulated by the FDA. In addition to our desire to reduce the scope of our potential exposure to these types of claims, many of our customers require us to maintain product liability insurance as a condition of conducting business with us. We currently carry product liability insurance in the amount of $50 million per claim and $50 million in the aggregate on a claims-made basis. Nevertheless, this insurance may not be sufficient to cover all claims made against us. We also cannot be certain that our current coverage will continue to be available in the future on reasonable terms, if at all. If we are liable for any product liability claims in excess of our coverage or outside of our coverage, the cost and expense of such liability could cause our earnings and financial condition to suffer. We selectively outsource certain non-sales and non-marketing services, and cannot assure you that we will be able to obtain adequate supplies of such services on acceptable terms. To enable us to focus on our core marketing and sales activities, we selectively outsource certain non-sales and non-marketing functions, such as laboratory research, manufacturing and warehousing. As we expand our activities in these areas, additional financial resources are expected to be utilized. We typically do not enter into long-term manufacturing contracts with third party manufacturers. Whether or not such contracts exist, we cannot assure you that we will be able to obtain adequate supplies of such services or products in a timely fashion, on acceptable terms, or at all. RISKS RELATED TO OUR INDUSTRY THE GROWTH OF MANAGED CARE ORGANIZATIONS, OTHER THIRD PARTY REIMBURSEMENT POLICIES, STATE REGULATORY AGENCIES AND RETAILER FULFILLMENT POLICIES MAY HARM OUR PRICING, WHICH MAY REDUCE OUR MARKET SHARE AND MARGINS. Our operating results and business success depend in large part on the availability of adequate third party payor reimbursement to patients for our prescription-brand products. These third party payors include government entities such as Medicaid, private health insurers and managed care organizations. Because of the size of the patient population covered by managed care organizations, marketing of prescription drugs to them and the pharmacy benefit managers that serve many of these organizations has become important to our business. Managed care organizations and other third party payors try to negotiate the pricing of medical services and products to control their costs. Managed care organizations and pharmacy benefit managers typically develop formularies to reduce their cost for medications. Formularies can be based on the prices and therapeutic benefits of the available products. Due to their lower costs, generic products are often favored. The breadth of the products covered by formularies varies considerably from one managed care organization to another, and many formularies include alternative and competitive products for treatment of particular medical conditions. Exclusion of a product from a formulary can lead to its sharply reduced usage in the managed care organization patient population. Payment or reimbursement of only a portion of the cost of our prescription 22 products could make our products less attractive, from a net-cost perspective, to patients, suppliers and prescribing physicians. We cannot be certain that the reimbursement policies of these entities will be adequate for our branded pharmaceutical products to compete on a price basis. If our products are not included within an adequate number of formularies or adequate reimbursement levels are not provided, or if those policies increasingly favor generic products, our market share and gross margins could be harmed, as could our overall business and financial condition. Some of our products are not of a type generally eligible for reimbursement. It is possible that products manufactured by others could address the same effects as our products and be subject to reimbursement. If this were the case, some of our products may be unable to compete on a price basis. In addition, decisions by state regulatory agencies, including state pharmacy boards, and/or retail pharmacies may require substitution of generic for branded products, may prefer competitors' products over our own, and may impair our pricing and thereby constrain our market share and growth. Managed care initiatives to control costs have influenced primary-care physicians to refer fewer patients to dermatologists and other specialists. Further reductions in these referrals could reduce the size of our potential market and harm our business, financial condition and results of operation. WE ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION. Pharmaceutical companies are subject to significant regulation by a number of national, state and local agencies. The FDA has jurisdiction over all of our business and administers requirements covering testing, manufacturing, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion of our products. In addition, the FTC and state and local authorities regulate the advertising of over-the-counter drugs and cosmetics. Failure to comply with applicable regulatory requirements could, among other things, result in: - fines; - changes to advertising; - suspensions of regulatory approvals of products; - product recalls; - delays in product distribution, marketing and sale; and - civil or criminal sanctions. Our prescription and over-the-counter products receive FDA review regarding their safety and effectiveness. However, the FDA is permitted to revisit and change its prior determinations. We cannot be sure that the FDA will not change its position with regard to the safety or effectiveness of our products. If the FDA's position changes, we may be required to change our labeling or formulations or cease to manufacture and market the challenged products. Even prior to any formal regulatory action, we could voluntarily decide to cease distribution and sale or recall any of our products if concerns about the safety or effectiveness develop. Before marketing any drug that is considered a "new drug" by the FDA, the FDA must provide its approval of the product. All products which are considered drugs which are not "new drugs" and that generally are recognized by the FDA as safe and effective for use do not require the FDA's approval. We believe that some of our products, as they are promoted and intended for use, are exempt from treatment as "new drugs' and are not subject to approval by the FDA. The FDA, however, could take a contrary position and we could be required to seek FDA approval of those products and the marketing of those products. We could also be required to withdraw those products from the market. 23 OBTAINING FDA AND OTHER REGULATORY APPROVALS IS TIME CONSUMING AND EXPENSIVE. The process of obtaining FDA and other regulatory approvals is time consuming and expensive. Clinical trials are required and the marketing and manufacturing of pharmaceutical products are subject to rigorous testing procedures. We may not be able to obtain FDA approval to conduct clinical trials or to manufacture or market any of the products we develop, acquire or license (including RESTYLANE(R)) on a timely basis or at all. Moreover, the costs to obtain approvals could be considerable and the failure to obtain or delays in obtaining an approval could significantly harm our business performance and financial results. Even if pre-marketing approval from the FDA is received, the FDA is authorized to impose post-marketing requirements such as: - testing and surveillance to monitor the product and its continued compliance with regulatory requirements; - submitting products for inspection and, if any inspection reveals that the product is not in compliance, prohibiting the sale of all products from the same lot; - suspending manufacturing; - switching status from prescription to over-the-counter drug; - recalling products; and - withdrawing marketing clearance. In their regulation of advertising, the FDA and FTC from time to time issue correspondence to pharmaceutical companies alleging that some advertising or promotional practices are false, misleading or deceptive. The FDA has the power to impose a wide array of sanctions on companies for such advertising practices, and the receipt of correspondence from the FDA alleging these practices could result in the following: - incurring substantial expenses, including fines, penalties, legal fees and costs to comply with the FDA's requirements; - changes in the methods of marketing and selling products; - taking FDA-mandated corrective action, which may include placing advertisements or sending letters to physicians rescinding previous advertisements or promotion; and - disruption in the distribution of products and loss of sales until compliance with the FDA's position is obtained. In recent years, various legislative proposals have been offered in Congress and in some state legislatures that include major changes in the health care system. These proposals have included price or patient reimbursement constraints on medicines, restrictions on access to certain products and mandatory substitution of generic for branded products. We cannot predict the outcome of such initiatives, and it is difficult to predict the future impact of the broad and expanding legislative and regulatory requirements affecting us. WE FACE SIGNIFICANT COMPETITION WITHIN OUR INDUSTRY. The pharmaceutical industry is highly competitive. Competition in our industry occurs on a variety of fronts, including: - developing and bringing new products to market before others; - developing new technologies to improve existing products; - developing new products to provide the same benefits as existing products at less cost; and - developing new products to provide benefits superior to those of existing products. 24 Many of our competitors are large, well-established companies in the fields of pharmaceuticals, chemicals, cosmetics and health care. Our competitors include Aventis, Bristol-Myers Squibb, Elan, Galderma, GlaxoSmithKline, ICN Pharmaceuticals, Johnson & Johnson, Pfizer, Schering-Plough, Wyeth and others. Many of these companies have greater resources than we do to devote to marketing, sales, research and development and acquisitions. As a result, they have a greater ability to undertake more extensive research and development, marketing and pricing policy programs. It is possible that our competitors may develop new or improved products to treat the same conditions as our products or make technological advances reducing their cost of production so that they may engage in price competition through aggressive pricing policies to secure a greater market share to our detriment. These competitors also may develop products which make our current or future products obsolete. Any of these events could significantly harm our business and financial results, including reducing our market share and gross margins. We sell and distribute both prescription brands and over-the-counter products. Each of these products competes with products produced by others to treat the same conditions. Several of our prescription products compete with generic pharmaceuticals, which claim to offer equivalent benefits at a lower cost. In some cases, insurers and other health care payment organizations try to encourage the use of these less expensive generic brands through their prescription benefits coverage and reimbursement policies. These organizations may make the generic alternative more attractive to the patient by providing different amounts of reimbursement so that the net cost of the generic product to the patient is less than the net cost of our prescription brand product. Aggressive pricing policies by our generic product competitors and the prescription benefits policies of third party payors could cause us to lose market share or force us to reduce our gross margins in response. RISKS RELATED TO THE NEW NOTES WE MAY NOT BE ABLE TO REPURCHASE THE NEW NOTES WHEN REQUIRED TO. On June 4, 2008, 2013 and 2018 or upon the occurrence of a change in control, holders of the New Notes may require us to offer to repurchase their New Notes for cash. We may not have sufficient funds at the time of any such events to make the required repurchases. The source of funds for any repurchase required as a result of any such events will be our available cash or cash generated from operating activities or other sources, including borrowings, sales of assets, sales of equity or funds provided by a new controlling entity. We cannot assure you, however, that sufficient funds will be available at the time of any such events to make any required repurchases of the New Notes tendered. Furthermore, the use of available cash to fund the repurchase of the New Notes may impair our ability to obtain additional financing in the future. YOU SHOULD CONSIDER THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNING NEW NOTES. We intend to treat the New Notes as contingent payment debt instruments for U.S. federal income tax purposes. As a result of this treatment, if you acquire a New Note, you will be required to include amounts in income, as ordinary income, in advance of the receipt of cash or other property attributable to them. For example, the amount of interest income you are required to include each year will exceed the stated interest that is payable on the New Notes each year. You will recognize gain or loss on a sale, purchase by us at your option, exchange, conversion or redemption of a New Note in an amount equal to the difference between the amount realized on the sale, purchase by us at your option, exchange, conversion or redemption, including the fair market value of any of our common stock received upon conversion, and your adjusted tax basis in the New Note. Any gain you recognize generally will be ordinary interest income; any loss will be ordinary loss to the extent of interest on the New Notes previously included in income and, thereafter, capital loss. There is some uncertainty as to the proper application of the Treasury regulations governing contingent payment debt instruments, and if our treatment were successfully challenged by the Internal Revenue Service, it might be determined that, among other things, you 25 should have accrued interest income at a lower rate, should not have recognized ordinary income upon conversion and should have recognized capital gain or loss, rather than ordinary income or loss upon a taxable disposition of the New Notes. See "Material United States Federal Income Tax Considerations." WE EXPECT THAT THE TRADING VALUE OF THE NEW NOTES WILL BE SIGNIFICANTLY AFFECTED BY THE PRICE OF OUR CLASS A COMMON STOCK AND OTHER FACTORS. The market price of the New Notes is expected to be significantly affected by the market price of our Class A common stock. This may result in greater volatility in the trading value of the New Notes than would be expected for nonconvertible debt securities. In addition, the New Notes have a number of features, including conditions to conversion, which, if not met, could result in a holder receiving less than the value of our Class A common stock into which a New Note would otherwise be convertible. These features could adversely affect the value and the trading prices for the New Notes. WE MAY BE UNABLE TO RAISE ADDITIONAL FINANCING NECESSARY TO CONDUCT OUR BUSINESS, MAKE PAYMENTS WHEN DUE OR REFINANCE OUR DEBT. We may need to raise additional funds in the future in order to implement our business plan, to refinance our debt or to acquire complementary businesses or products. Any required additional financing may be unavailable on terms favorable to us, or at all. If we raise additional funds by issuing equity securities, holders of our Class A common stock may experience significant dilution of their ownership interest and these securities may have rights senior to those of the holders of our Class A common stock. OUR INDEBTEDNESS AND INTEREST EXPENSE WILL LIMIT OUR CASH FLOW AND COULD ADVERSELY AFFECT OUR OPERATIONS AND OUR ABILITY TO MAKE FULL PAYMENT ON YOUR NEW NOTES. Upon consummation of the exchange offer contemplated hereby, we will have an increased level of debt. Our indebtedness poses risks to our business, including the risks that: - we could use a substantial portion of our consolidated cash flow from operations to pay principal and interest on our debt, thereby reducing the funds available for working capital, capital expenditures, acquisitions, product development and other general corporate purposes; - insufficient cash flow from operations may force us to sell assets, or seek additional capital, which we may be unable to do at all or on terms favorable to us; and - our level of indebtedness may make us vulnerable to economic or industry downturns. THE NEW NOTES ARE UNSECURED OBLIGATIONS OF OUR COMPANY AND WILL BE EFFECTIVELY SUBORDINATED TO ANY PRESENT OR FUTURE OBLIGATIONS TO SECURED CREDITORS AND LIABILITIES OF OUR SUBSIDIARIES. The New Notes are unsecured obligations of our company and will be effectively subordinated to any present or future secured debt. In the event of our insolvency, the assets securing any future secured facilities would be available to satisfy the claims of our secured lenders prior to any application of those assets to payment of other creditors, including the holders of the New Notes. In addition, the Old Notes are, and the New Notes will be, structurally subordinated to all liabilities of our subsidiaries. Further, the Indenture governing the New Notes does not limit the incurrence of senior debt or the incurrence of other debt and liabilities by us or our subsidiaries. The incurrence of additional debt and other liabilities could impede our ability to pay obligations on our New Notes. 26 RISKS RELATED TO OUR CLASS A COMMON STOCK THE PRICE OF OUR CLASS A COMMON STOCK HAS FLUCTUATED SIGNIFICANTLY DURING THE PAST SEVERAL YEARS AND MAY FLUCTUATE SIGNIFICANTLY IN THE FUTURE, WHICH MAY MAKE IT DIFFICULT FOR YOU TO RESELL THE NEW NOTES OR THE SHARES OF OUR CLASS A COMMON STOCK INTO WHICH THE NEW NOTES MAY BE CONVERTED AT PRICES YOU FIND ATTRACTIVE. Our Class A common stock is traded on the NYSE and has experienced and may continue to experience significant price and volume fluctuations that could adversely affect the market price of our Class A common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in financial results, earnings below analysts' estimates and financial performance and other activities of other publicly traded companies in the pharmaceutical and dermatological product industries could cause the price of our Class A common stock to fluctuate substantially. The price of the New Notes may be significantly affected by changes in the price of our Class A common stock. Any similar fluctuations in the future could adversely affect the market price of our Class A common stock. See "Price Range of Class A Common Stock and Old Notes." FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT OUR CLASS A COMMON STOCK PRICE. As of June 30, 2003, an aggregate of 6,390,596 shares of our Class A common stock were issuable upon exercise of outstanding stock options under our stock option plans, and an additional 2,835,224 shares of our Class A common stock were reserved for the issuance of additional options and shares under these plans. Future sales of our Class A common stock and instruments convertible or exchangeable into our Class A common stock and transactions involving equity derivatives relating to our Class A common stock, or the perception that such sales or transactions could occur, could adversely affect the market price of our Class A common stock. This could, in turn, have an adverse effect on the trading price of the New Notes resulting from, among other things, a delay in the ability of holders to convert their New Notes into our Class A common stock. OUR CHARTER PROVISIONS, RIGHTS PLAN, STOCK OPTION VESTING, EMPLOYMENT AGREEMENT AND DELAWARE LAW MAY HAVE ANTI-TAKEOVER EFFECTS. Our certificate of incorporation and bylaws authorize the board of directors to designate and issue, without stockholder approval, preferred stock with voting, conversion and other rights and preferences that could differentially and adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock or of rights to purchase preferred stock could be used to discourage an unsolicited acquisition proposal. Moreover, we have granted a dividend of one preference stock purchase right on each outstanding share of our Class A common stock and Class B common stock. Under certain circumstances, after a person has acquired beneficial ownership of a certain percentage of our common stock, each right will entitle the holder to purchase, at the right's then-current exercise price, stock of our company or our successor at a discount. In addition, certain provisions of Delaware law applicable to our company and certain provisions of our certificate of incorporation and bylaws could also delay or make more difficult a merger, tender offer or proxy contest involving our company, including Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years unless certain conditions are met. Our senior management is entitled to certain payments upon a change in control. All of our stock option plans provide for the acceleration of vesting in the event of a change in control in our company. The possible issuance of preferred stock, the rights granted to stockholders under our rights plan, Delaware law, provisions of our certificate of incorporation and bylaws and our stock option plans and change of control payments could each have the effect of delaying, deferring or preventing a change in control of our company, including, without limitation, discouraging a proxy 27 contest, making more difficult the acquisition of a substantial block of our common stock and limiting the price that investors might in the future be willing to pay for shares of our common stock. Under certain circumstances, our obligations in a change of control may require us to make payments that would constitute excess parachute payments under the Internal Revenue Code of 1986, as amended. In the event that we were required to make payments constituting excess parachute payments, these payments would not be tax deductible for us. See "Description of Capital Stock." 28 USE OF PROCEEDS We will not receive any cash proceeds from the exchange offer. All Old Notes that are properly tendered and not withdrawn in the exchange offer will be retired and cancelled. RATIOS OF EARNINGS TO FIXED CHARGES
NINE MONTHS ENDED FISCAL YEAR ENDED JUNE 30, MARCH 31, ------------------------------------ --------- 1998 1999 2000 2001 2002 2003 ---- ----- ----- ----- ----- --------- Ratios of earnings to fixed charges....... 5.3x 26.9x 21.0x 22.2x 27.6x 6.4x
For purposes of computing the ratios of earnings to fixed charges, earnings represent pre-tax income from continuing operations plus fixed charges. Fixed charges represent interest expense and the portion of rents representative of interest related to continuing operations. 29 BOOK VALUE PER SHARE At March 31, 2003, our book value per share was $16.28. PRICE RANGE OF CLASS A COMMON STOCK AND OLD NOTES Our Class A common stock currently trades on the NYSE under the symbol "MRX". The closing sale price of our Class A common stock on the NYSE on July 15, 2003 was $57.00 per share. The last reported price per $1,000 in principal amount of Old Notes on The Portal(SM) Market of the National Association of Securities Dealers, Inc. on July 15, 2003 was $1,172.50. As of June 30, 2003, there were 27,238,123 shares of Class A common stock issued and outstanding and there was $400,000,000 in principal amount of the Old Notes outstanding. OUR CLASS A COMMON STOCK The following table sets forth the high and low sale prices per share of our Class A common stock on the NYSE for the periods indicated. For current price information, you should consult publicly available sources.
HIGH LOW ------ ------ FISCAL 2002 First Quarter............................................ $54.95 $41.80 Second Quarter........................................... 64.60 48.60 Third Quarter............................................ 64.59 52.40 Fourth Quarter........................................... 55.75 40.27 FISCAL 2003 First Quarter............................................ $47.40 $33.85 Second Quarter........................................... 50.14 37.95 Third Quarter............................................ 56.60 45.21 Fourth Quarter........................................... 61.88 50.28 FISCAL 2004 First Quarter (through July 15, 2003).................... $58.00 $54.71
OUR OLD NOTES The following table sets forth the high and low sale prices paid for the Old Notes for the periods indicated. For current price information, you should consult publicly available sources.
HIGH LOW --------- --------- FISCAL 2002 Fourth Quarter..................................... $1,017.50 $ 946.50 FISCAL 2003 First Quarter...................................... $1,029.20 $ 873.80 Second Quarter..................................... 1,120.30 953.30 Third Quarter...................................... 1,201.70 1,078.80 Fourth Quarter..................................... 1,243.90 1,142.10 FISCAL 2004 First Quarter (through July 15, 2003).............. $1,186.20 $1,160.30
30 DIVIDEND POLICY On June 12, 2003, we declared a quarter-end cash dividend of $0.05 per issued and outstanding share of common stock payable on July 31, 2003 to our stockholders of record at the close of business on July 1, 2003. However, we have not adopted a dividend policy. Any future determinations to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, operating results, capital requirements and other factors that our board of directors deems relevant. 31 CAPITALIZATION The following table sets forth our (i) cash, cash equivalents and short-term investments and (ii) capitalization, in each case as of March 31, 2003 and as adjusted to give effect to the exchange offer, assuming all Old Notes are exchanged for New Notes. You should read this table in conjunction with the selected consolidated financial data provided on page 33 of this prospectus, our financial statements and accompanying notes included in our 2002 Annual Report on Form 10-K, the management's discussion and analysis and results of operations section included in our 2002 Annual Report on Form 10-K and the consolidated financial statements and accompanying notes included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, all incorporated into this prospectus by reference.
AS OF MARCH 31, 2003 ----------------------- ACTUAL AS ADJUSTED --------- ----------- (DOLLARS IN THOUSANDS) CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS........... $ 538,568 $ 538,568 ========= ========= LONG-TERM DEBT OBLIGATIONS: 2.5% Contingent Convertible Senior Notes Due 2032......... $ 400,000 $ -- 1.5% Contingent Convertible Senior Notes Due 2033......... -- $ 492,000 --------- --------- STOCKHOLDERS' EQUITY:....................................... -- Preferred Stock, $0.01 par value; shares authorized: 5,000,000; no shares issued............................ -- -- Class A Common Stock, $0.014 par value; shares authorized: 50,000,000; issued and outstanding: 31,112,439......... 436 436 Class B Common Stock, $0.014 par value; shares authorized: 1,000,000; issued and outstanding: 379,016............. 5 5 Additional paid-in capital................................ 440,059 440,059 Accumulated other comprehensive income.................... 1,935 1,935 Deferred compensation..................................... (1,855) (1,855) Accumulated earnings(a)................................... 192,328 115,463 Treasury stock, at cost; 4,340,734 shares actual.......... (190,908) (190,908) --------- --------- Total stockholders' equity............................. 442,000 365,135 --------- --------- Total capitalization................................... $ 842,000 $ 857,135 ========= =========
- --------------- (a) Included in the "as adjusted" accumulated earnings is a special charge which we will incur in the first quarter of fiscal 2004 equal to the par value of the New Notes exchanged in excess of the par value of the Old Notes, plus the unamortized debt issuance costs related to the Old Notes, net of taxes. 32 SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The following selected consolidated financial data for the fiscal years ended June 30, 1998, 1999, 2000, 2001 and 2002 are derived from our audited financial statements and accompanying notes. The selected consolidated financial data for the nine-month periods ended March 31, 2002 and 2003 and the selected consolidated balance sheet data as of March 31, 2002 and 2003 are unaudited. You should read the selected financial data set forth below in conjunction with our financial statements and accompanying notes included in our 2002 Annual Report on Form 10-K, the management's discussion and results of operations sections included in our 2002 Annual Report on Form 10-K, and the consolidated financial statements and accompanying notes included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, all incorporated into this prospectus by reference. Results for the nine months ended March 31, 2003 are not necessarily representative of results for our fiscal year ending June 30, 2003.
NINE MONTHS ENDED FISCAL YEAR ENDED JUNE 30, MARCH 31, ---------------------------------------------------- ------------------- 1998 1999 2000 2001 2002 2002 2003 -------- -------- -------- -------- -------- -------- -------- STATEMENTS OF OPERATIONS DATA: Net revenues................................ $ 77,571 $116,871 $139,099 $167,802 $212,807 $155,179 $180,834 Gross profit................................ 63,592 95,236 113,187 137,105 177,042 129,114 153,255 Operating expenses: Selling, general and administrative....... 27,424 38,219 45,404 59,508 77,314 57,488 67,740 Research and development expenses......... 2,885 3,396 4,903 25,515(a) 15,132(b) 5,220 21,352(c) Depreciation and amortization............. 2,903 5,810 7,374 8,261 7,928 5,892 6,746 In-process research and development....... 35,400 9,500 -- -- 6,217 6,217 -- -------- -------- -------- -------- -------- -------- -------- Total operating expenses.................... 68,612 56,925 57,681 93,284 106,591 74,817 95,838 -------- -------- -------- -------- -------- -------- -------- Operating (loss) income..................... (5,020) 38,311 55,506 43,821 70,451 54,297 57,417 Other: Gain on sale of assets.................... -- 17,650 -- -- -- -- -- Interest income, net...................... 7,037 9,678 11,876 15,504 8,533 7,168 129 Income tax expense........................ (14,424) (24,202) (24,388) (18,905) (28,960) (23,178) (20,141) -------- -------- -------- -------- -------- -------- -------- Net (loss) income........................... $(12,407) $ 41,437 $ 42,994 $ 40,420 $ 50,024 $ 38,287 $ 37,405 ======== ======== ======== ======== ======== ======== ======== Basic net (loss) income per common share.... $ (0.51) $ 1.46 $ 1.48 $ 1.34 $ 1.65 $ 1.26 $ 1.38 ======== ======== ======== ======== ======== ======== ======== Diluted net (loss) income per common share.. $ (0.51) $ 1.41 $ 1.41 $ 1.28 $ 1.59 $ 1.21 $ 1.33 ======== ======== ======== ======== ======== ======== ======== Number of shares used in computing basic net income (loss) per common share............ 24,102 28,414 29,029 30,134 30,268 30,423 27,194 ======== ======== ======== ======== ======== ======== ======== Number of shares used in computing diluted net income (loss) per common share........ 24,102 29,462 30,499 31,694 31,405 31,636 28,136 ======== ======== ======== ======== ======== ======== ======== BALANCE SHEET DATA (AT PERIOD END): Cash, cash equivalents and short term investments............................... $237,921 $237,304 $285,737 $334,157 $577,576 $310,598 $538,568 Accounts receivable, net.................... 18,900 31,583 33,164 36,841 45,054 48,869 50,579 Inventories, net............................ 9,208 7,273 10,002 8,750 11,955 10,983 11,835 Other current assets........................ 12,101 59,432 22,385 19,131 23,888 26,258 25,393 -------- -------- -------- -------- -------- -------- -------- Total current assets...................... 278,130 335,592 351,288 398,879 658,473 396,708 626,375 Property and equipment, net................. 1,344 1,705 1,759 1,964 2,605 2,339 2,572 Intangible assets, net...................... 71,283 128,976 141,182 147,277 197,845 178,785 279,879 Other assets................................ 1,593 1,237 1,111 576 17,350 16,269 10,644 -------- -------- -------- -------- -------- -------- -------- Total assets.............................. $352,350 $467,510 $495,340 $548,696 $876,273 $594,101 $919,470 ======== ======== ======== ======== ======== ======== ======== Current liabilities......................... $ 15,174 $ 56,980 $ 38,987 $ 40,410 $ 47,214 $ 36,977 $ 75,336 Deferred tax liabilities.................... 10,502 1,935 4,000 4,832 -- -- 2,134 Noncurrent liabilities...................... 2,179 34,847 14,914 -- 400,000 -- 400,000 Stockholders' equity........................ 324,495 373,748 437,439 503,454 429,059 557,124 442,000 -------- -------- -------- -------- -------- -------- -------- Total liabilities and stockholders' equity.................................. $352,350 $467,510 $495,340 $548,696 $876,273 $594,101 $919,470 ======== ======== ======== ======== ======== ======== ======== Working capital........................... $262,956 $278,612 $312,301 $358,469 $611,259 $359,731 $551,039 ======== ======== ======== ======== ======== ======== ========
- --------------- (a) Includes $17.0 million paid to Corixa for a development, commercialization and licensing agreement. (b) Includes $7.7 million paid to aaiPharma for a research and development collaboration. (c) Includes $14.2 million paid to Dow for a research and development collaboration. 33 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER We believe, after consultation with our advisors, that it is in the best interests of our company and our shareholders to take advantage of the favorable current trends in the convertible bond market. The financial terms of the exchange offer, if successful, with respect to the interest rate, conversion price, contingent trigger events and the reduction in the number of underlying shares into which the New Notes will be convertible will have a favorable impact on our company's financial condition and operating results. The exchange offer is not being made to, nor will we accept tenders for exchange from, holders of Old Notes in any jurisdiction in which the exchange offer or the acceptance of it would not be in compliance with the securities or blue sky laws of such jurisdiction. Our board of directors and officers do not make any recommendation to the holders of Old Notes as to whether or not to tender all or any portion of their Old Notes. In addition, we have not authorized anyone to make any recommendation. You must make your own decision whether to tender your Old Notes and, if so, the amount of Old Notes to tender. TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING This prospectus and the accompanying letter of transmittal contain the terms and conditions of the exchange offer. Upon the terms and subject to the conditions included in this prospectus and in the accompanying letter of transmittal, which together are the exchange offer, we will accept for exchange Old Notes which are properly tendered prior to the expiration date, unless you have previously withdrawn them. - When you tender to us Old Notes as provided below, our acceptance of the Old Notes will constitute a binding agreement between you and us upon the terms and subject to the conditions in this prospectus and in the accompanying letter of transmittal. - For each $1,000 principal amount of Old Notes you tender and that is accepted by us in the exchange offer, we will give you $1,230 principal amount of New Notes. Upon completion of the exchange offer, we will also pay accrued and unpaid interest up to the date of acceptance of Old Notes that we accept for exchange. - You may tender all, some or none of your existing Old Notes. - The exchange offer is conditioned on the effectiveness of the registration statement of which this prospectus is a part and on at least $200 million in aggregate principal amount of the Old Notes having been tendered and not withdrawn at the expiration of the exchange offer. Our obligation to accept Old Notes for exchange in the exchange offer is also subject to the conditions described under "--Conditions to the Exchange Offer." - The exchange offer expires at 5:00 p.m., New York City time, on August 13, 2003. We may, however, in our sole discretion, extend the period of time for which the exchange offer is open. References in this prospectus to the expiration date mean 5:00 p.m., New York City time, on August 13, 2003 or, if extended by us, the latest date to which the exchange offer is extended by us. - We will keep the exchange offer open for at least 20 business days, or longer if required by applicable law, after the date that we first mail notice of the exchange offer to the holders of the Old Notes. We are sending this prospectus, together with the letter of transmittal, on or about the date of this prospectus to all of the registered holders of Old Notes at their addresses listed in the trustee's security register with respect to the Old Notes. 34 - We expressly reserve the right, at any time, to extend the period of time during which the exchange offer is open, and thereby delay acceptance of any Old Notes, by giving oral or written notice of an extension to the Exchange Agent and notice of that extension to the holders as described below. During any extension, all Old Notes previously tendered will remain subject to the exchange offer unless withdrawal rights are exercised. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder promptly after the expiration or termination of the exchange offer. - We expressly reserve the right to amend or terminate the exchange offer at any time prior to the expiration date, and not to accept for exchange any Old Notes that we have not yet accepted for exchange, if any of the conditions of the exchange offer specified below under "--Conditions to the Exchange Offer" are not satisfied. - We will give oral or written notice of any extension, amendment, waiver, termination or non-acceptance described above to holders of the Old Notes promptly. If we amend this exchange offer in any respect or waive any condition to the exchange offer, we will give written notice of the amendment or waiver to the Exchange Agent and will make a public announcement of the amendment or waiver promptly afterward. If we extend the expiration date, we will give notice by means of a press release or other public announcement no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date. Without limiting the manner in which we may choose to make any public announcement and subject to applicable law, we will have no obligation to publish, advertise or otherwise communicate any public announcements other than by issuing a release to the Dow Jones News Service. - If we consider an amendment to the exchange offer to be material, or if we waive a material condition of the exchange offer, we will promptly disclose the amendment in a prospectus supplement, and if required by law, we will extend the exchange offer for a period of five to ten business days. - Holders of Old Notes do not have any appraisal or dissenters' rights in connection with the exchange offer. - We intend to conduct the exchange offer in accordance with the applicable requirements of the Exchange Act and the applicable rules and regulations of the SEC. IMPORTANT RESERVATION OF RIGHTS REGARDING THE EXCHANGE OFFER You should note that: - All questions as to the validity, form, eligibility, time of receipt and acceptance of Old Notes tendered for exchange will be determined by our company in our sole discretion and our determination shall be final and binding. - We reserve the absolute right to reject any and all tenders of any particular Old Notes not properly tendered or to not accept any particular Old Notes the acceptance of which might, in our judgment or the judgment of our counsel, be unlawful. - We also reserve the absolute right to waive any defects or irregularities or conditions of the exchange offer as to any particular Old Notes either before or after the expiration date, including the right to waive the ineligibility of any holder who seeks to tender Old Notes in the exchange offer. If we waive a condition with respect to any particular noteholder, we will waive it for all noteholders. Unless we agree to waive any defect or irregularity in connection with the tender of Old Notes 35 for exchange, you must cure any defect or irregularity within any reasonable period of time as we shall determine. - Our interpretation of the terms and conditions of the exchange offer as to any particular Old Note either before or after the expiration date, including the letter of transmittal and the instructions to such letter of transmittal, shall be final and binding on all parties. - Neither our company, the exchange agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of Old Notes for exchange, nor shall any of them incur any liability for failure to give any notification. CONDITIONS TO THE EXCHANGE OFFER We will not accept Old Notes for exchange and may terminate or not complete the exchange offer if, prior to expiration date: - the registration statement and any post-effective amendment to the registration statement covering the New Notes is not effective under the Securities Act; or - less than $200 million in aggregate principal amount of the Old Notes is validly tendered without being withdrawn at the expiration of the exchange offer; We may not accept Old Notes for exchange and may terminate or not complete the exchange offer if, prior to expiration date: - any action, proceeding or litigation seeking to enjoin, make illegal or delay completion of the exchange offer or otherwise relating in any manner to the exchange offer is instituted or threatened; - any order, stay, judgment or decree is issued by any court, government, governmental authority or other regulatory or administrative authority and is in effect, or any statute, rule, regulation, governmental order or injunction shall have been proposed, enacted, enforced or deemed applicable to the exchange offer, any of which would or might restrain, prohibit or delay completion of the exchange offer or impair the contemplated benefits of the exchange offer to us. See "-- Purpose of the Exchange Offer"; - any of the following occurs and the adverse effect of such occurrence shall, in our reasonable judgment, be continuing: - any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the U.S. - any extraordinary or material adverse change in U.S. financial markets generally, including, without limitation, a decline of at least 5% in either the Dow Jones Industrial Average or the Standard & Poor's 500 Index from July 16, 2003. - a declaration of a banking moratorium or any suspension of payments in respect of banks in the U.S. - any limitation, whether or not mandatory, by any governmental entity on, or any other event that would reasonably be expected to materially adversely affect, the extension of credit by banks or other lending institutions. - a commencement of a war or other national or international calamity directly or indirectly involving the U.S., which would reasonably be expected to affect materially and adversely, or to delay materially, the completion of the exchange offer. 36 - any of the situations described above existed at the time of commencement of the exchange offer and that situation deteriorates materially after commencement of the exchange offer; - any tender or exchange offer, other than this exchange offer by us, with respect to some or all of our outstanding Class A common stock or any merger, acquisition or other business combination proposal involving us shall have been proposed, announced or made by any person or entity; - any event or events occur that have resulted or may result, in our reasonable judgment, in an actual or threatened change in the business condition, income, operations, stock ownership or prospects of us and our subsidiaries, taken as a whole that, in our reasonable judgment, would have a material adverse effect on our company; or - as the term "group" is used in Section 13(d)(3) of the Exchange Act: - any person, entity or group acquires more than 5% of our outstanding shares of Class A common stock, other than a person, entity or group that had publicly disclosed such ownership with the SEC, prior to July 16, 2003; - any such person, entity or group that had publicly disclosed such ownership prior to such date shall acquire additional common stock constituting more than 2% of our outstanding shares of Class A common stock; or - any new group shall have been formed that beneficially owns more than 5% of our outstanding shares of Class A common stock, that in our judgment in any such case, and regardless of the circumstances, makes it inadvisable to proceed with the exchange offer or with such acceptance for exchange of Old Notes. If any of the above events occur, we may: - terminate the exchange offer and promptly return all tendered Old Notes to tendering security holders; - extend the exchange offer and, subject to the withdrawal rights described in "The Exchange Offer--Withdrawal Rights" herein, retain all tendered Old Notes until the extended exchange offer expires; - amend the terms of the exchange offer, which may result in an extension of the period of time for which the exchange offer is kept open; or - waive the unsatisfied condition and, subject to any requirement to extend the period of time during which the exchange offer is open, complete the exchange offer. LEGAL LIMITATION The above conditions are for our sole benefit. We may assert these conditions with respect to all or any portion of the exchange offer regardless of the circumstances giving rise to them. We may waive, in our discretion, any condition, in whole or in part, at any time prior to the expiration date of the exchange offer. Our failure at any time to exercise our rights under any of the above conditions does not represent a waiver of these rights. Each right is an ongoing right that may be asserted at any time prior to the expiration date of the exchange offer. Any determination by us concerning the conditions described above will be final and binding upon all parties. If a stop order issued by the SEC is threatened or in effect with respect to the registration statement of which this prospectus is a part, or with respect to the qualification of the Indenture governing the New Notes under the Trust Indenture Act, we will not: - accept for exchange any Old Notes tendered; or - issue any New Notes in exchange for any Old Notes. 37 PROCEDURES FOR TENDERING TENDER OF OLD NOTES HELD THROUGH A CUSTODIAN If you are a beneficial owner of Old Notes that are held of record by a custodian bank, depository institution, broker, dealer, trust company or other nominee, you must instruct the custodian to tender the Old Notes on your behalf. Your custodian will provide you with their instruction letter which you must use to give these instructions. TENDER OF OLD NOTES HELD THROUGH DTC To effectively tender Old Notes that are held through DTC, DTC participants should transmit their acceptance through the Automated Tender Offer Program, or ATOP, for which the transaction will be eligible, and DTC will then edit and verify the acceptance and send an agent's message to the exchange agent for its acceptance. Delivery of tendered Old Notes must be made to the exchange agent pursuant to the book-entry delivery procedures set forth below or the tendering DTC participant must comply with the guaranteed delivery procedures set forth below. No letters of transmittal will be required to tender Old Notes through ATOP. In addition, the exchange agent must receive: - an electronic confirmation pursuant to DTC's ATOP system indicating the aggregate principal amount of Old Notes to be tendered and any other documents, if any, required by the letter of transmittal; and - prior to the expiration date, a confirmation of book-entry transfer of such Old Notes into the exchange agent's account at DTC, in accordance with the procedure for book-entry transfer described below; or - the holder must comply with the guaranteed delivery procedures described below. Your Old Notes must be tendered by book-entry transfer. The exchange agent will establish an account with respect to the Old Notes at DTC for purposes of the exchange offer within two business days after the commencement of the exchange offer. Any financial institution that is a participant in DTC must make book-entry delivery of the Old Notes by having DTC transfer such Old Notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. Although your Old Notes will be tendered through the DTC facility, the letter of transmittal, or facsimile, or an electronic confirmation pursuant to DTC's ATOP system, with any required signature guarantees and any other required documents, if any, must be transmitted to and received or confirmed by the exchange agent at its address set forth on page 67 of this prospectus, prior to 5:00 p.m., New York City time, on the expiration date. You or your broker must ensure that the exchange agent receives an agent's message from DTC confirming the book-entry transfer of your Old Notes. An agent's message is a message transmitted by DTC and received by the exchange agent that forms a part of the book-entry confirmation that states that DTC has received an express acknowledgment from the DTC participant tendering the Old Notes that such participant agrees to be bound by the terms of the letter of transmittal. Delivery of documents to DTC in accordance with its procedures does not constitute delivery to the exchange agent. If you are an institution that is a participant in DTC's book-entry transfer facility, you should follow the same procedures that are applicable to persons holding Old Notes through a financial institution. Do not send letters of transmittal or other exchange offer documents to us, the dealer managers or the information agent. 38 It is your responsibility to provide all necessary materials to the exchange agent before the expiration date. If the exchange agent does not receive all of the required materials before the expiration date, your Old Notes will not be validly tendered. We will have accepted the validity of tendered Old Notes if and when we give oral or written notice to the exchange agent. The exchange agent will act as the new trust's agent for purposes of receiving the New Notes from us. If we do not accept any tendered Old Notes for exchange because of an invalid tender or the occurrence of any other event, the exchange agent will return those Old Notes to you, without expense, promptly after the expiration date via book- entry transfer through DTC. GUARANTEED DELIVERY PROCEDURES If you desire to tender your Old Notes and you cannot complete the procedures for book-entry transfer set forth above on a timely basis, you may still tender your Old Notes if: - your tender is made through an eligible institution; - prior to the expiration date, the exchange agent received from the eligible institution a properly completed and duly executed letter of transmittal, or a facsimile of such letter of transmittal or an electronic confirmation pursuant to DTC's ATOP system, and notice of guaranteed delivery, substantially in the form provided by us, by facsimile transmission, mail or hand delivery, that: - sets forth the name and address of the holder of Old Notes and the principal amount of Old Notes tendered; - states that the tender is being made thereby; and - guarantees that within three NYSE trading days after the expiration date a book-entry confirmation and any other documents required by the letter of transmittal, if any, will be deposited by the eligible institution with the exchange agent. ACCEPTANCE OF OLD NOTES AND DELIVERY OF NEW NOTES If all of the conditions to the exchange offer are satisfied or waived prior to the expiration date, we will accept all Old Notes properly tendered and not withdrawn as of the expiration date and will issue the New Notes promptly after the expiration date. See "--Conditions to the Exchange Offer". For purposes of the exchange offer, our giving of oral or written notice of our acceptance to the exchange agent will be considered our acceptance of the exchange offer. In all cases, we will issue New Notes in exchange for Old Notes that are accepted for exchange only after timely receipt by the exchange agent of: - a timely book-entry confirmation of transfer of Old Notes into the exchange agent's account at DTC using the book-entry transfer procedures described above; - a properly completed and duly executed letter of transmittal or an electronic confirmation of the submitting holder's acceptance through DTC's ATOP system; and - all other required documents, if any. We will have accepted validly tendered Old Notes if and when we have given oral or written notice to the exchange agent. The exchange agent will act as agent for the tendering holders for the purposes of receiving the New Notes from us, and will make the exchange on, or promptly after, the expiration date. Following this exchange the holders in whose names the New Notes will be issuable upon exchange will be deemed the holders of record of the New Notes. 39 The reasons we may not accept tendered Old Notes are: - the Old Notes were not validly tendered pursuant to the procedures for tendering; see "--Procedures for Tendering"; - we determine in our reasonable discretion that any of the conditions to the exchange offer have not been satisfied prior to the expiration date; see "--Conditions to the Exchange Offer"; - a holder has validly withdrawn a tender of Old Notes as described under, see "--Withdrawal Rights"; or - we have prior to the expiration date of the exchange offer, delayed or terminated the exchange offer; see "--Terms of the Exchange offer; Period for Tendering". If we do not accept any tendered Old Notes for any reason included in the terms and conditions of the exchange offer, we will return any unaccepted or non-exchanged Old Notes tendered by book-entry transfer into the exchange agent's account at DTC using the book-entry transfer procedures described above, non-exchanged Old Notes will be credited to an account maintained with DTC promptly after the expiration or termination of the exchange offer. Old Notes which are not tendered for exchange or are tendered but not accepted in connection with the exchange offer will remain outstanding and remain subject to the Old Indenture. Any validly tendered Old Notes acquired in the exchange offer will be retired and will not be reissuable. The New Notes will bear interest from the issue date. Old Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the exchange offer. WITHDRAWAL RIGHTS You may withdraw your tender of Old Notes at any time prior to 5:00 p.m., New York City time, on the expiration date. You may also withdraw a tender of your Old Notes after the expiration of 40 business days from the commencement date of the exchange offer if your tender has not yet been accepted for exchange. For a withdrawal to be effective, the exchange agent must receive a written notice of withdrawal at the address or, in the case of eligible institutions, at the facsimile number, set forth below, prior to 5:00 p.m., New York City time, on the expiration date. Any notice of withdrawal must: - specify the name of the person who tendered the Old Notes to be withdrawn; - specify the aggregate amount of Old Notes to be withdrawn, if not all of the Old Notes are tendered by the holder; - contain a statement that you are withdrawing your election to have your Old Notes exchanged; - be signed by the holder in the same manner as the original signature on the letter of transmittal by which the Old Notes were tendered, including any required signature guarantees; and - specify, on the notice of withdrawal, the name and number of the account at DTC to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such facility, if you tendered your Old Notes in accordance with the procedure for book-entry transfer described above. Any Old Notes that have been tendered for exchange, but which are not exchanged for any reason, will be credited to an account maintained with DTC, as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn Old Notes 40 may be retendered by following the procedures described under "Procedures for Tendering" above at any time on or prior to 5:00 p.m., New York City time, on the expiration date. CONSEQUENCES OF EXCHANGING OLD NOTES If the exchange offer is consummated, Old Notes that are not tendered, or are tendered but not accepted in the exchange offer, will remain outstanding. Accordingly, interest thereon will continue to accrue in accordance with their terms, and the Old Notes will continue to have the benefit of the Indenture governing the unexchanged Old Notes but not the benefit of the Indenture governing the New Notes. However, the trading market for unexchanged Old Notes could become significantly limited due to the reduction in the amount of Old Notes outstanding after completion of the exchange offer, which may adversely affect the market price and price volatility of the Old Notes. See "Risk factors--Risks Related to the Exchange Offer". DEALER MANAGERS Deutsche Bank Securities Inc. and Thomas Weisel Partners LLC are acting as co-dealer managers in connection with the exchange offer and will receive an aggregate fee that would range between 1.5% to 1.575% of the aggregate principal amount of the New Notes issued pursuant to the exchange offer. We have agreed to indemnify Deutsche Bank Securities Inc. and Thomas Weisel Partners LLC against specified liabilities relating to or arising out of the exchange offer, including civil liabilities under the federal securities laws, and to contribute to payments that Deutsche Bank Securities Inc. and Thomas Weisel Partners LLC, as the case may be, may be required to make in respect thereof. However, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. Deutsche Bank Securities Inc. and/or Thomas Weisel Partners LLC may, from time to time, hold Old Notes and our Class A common stock in their respective proprietary accounts, and to the extent they own Old Notes in their respective accounts at the time of the exchange offer, Deutsche Bank Securities Inc. and/or Thomas Weisel Partners LLC may tender these Old Notes. As of the date of this prospectus, Deutsche Bank Securities Inc. holds a substantial position in the Old Notes. EXCHANGE AGENT Deutsche Bank Trust Company Americas has been appointed to act as the exchange agent for the exchange offer. All executed letters of transmittal should be directed to the exchange agent at one of the addresses set forth below. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notices of guaranteed delivery should be directed to the exchange agent, addressed as follows: To: DEUTSCHE BANK TRUST COMPANY AMERICAS BY HAND: BY MAIL: BY OVERNIGHT MAIL OR COURIER: Deutsche Bank Trust Company DB Services Tennessee, Inc. DB Services Tennessee, Inc. Americas Reorganization Unit Corporate Trust & Agency C/O The Depository Trust P.O. Box 292737 Services Clearing Corporation Nashville, TN 37229-2737 Reorganization Unit 55 Water Street, 1st floor Fax: (615) 835-3701 648 Grassmere Park Road Jeanette Park Entrance Nashville, TN 37211 New York, NY 10041 Attn: Karl Shepherd Confirm by Telephone (615) 835-3572 Information (800) 735-7777
DELIVERY OF A LETTER OF TRANSMITTAL OR AGENT'S MESSAGE TO AN ADDRESS OTHER THAN THE ADDRESSES LISTED ABOVE OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER THAN AS SET FORTH ABOVE IS NOT VALID DELIVERY OF THE LETTER OF TRANSMITTAL OR AGENT'S MESSAGE. 41 Deutsche Bank Trust Company Americas will assist us with the distribution of this prospectus and the other exchange materials. The exchange agent will receive reasonable compensation for its services, will be reimbursed for reasonable out-of-pocket expenses and will be indemnified against liabilities in connection with its services, including liabilities under the federal securities laws. The exchange agent has not been retained to make solicitations or recommendations. The fees received by the exchange agent will not be based on the aggregate principal amount of Old Notes tendered in the exchange offer. INFORMATION AGENT D.F. King & Co., Inc. has been appointed to act as the information agent in connection with the exchange offer. The information agent may contact holders of Old Notes by mail, telephone, facsimile transmission and personal interviews and may request brokers, dealers and other nominee stockholders to forward materials relating to the exchange offer to beneficial owners. The information agent will receive reasonable compensation for its services, will be reimbursed for reasonable out-of-pocket expenses and will be indemnified against liabilities in connection with their services, including liabilities under the federal securities laws. The information agent has not been retained to make solicitations or recommendations. The fees received by the information agent will not be based on the aggregate principal amount of Old Notes tendered in the exchange offer. SOLICITING DEALERS We will not pay any fees or commissions to any broker or dealer or any other person, other than Deutsche Bank Securities Inc. and Thomas Weisel Partners LLC for soliciting tenders of Old Notes under the exchange offer. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by us for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. TRANSFER TAXES Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes, except that holders who instruct us to register New Notes in the name of, or request that Old Notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder, will be responsible for the payment of any applicable transfer tax. 42 DESCRIPTION OF THE NEW NOTES The New Notes will be issued under a new Indenture between Medicis Pharmaceutical Corporation and Deutsche Bank Trust Company Americas, as trustee, such new indenture referenced hereinafter as "New Indenture." The following description is only a summary of the material provisions of the New Notes and the related New Indenture. We urge you to read the New Indenture and the New Notes in their entirety because they, and not this description, define your rights as holders of the New Notes. You may request copies of these documents at our address shown under the caption "Incorporation by Reference." The terms of the New Notes include those stated in the New Indenture and those made part of the New Indenture by reference to the Trust Indenture Act of 1939, as amended. For purposes of this section, references to "we," "us," "our" and "Medicis" include only Medicis Pharmaceutical Corporation and not its subsidiaries. GENERAL We will issue the New Notes in an aggregate principal amount limited to $492 million. The New Notes will be our unsecured senior obligations and will mature on June 4, 2033, unless earlier redeemed at our option as described under "--Optional Redemption of the New Notes," repurchased by us at a holder's option on certain dates as described under "--Repurchase of New Notes at the Option of the Holder" or repurchased by us at a holder's option upon a change in control of Medicis as described under "--Right to Require Purchase of New Notes upon a Change in Control." The New Notes are convertible into shares of our Class A common stock as described under "--Conversion Rights." Interest on the New Notes will accrue at the rate per annum shown on the cover page of this prospectus and will be payable semi-annually in arrears on June 4 and December 4 of each year, commencing on December 4, 2003. Interest on the New Notes will accrue from and including the first day after expiration of the exchange offer or, if interest has already been paid, from the date it was most recently paid. We will make each interest payment to the holders of record of the New Notes on the immediately preceding May 15 and November 15, whether or not this day is a business day. Interest payable upon redemption will be paid to the person to whom principal is payable. Interest on the New Notes will be computed on the basis of a 360-day year comprised of twelve 30-day months. We will pay the principal of, and interest (including contingent interest, if any) on, the New Notes at the office or agency maintained by us in the Borough of Manhattan in New York City. Holders may register the transfer of their New Notes at the same location. We reserve the right to pay interest to holders of the New Notes by check mailed to the holders at their registered addresses. However, a holder of New Notes with an aggregate principal amount in excess of $1,000,000 will be paid by wire transfer in immediately available funds. Except under the limited circumstances described below, the New Notes will be issued only in fully registered book-entry form, without coupons, and will be represented by one or more Global Notes. There will be no service charge for any registration of transfer or exchange of New Notes. We may, however, require holders to pay a sum sufficient to cover any tax or other governmental charge payable in connection with any transfer or exchange. The New Indenture does not contain any restriction on the payment of dividends, the incurrence of indebtedness or the repurchase of our securities, and does not contain any financial covenants. Other than as described under "--Right to Require Purchase of New Notes upon a Change in Control," the New Indenture contains no covenants or other provisions that afford protection to holders of New Notes in the event of a highly leveraged transaction. CONTINGENT INTEREST We will pay contingent interest during any six-month period, from June 4 to December 3 and from December 4 to June 3, with the initial six-month period commencing June 4, 2008, if the average trading price of the New Notes per $1,000 principal amount for the five trading day period ending on the third trading day immediately preceding the first day of the applicable six- 43 month period equals $1,200 or more. The average trading price of the New Notes shall be determined no later than the second trading day immediately preceding the first day of the applicable six-month period by the conversion agent acting as calculation agent in the manner set forth in the definition of "trading price" under "--Conversion Rights of the Old Notes; Conversion Upon Satisfaction of Trading Price Condition." During any period when contingent interest is payable, it will be payable at a rate equal to 0.5% per annum. We will pay contingent interest, if any, in the same manner as we will pay interest as described above under "--General." CONVERSION RIGHTS A holder may convert any outstanding New Notes into shares of our Class A common stock at an initial conversion price $77.52 per share. The conversion price (and resulting conversion rate) is, however, subject to adjustment as described below. A holder may convert New Notes only in denominations of $1,000 and integral multiples of $1,000. GENERAL Holders may surrender New Notes for conversion into shares of our Class A common stock prior to the maturity date in the following circumstances: - during any quarter commencing after September 30, 2003, if the closing sale price per share of our Class A common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding quarter exceeds 120% of the conversion price per share on that 30th trading day; - if we have called the New Notes for redemption; - during the five trading-day period immediately following any nine consecutive trading day period in which the trading price per $1,000 principal amount of the New Notes for each day of such period was less than 95% of the product of the closing sale price per share of our Class A common stock on that day multiplied by the number of shares issuable upon conversion of $1,000 principal amount of the New Notes; or - upon the occurrence of specified corporate transactions. CONVERSION UPON SATISFACTION OF MARKET PRICE CONDITION A holder may surrender any of its New Notes for conversion into shares of our Class A common stock during any quarter commencing after September 30, 2003 if the closing sale price of our Class A common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding quarter, exceeds 120% of the conversion price per share on that 30th trading day. The conversion agent, which will initially be the trustee, will determine on our behalf at the end of each quarter whether the New Notes are convertible as a result of the market price of our Class A common stock. CONVERSION UPON NOTICE OF REDEMPTION A holder may surrender for conversion any New Note called for redemption at any time prior to the close of business on the day that is two business days prior to the redemption date, even if the New Notes are not otherwise convertible at such time. CONVERSION UPON SATISFACTION OF TRADING PRICE CONDITION A holder may surrender any of its New Notes for conversion into shares of Class A common stock during the five trading day period immediately following any nine consecutive trading day period in which the trading price per $1,000 principal amount of the New Notes (as determined following a request by a holder of the New Notes in accordance with the procedures described below) for each day of such period was less than 95% of the product of the closing 44 sale price per share of our Class A common stock on that day multiplied by the number of shares issuable upon conversion of $1,000 principal amount of the New Notes; provided, however, that if, on the date of any conversion pursuant to this 95% price condition, the closing sale price per share of our Class A common stock is greater than the conversion price, then a holder surrendering New Notes for such conversion will receive, in lieu of a number of shares of our Class A common stock based on the conversion price, cash or Class A common stock or a combination of both, at our option, with a value equal to the principal amount of such holder's New Notes so surrendered as of the conversion date (which we refer to as a principal value conversion). If a holder surrenders its New Notes for such conversion, we will notify such holder by the second trading day following the date of conversion whether we will pay such holder in cash, our Class A common stock or a combination of cash and our Class A common stock, and in what percentage. Any shares of our Class A common stock delivered will be valued at the greater of (x) the conversion price on the conversion date and (y) the closing sale price of our Class A common stock on the third trading day after the conversion date. We will pay such holder any portion of the principal amount of such holder's New Notes so surrendered to be paid in cash on the third trading day after the conversion date. With respect to any portion of the sum of the principal amount of such holder's New Notes so surrendered to be paid in shares of our Class A common stock, we will deliver the shares to such holder on the fourth trading day following the conversion date. The "trading price" of the New Notes on any date of determination means the average of the secondary market bid quotations per $1,000 principal amount of New Notes obtained by the conversion agent for $5,000,000 principal amount of the New Notes at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers we select, provided that if at least three such bids cannot reasonably be obtained by the conversion agent, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the conversion agent, this one bid shall be used. If the conversion agent cannot reasonably obtain at least one bid for $5,000,000 principal amount of the New Notes from a nationally recognized securities dealer or, in our reasonable judgment, the bid quotations are not indicative of the secondary market value of the New Notes, then the trading price of the New Notes will be determined in good faith by the conversion agent acting as calculation agent taking into account in such determination such factors as it, in its sole discretion after consultation with us, deems appropriate. Other than in connection with a determination of whether contingent interest shall be payable, the conversion agent shall have no obligation to determine the trading price of the New Notes unless we have requested such determination; and we shall have no obligation to make such request unless a holder provides us with reasonable evidence that the trading price of the New Notes is less than 95% of the product of the closing sale price of our Class A common stock and the number of shares issuable upon conversion of $1,000 principal amount of the New Notes; at which time, we shall instruct the conversion agent to determine the trading price of the New Notes beginning on the next trading day and on each successive trading day until the trading price is greater than or equal to 95% of the product of the closing sale price of our Class A common stock and the number of shares of our Class A common stock issuable upon conversion of $1,000 principal amount of the New Notes. CONVERSION UPON SPECIFIED CORPORATE TRANSACTIONS If we elect to: - distribute to all holders of our Class A common stock rights, warrants or options entitling them to subscribe for or purchase, for a period expiring within 60 days of the date of distribution, shares of our common stock at less than the then current market price; or - distribute to all holders of shares of our Class A common stock any assets, debt securities or certain rights to purchase our securities, which distribution has a per 45 share value exceeding 10% of the closing price of our Class A common stock on the day preceding the declaration date for such distribution, we must notify the holders of New Notes at least 20 days prior to the ex-dividend date for such distribution. Once we have given such notice, holders may surrender their New Notes for conversion until the earlier of the close of business on the business day prior to the ex-dividend date or our announcement that such distribution will not take place. This provision shall not apply if the holder of a New Note otherwise participates in the distribution without conversion. In addition, if we are a party to a consolidation, merger, share exchange, sale of all or substantially all of our assets or other similar transaction, in each case pursuant to which the shares of our Class A common stock would be converted into cash, securities or other property, a holder may surrender its New Notes for conversion at any time from and after the date which is 15 days prior to the anticipated effective date of such transaction until and including the date which is 15 days after the actual date of such transaction. If we are a party to a consolidation, merger, share exchange, sale of all or substantially all of our assets or other similar transaction, in each case pursuant to which the shares of our Class A common stock are converted into cash, securities, or other property, then at the effective time of the transaction, a holder's right to convert its New Notes into shares of our Class A common stock will be changed into a right to convert such New Notes into the kind and amount of cash, securities and other property which such holder would have received if such holder had converted such New Notes immediately prior to the transaction. If the transaction also constitutes a change in control, such holder can require us to repurchase all or a portion of its New Notes as described under "--Right to Require Purchase of New Notes upon a Change in Control." If a holder of a New Note has delivered notice of its election to have such New Note repurchased at the option of such holder or as a result of a change in control, such New Note may be converted only if the notice of election is withdrawn as described, respectively, under "--Repurchase of New Notes at the Option of the Holder" or "--Right to Require Purchase of New Notes upon a Change in Control." CONVERSION RATE ADJUSTMENT We will adjust the conversion price if (without duplication): (1) we issue to all holders of shares of our Class A common stock or other capital stock as a dividend or distribution on our common stock; (2) we subdivide, combine or reclassify our common stock; (3) we issue to all holders of our Class A common stock rights, warrants or options entitling them to subscribe for or purchase shares of our common stock at less than the then current market price; (4) we distribute to all holders of our Class A common stock evidences of our indebtedness, shares of capital stock (other than shares of our common stock), securities, cash, property, rights, warrants or options, excluding: - those rights, warrants or options referred to in clause (3) above; - any dividend or distribution paid exclusively in cash not referred to below; and - any dividend or distribution referred to in clause (1) above. (5) we declare a dividend or distribution to all or substantially all of the holders of our Class A common stock, to the extent that such dividend or distribution is payable in cash and exceeds, (i) prior to June 11, 2008, $0.05 per issued and outstanding share of Class A common stock per fiscal quarter, subject to adjustment for subdivisions, combinations, stock dividends and stock splits and (ii) after June 11, 2008, together with all other all cash distributions and consideration payable in respect of any tender or exchange offer by us or one of our subsidiaries for shares 46 made within the preceding twelve months, 5% of our aggregate market capitalization on the date of the declaration of the distribution. If an adjustment is required under this clause (5) as a result of a distribution that is a quarterly dividend, the adjustment would be based upon the amount by which the distribution exceeds the amount of the current quarterly cash dividend. If an adjustment is required to be made under this clause (5) as a result of a distribution that is not a quarterly dividend, the adjustment would be based upon the full amount of the distribution. (6) during any twelve-month period we or one of our subsidiaries complete a repurchase (including by way of a tender offer, but excluding shares purchased by us in connection with this offering) of shares of our common stock which involves an aggregate consideration that, together with: - any cash and other consideration payable in respect of any tender or exchange offer by us or one of our subsidiaries for shares of our common stock concluded within the preceding 12 months; and - the amount of any all-cash distributions to all holders of our common stock made within the preceding 12 months; exceeds 5% of our aggregate market capitalization on the expiration of the tender or exchange offer. (7) someone other than Medicis or one of our subsidiaries makes a payment in respect of a tender offer or exchange offer in which, as of the closing date of the offer, Medicis' board of directors is not recommending rejection of the offer. The adjustment referred to in this clause will only be made if: - the tender offer or exchange offer is for an amount that increases the offeror's ownership of common stock to more than 25% of the total shares of Medicis common stock outstanding; and - the cash and value of any other consideration included in the payment per share of common stock exceeds the current market price per share of common stock on the next business day succeeding the last date on which tenders or exchanges may be made pursuant to the tender or exchange offer. However, the adjustment referred to in this clause (7) will not be made if as of the closing of the offer, the offering documents disclose a plan or an intention to cause Medicis to engage in a consolidation or merger of Medicis or a sale of all or substantially all of Medicis' assets. For purposes of the foregoing, the term "market capitalization" as of any date of calculation means the closing sale price of our Class A common stock on the trading day immediately prior to such date of calculation multiplied by the aggregate number of shares of our Class A common stock and Class B common stock outstanding on the trading day immediately prior to such date of calculation. If the rights provided for in our rights agreement dated as of August 17, 1995, as amended, have separated from our Class A common stock in accordance with the provisions of the rights agreement so that the holders of the New Notes would not be entitled to receive any rights in respect of our Class A common stock issuable upon conversion of the New Notes, the conversion price will be adjusted as provided in clause (4) above, subject to readjustment in the event of the expiration, termination or redemption of the rights. In lieu of any such adjustment, we may amend our rights agreement to provide that upon conversion of the New Notes the holders will receive, in addition to our Class A common stock issuable upon such conversion, the rights which would have attached to such shares of our Class A common stock if the rights had not become separated from our Class A common stock under our rights agreement. See "Description of Capital Stock--Preference Stock Purchase Rights." To the extent that we adopt any future rights 47 plan, upon conversion of the New Notes into our Class A common stock, you will receive, in addition to our Class A common stock, the rights under the future rights plan whether or not the rights have separated from our Class A common stock at the time of conversion and no adjustment to the conversion price will be made in accordance with clause (4) above. The conversion price will not be adjusted until adjustments amount to 1% or more of the conversion price as last adjusted. We will carry forward any adjustment we do not make and will include it in any future adjustment. We will not issue fractional shares of Class A common stock to a holder who converts a New Note. In lieu of issuing fractional shares, we will pay cash based upon the closing sale price of our Class A common stock on the date of conversion. Except as described in this paragraph, no holder of New Notes will be entitled, upon conversion of the New Notes, to any actual payment or adjustment on account of accrued and unpaid interest, including contingent interest, if any, or on account of dividends on shares issued in connection with the conversion. If any holder surrenders a New Note for conversion between the close of business on any record date for the payment of an installment of interest (including any contingent interest, if any) and the opening of business on the related interest payment date the holder must deliver payment to us of an amount equal to the interest payable on the interest payment date (including any contingent interest, if any) on the principal amount to be converted together with the New Note being surrendered. The foregoing sentence shall not apply to New Notes called for redemption on a redemption date within the period between and including the record date and the interest payment date. If we make a distribution of property to our stockholders which would be taxable to them as a dividend for federal income tax purposes and the conversion price of the New Notes is decreased, this decrease may be deemed to be the receipt of taxable income by holders of the New Notes. We may from time to time reduce the conversion price if our board of directors determines that this reduction would be in the best interests of Medicis. Any such determination by our board of directors will be conclusive. Any such reduction in the conversion price must remain in effect for at least 20 trading days. In addition, we may from time to time reduce the conversion price if our board of directors deems it advisable to avoid or diminish any income tax to holders of our Class A common stock resulting from any stock or rights distribution on our common stock. OPTIONAL REDEMPTION OF THE NEW NOTES Prior to June 11, 2008, we cannot redeem the New Notes at our option. Beginning on June 11, 2008, we may redeem the New Notes, in whole at any time, or in part from time to time, for cash at a price equal to 100% of the principal amount of the New Notes plus accrued and unpaid interest (including contingent interest, if any) up to but not including the date of redemption. We will give not less than 30 days' nor more than 60 days' notice of redemption by mail to holders of the New Notes. If we opt to redeem less than all of the New Notes at any time, the trustee will select or cause to be selected the New Notes to be redeemed by any method that it deems fair and appropriate. In the event of a partial redemption, the trustee may provide for selection for redemption of portions of the principal amount of any New Note of a denomination larger than $1,000. REPURCHASE OF NEW NOTES AT THE OPTION OF THE HOLDER A holder has the right to require us to repurchase all or a portion of the New Notes on June 4, 2008, 2013 and 2018. We will repurchase the New Notes for an amount of cash equal to 100% of the principal amount of the New Notes on the date of purchase, plus accrued and unpaid interest (including contingent interest, if any) to the date of repurchase. To exercise the repurchase right, the holder of a New Note must deliver, during the period beginning at any time from the opening of business on the date that is 20 business days prior to the repurchase date 48 until the close of business on the business day before the repurchase date, a written notice to us and the trustee of such holder's exercise of the repurchase right. This notice must be accompanied by certificates evidencing the New Note or New Notes with respect to which the right is being exercised, duly endorsed for transfer. This notice of exercise may be withdrawn by the holder at any time on or before the close of business on the business day preceding the repurchase date. If the holders exercise their rights to require us to repurchase New Notes, we intend to comply with applicable tender offers rules under the Exchange Act with respect to any purchase. MANDATORY REDEMPTION Except as set forth under "--Right to Require Purchase of New Notes upon a Change in Control" and "--Repurchase of New Notes at the Option of the Holder," we are not required to make mandatory redemption of, or sinking fund payments with respect to, the New Notes. RIGHT TO REQUIRE PURCHASE OF NEW NOTES UPON A CHANGE IN CONTROL If a change in control (as defined below) occurs, each holder of New Notes may require that we repurchase the holder's New Notes up to and including the date fixed by us that is not less than 45 days nor more than 60 days after we give notice of the change in control. We will repurchase the New Notes for an amount of cash equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest, including contingent interest, if any, to the date of repurchase. "Change in control" means the occurrence of one or more of the following events: - any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of our assets, to any person or group of related persons, as defined in Section 13(d) of the Exchange Act (a "Group"); - the approval by the holders of our capital stock of any plan or proposal for our liquidation or dissolution, whether or not otherwise in compliance with the provisions of the New Indenture; - any person or Group shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by our issued and outstanding voting stock of, or any successor to, all or substantially all of our assets; or - the first day on which a majority of the members of our board of directors are not continuing directors. The definition of "change in control" includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of our assets. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of New Notes to require us to repurchase such New Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of our assets to another person or Group may be uncertain. "Continuing directors" means, as of any date of determination, any member of our board of directors who - was a member of such board of directors on the date of the original issuance of the New Notes, or - was nominated for election or elected to such board of directors with the approval of a majority of the continuing directors who were members of such board at the time of such nomination or election. 49 On or prior to the date of repurchase, we will deposit with a paying agent an amount of money sufficient to pay the aggregate repurchase price of the New Notes which is to be paid on the date of repurchase. On or before the 30th day after the change in control, we must mail to the trustee and all holders of the New Notes a notice of the occurrence of the change offer in control, stating: - the repurchase date; - the date by which the repurchase right must be exercised; - the repurchase price for the New Notes; and - the procedures which a holder of New Notes must follow to exercise the repurchase right. To exercise the repurchase right, the holder of a New Note must deliver, on or before the third business day before the repurchase date, a written notice to us and the trustee of the holder's exercise of the repurchase right. This notice must be accompanied by certificates evidencing the New Note or New Notes with respect to which the right is being exercised, duly endorsed for transfer. This notice of exercise may be withdrawn by the holder at any time on or before the close of business on the business day preceding the repurchase date. The effect of these provisions granting the holders the right to require us to repurchase the New Notes upon the occurrence of a change in control may make it more difficult for any person or group to acquire control of us or to effect a business combination with us. Our ability to pay cash to holders of New Notes following the occurrence of a change in control may be limited by our then existing financial resources. We cannot assure you that sufficient funds will be available when necessary to make any required repurchases. Our obligation to make a change in control will be satisfied if a third party makes the change of control offer in the manner and at the times and otherwise in compliance in all material respects with the requirements applicable to a change in control offer made by us and purchases all New Notes properly tendered and not withdrawn under the change in control offer. If a change in control occurs and the holders exercise their rights to require us to repurchase New Notes, we intend to comply with applicable tender offer rules under the Exchange Act with respect to any repurchase. The term "beneficial owner" will be determined in accordance with Rules 13d-3 and 13d-5 promulgated by the SEC under the Exchange Act or any successor provision, except that a person shall be deemed to have "beneficial ownership" of all shares of our common stock that the person has the right to acquire, whether exercisable immediately or only after the passage of time. CONSOLIDATION, MERGER AND SALE OF ASSETS We may, without the consent of the holders of any of the New Notes, consolidate with, or merge into any other person or convey, transfer or lease our properties and assets substantially as an entirety to, any other person, if: - we are the resulting or surviving corporation or the successor, transferee or lessee, if other than us, is a corporation organized under the laws of any U.S. jurisdiction and expressly assumes our obligations under the New Indenture and the New Notes by means of a supplemental indenture entered into with the trustee; and - after giving effect to the transaction, no event of default and no event which, with notice or lapse of time, or both, would constitute an event of default, shall have occurred and be continuing. Under any consolidation, merger or any conveyance, transfer or lease of our properties and assets as described in the preceding paragraph, the successor company will be our successor and shall succeed to, and be substituted for, and may exercise every right and power of, Medicis 50 under the New Indenture. If the predecessor is still in existence after the transaction, it will be released from its obligations and covenants under the New Indenture and the New Notes. 'MODIFICATION AND WAIVER We and the trustee may enter into one or more supplemental indentures that add, change or eliminate provisions of the New Indenture or modify the rights of the holders of the New Notes with the written consent of the holders of at least a majority in principal amount of the New Notes then outstanding. However, without the consent of each holder of an outstanding New Note, no supplemental indenture may, among other things: - change the stated maturity of the principal of, or payment date of any installment of interest (including contingent interest, if any) on, any New Note; - reduce the principal amount of, or the rate of interest (including contingent interest, if any) on, any New Note; - change the currency in which the principal of any New Note or interest is payable; - impair the right to institute suit for the enforcement of any payment on or with respect to any New Note when due; - adversely affect the right provided in the New Indenture to convert any New Note; - modify the provisions of the New Indenture relating to our requirement to repurchase New Notes upon a change in control or to repurchase the New Notes at the option of the holders pursuant to the terms described herein, in any case in a manner adverse to the holders of the New Notes; - reduce the percentage in principal amount of the outstanding New Notes necessary to modify or amend the New Indenture or to consent to any waiver provided for in the New Indenture; or - waive a default in the payment of principal of, or interest (including contingent interest, if any) on, any New Note. The holders of a majority in principal amount of the outstanding New Notes may, on behalf of the holders of all New Notes: - waive compliance by us with restrictive provisions of the New Indenture other than as provided in the preceding paragraph; and - waive any past default under the New Indenture and its consequences, except a default in the payment of the principal of or any interest (including contingent interest, if any) on any New Note or in respect of a provision which under the New Indenture cannot be modified or amended without the consent of the holder of each outstanding New Note affected. Without the consent of any holders of New Notes, we and the trustee may enter into one or more supplemental indentures for any of the following purposes: - to cure any ambiguity, omission, defect or inconsistency in the New Indenture; - to evidence a successor to us and the assumption by the successor of our obligations under the New Indenture and the New Notes; - to make any change that does not adversely affect the rights of any holder of the New Notes; - to comply with any requirement in connection with the qualification of the New Indenture under the Trust Indenture Act; or - to complete or make provision for certain other matters contemplated by the New Indenture. 51 EVENTS OF DEFAULT Each of the following is an "event of default": (1) a default in the payment of any interest (including contingent interest, if any) upon any of the New Notes when due and payable, which continues for 30 days; (2) a default in the payment of the principal of the New Notes when due, including on a redemption or repurchase date; (3) failure to pay when due the principal of indebtedness for money borrowed by us or our subsidiaries in excess of $20 million, or the acceleration of that indebtedness that is not withdrawn within 15 days after the date of written notice to us by the trustee or to us and the trustee by the holders of at least 25% in principal amount of the outstanding New Notes; (4) a default by us in the performance, or breach, of any of our other covenants in the New Indenture which are not remedied within 60 days after written notice to us by the trustee or to us and the trustee by the holders of at least 25% in principal amount of the outstanding New Notes; or (5) events of bankruptcy, insolvency or reorganization involving Medicis. If an event of default described in clauses (1), (2), (3) or (4) occurs and is continuing, either the trustee or the holders of at least 25% in principal amount of the outstanding New Notes may declare the principal amount of accrued and unpaid interest on all New Notes to be immediately due and payable. This declaration may be rescinded if the conditions described in the New Indenture are satisfied. If an event of default of the type referred to in clause (5) occurs, the principal amount of and accrued and unpaid interest, (including contingent interest, if any) on the outstanding New Notes will automatically become immediately due and payable. Within 90 days following a default, the trustee must give to the registered holders of New Notes notice of all uncured defaults known to it. The trustee will be protected in withholding the notice if it in good faith determines that the withholding of the notice is in the best interests of the registered holders, except in the case of a default in the payment of the principal of, or interest, including contingent interest, if any, on, any of the New Notes when due or in the payment of any redemption or repurchase obligation. The holders of not less than a majority in principal amount of the outstanding New Notes may direct the time, method and place of conducting any proceedings for any remedy available to the trustee, or exercising any trust or power conferred on the trustee. Subject to the provisions of the New Indenture relating to the duties of the trustee, if an event of default occurs and is continuing, the trustee will be under no obligation to exercise any of the rights or powers under the New Indenture at the request or direction of any of the holders of the New Notes unless the holders have offered to the trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, or interest, including contingent interest, if any, when due or the right to convert a New Note in accordance with the New Indenture, no holder may institute a proceeding or pursue any remedy with respect to the New Indenture or the New Notes unless the conditions provided in the New Indenture have been satisfied, including: - holders of at least 25% in principal amount of the outstanding New Notes have requested the trustee to pursue the remedy; and - holders have offered the trustee security or indemnity satisfactory to the trustee against any loss, liability or expense. We are required to deliver to the trustee annually a certificate indicating whether the officers signing the certificate know of any default by us in the performance or observance of any of the terms of the New Indenture. If the officers know of a default, the certificate must specify the status and nature of all defaults. 52 BOOK-ENTRY SYSTEM The New Notes will be issued in the form of global securities held in book-entry form. DTC or its nominee will be the sole registered holder of the New Notes for all purposes under the New Indenture. Owners of beneficial interests in the New Notes represented by the global securities will hold their interests pursuant to the procedures and practices of DTC. As a result, beneficial interests in any such securities will be shown on, and transfers will be effected only through, records maintained by DTC and its direct and indirect participants. Any such interests may not be exchanged for certificated securities, except in limited circumstances. Owners of beneficial interests must exercise any rights in respect of their interests, including any right to convert or require repurchase of their interests in the New Notes, in accordance with the procedures and practices of DTC. Beneficial owners will not be holders and will not be entitled to any rights under the global securities or the New Indenture. We and the trustee, and any of our respective agents, may treat DTC as the sole holder and registered owner of the global securities. EXCHANGE OF GLOBAL NOTES The New Notes, represented by one or more global notes, will be exchangeable for certificated securities with the same terms only if: - DTC is unwilling or unable to continue as depositary or if DTC ceases to be a clearing agency registered under the Exchange Act and we do not appoint a successor depositary within 90 days; - we decide to discontinue use of the system of book-entry transfer through DTC or any successor depositary; or - a default under the New Indenture occurs and is continuing. DTC has advised us as follows: DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" for registered participants, and it facilitates the settlement of transactions among its participants in those securities through electronic computerized book-entry changes in participants' accounts, eliminating the need for physical movement of securities certificates. DTC's participants include securities brokers and dealers, including the agent, banks, trust companies, clearing corporation and other organizations, some of whom and/or their representatives own DTC. Access to DTC's book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. GOVERNING LAW The New Indenture and the New Notes will be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflict of laws. 53 COMPARISON BETWEEN THE TERMS OF THE OLD NOTES AND THE NEW NOTES The Old Notes were issued under an Indenture dated June 4, 2002 between our company and Deutsche Bank Trust Company Americas, as trustee, such indenture will be hereinafter referred to as the Old Indenture. The following comparison is only a summary of certain provisions of the Old Notes and the Old Indenture that differ in a material respect to the provisions of the New Notes and the New Indenture. GENERAL OLD NOTES There is $400 million in aggregate principal amount of Old Notes outstanding. The Old Notes are our unsecured senior obligations and will mature on June 4, 2032, unless earlier redeemed at our option as described under "--Optional Redemption of the Notes--Old Notes", repurchased by us at a holder's option on certain dates as described under "--Repurchase of Notes at the Option of the Holder--Old Notes" or repurchased by us at a holder's option upon a change in control of our company. The Old Notes are convertible into shares of our Class A common stock upon the occurrence of certain conditions. The Old Notes bear interest at a rate of 2.5% per annum, payable semi-annually in arrears on June 4 and December 4 of each year. We will make each interest payment to the holders of record of the Old Notes on the immediately preceding May 15 and November 15, whether or not such day is a business day. NEW NOTES We will issue up to $492 million in aggregate principal amount of New Notes. The New Notes will be our unsecured senior obligations and will mature on June 4, 2033, unless earlier redeemed at our option as described under "--Optional Redemption of the Notes--New Notes", repurchased by us at a holder's option on certain dates as described under "Repurchase of Notes at the Option of the Holder--New Notes" or repurchased by us at a holder's option upon a change in control of our company. The New Notes are convertible into shares of our Class A common stock upon the occurrence of certain conditions. The New Notes will bear interest at a rate of 1.5% per annum, payable semi-annually in arrears on June 4 and December 4 of each year, commencing on December 4, 2003. We will make each interest payment to the holders of record of the New Notes on the immediately preceding May 15 and November 15, whether or not such day is a business day. CONTINGENT INTEREST OLD NOTES Holders of Old Notes will receive a contingent interest payment during any six-month period, from June 4 to December 3 and from December 4 to June 3, with the initial six-month period commencing June 4, 2007, if the average trading price of the Old Notes per $1,000 in principal amount for the five trading day period ending on the third trading day immediately preceding the first day of the applicable six-month period equals $1,200 or more. The average trading price of the Old Notes shall be determined no later than the second trading day immediately preceding the first day of the applicable six-month period by the conversion agent acting as a calculation agent in the manner set forth below in the definition of "trading price." During any period when contingent interest is payable, it will be payable at a rate equal to 0.5% per annum. We will pay contingent interest, if any, in the same manner as we will pay interest. 54 NEW NOTES We will pay contingent interest during any six-month period, from June 4 to December 3 and from December 4 to June 3, with the initial six-month period commencing June 4, 2008. Other than as described in the previous sentence, the terms of the New Notes regarding contingent interest are identical to the terms of the Old Notes. CONVERSION RIGHTS OLD NOTES A holder may convert any outstanding Old Notes into shares of our Class A common stock at an initial conversion price per share of $58.10. This represents a conversion rate of approximately 17.2117 shares per $1,000 in principal amount of the Old Notes. The conversion price (and resulting conversion rate) is, however, subject to adjustments. A holder may convert Old Notes only in denominations of $1,000 and integral multiples of $1,000. CONVERSION UPON SATISFACTION OF MARKET PRICE CONDITION A holder may surrender any of its Old Notes for conversion into shares of our Class A common stock during any quarter commencing after June 30, 2002 if the closing sale price of our Class A common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding quarter exceeds 110% of the conversion price per share on that 30th trading day. The conversion agent, which will initially be the trustee, will determine on our behalf at the end of each quarter whether the Old Notes are convertible as a result of the market price of our Class A common stock. NEW NOTES A holder may convert any outstanding New Notes into shares of our Class A common stock at an initial conversion price per share of $77.52. This represents a conversion rate of approximately 12.8998 shares per $1,000 in principal amount of the New Notes. This conversion price (and resulting conversion rate) is, however, subject to adjustments for certain transactions affecting our Class A common stock as described under "Description of the New Notes--Conversion Rate Adjustments". A holder may convert New Notes only in denominations of $1,000 and integral multiples of $1,000. In addition to adjusting the conversion rate pursuant to the terms of the Old Notes, prior to June 11, 2008, we will adjust the conversion rate of the New Notes if we declare a dividend or distribution to all or substantially all of the holders of our Class A common stock, to the extent that such dividend or distribution is payable in cash and is greater than $0.05 per issued and outstanding share of Class A common stock per fiscal quarter. See "Description of the New Notes -- Conversion Rate Adjustment." CONVERSION UPON SATISFACTION OF MARKET PRICE CONDITION A holder may surrender any of its New Notes for conversion into shares of our Class A common stock during any quarter commencing after September 30, 2003 if the closing sale price of our Class A common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding quarter, exceeds 120% of the conversion price per share on that 30th trading day. Other than the differences in conversion rights described in preceding three paragraphs, the terms of the conversion rights of the New Notes are identical to the terms of the Old Notes. OPTIONAL REDEMPTION OF THE NOTES OLD NOTES Prior to June 11, 2007, we cannot redeem the Old Notes at our option. Beginning on June 11, 2007, we may redeem the Old Notes, in whole at any time, or in part from time to time, 55 for cash at a price equal to 100% of the principal amount of the Old Notes, plus accrued and unpaid interest, (including contingent interest, if any), up to but not including the date of redemption. We will give not less than 20 days' nor more than 60 days' notice of redemption by mail to holders of the Old Notes. If we opt to redeem less than all of the Old Notes at any time, the trustee will select or cause to be selected the Old Notes to be redeemed by any method that it deems fair and appropriate. In the event of a partial redemption, the trustee may provide for selection for redemption of portions of the principal amount of any Old Note of a denomination larger than $1,000. NEW NOTES Prior to June 11, 2008, we cannot redeem the New Notes at our option. Beginning on June 11, 2008, we may redeem the New Notes, in whole at any time, or in part from time to time, for cash at a price equal to 100% of the principal amount of the New Notes, plus accrued and unpaid interest (including contingent interest, if any), up to but not including the date of redemption. Other than as described in the previous paragraph, the terms of the New Notes regarding optional redemption are identical to the terms of the Old Notes. REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER OLD NOTES A holder has the right to require us to repurchase all or a portion of the Old Notes on June 4, 2007, 2012 and 2017. We will repurchase the Old Notes for an amount of cash equal to 100% of the principal amount of the Old Notes on the date of purchase, plus accrued and unpaid interest (including contingent interest, if any) to the date of repurchase. To exercise the repurchase right, the holder of an Old Note must deliver, during the period beginning at any time from the opening of business on the date that is 20 business days prior to the repurchase date until the close of business on the business day before the repurchase date, a written notice to us and the trustee of such holder's exercise of the repurchase right. This notice must be accompanied by certificates evidencing the Old Note or Old Notes with respect to which the right is being exercised, duly endorsed for transfer. This notice of exercise may be withdrawn by the holder at any time on or before the close of business on the business day preceding the repurchase date. NEW NOTES A holder has the right to require us to repurchase all or a portion of the New Notes on June 4, 2008, 2013 and 2018. Other than as described in the previous sentence, the terms of the New Notes regarding repurchase of the New Notes at the option of the holder are identical to the Old Notes. 56 DESCRIPTION OF CAPITAL STOCK COMMON STOCK We have two classes of authorized common stock: Class A common stock, par value $0.014 per share, of which we are authorized to issue 50,000,000 shares, and Class B common stock, par value $0.014 per share, of which we are authorized to issue 1,000,000 shares. As of March 31, 2003, 30,743,267 shares of Class A common stock were issued and outstanding and held by approximately 248 holders of record. As of March 31, 2003, 379,016 shares of Class B common stock were issued and outstanding and held by a single holder. As of June 30, 2003, an additional 6,390,796 shares of Class A common stock were issuable upon exercise of outstanding option. Except as noted below, the designations, preferences, limitations and relative rights of the Class A common stock and Class B common stock are substantially identical. Holders of Class A common stock are entitled to one vote per share while holders of Class B common stock are entitled to ten votes per share. Except as required by law, holders of Class A common stock and Class B common stock vote together as a class on all matters with respect to which our stockholders are entitled to vote. Holders of Class A common stock and Class B common stock have equal rights to receive dividends and other distributions, if any, as may be declared from time to time by our board of directors. However, any dividend declared and paid to the holders of Class A common stock must be accompanied by the declaration and payment of an equivalent dividend to the holders of Class B common stock. If we in any manner subdivide, combine or reclassify the outstanding shares of Class A common stock or Class B common stock, as the case may be, the outstanding shares of the other class shall be subdivided, combined or reclassified proportionately in the same manner and on the same basis as the outstanding shares of Class A common stock or Class B common stock, as the case may be. Holders of Class A common stock and Class B common stock are not entitled to preemptive or similar rights. The Class B common stock may be converted into Class A common stock on a share-for-share basis at any time at the election of the holder and will automatically convert into Class A common stock upon sale or transfer of Class B common stock other than to another holder of Class B common stock. PREFERRED STOCK We currently have authorized 5,000,000 shares of preferred stock, par value $0.01 per share, of which no shares are issued or outstanding. See "--Preference Stock Purchase Rights." Upon liquidation, dissolution or winding up of our company, any holders of preferred stock will be paid in full any amounts to which they may be entitled, prior to any distribution of our assets to the holders of Class A common stock and Class B common stock on a pro rata basis. PREFERENCE STOCK PURCHASE RIGHTS On August 17, 1995, our board of directors adopted a stockholder rights plan, pursuant to which it declared a dividend of one preference stock purchase right on each outstanding share of Class A common stock and Class B common stock. The description and terms of these rights are set forth in a Rights Agreement, dated as of August 17, 1995, as amended, between our company and Norwest Bank Minnesota, N.A., as rights agent. These rights are exercisable only if a person or group acquires beneficial ownership of 15% or more of the then outstanding shares of Class A common stock or announces a tender offer the consummation of which would result in beneficial ownership by a person or group of 15% or more of the then outstanding shares of Class A common stock. Each right entitles the holder to buy one one-hundredth of a share of a new Series A junior participating preference stock at an exercise price of $185.00 per share, subject to adjustment. 57 If we are acquired in a merger or other business combination transaction after a person has acquired beneficial ownership of 15% or more of the then outstanding shares of Class A common stock, each right will entitle the holder to purchase, at the right's then-current exercise price, a number of shares of the acquiring person's common stock having a market value of twice such price. In addition, if a person or group acquires 50% or more of the then outstanding shares of Class A common stock, each right will entitle the holder, other than such person or members of such group, to purchase, at the right's then-current exercise price, a number of shares of Class A common stock of such other person or group, including our company as successor to the acquiring company or as the surviving corporation, having a market value of twice such price. Following the acquisition by a person or group of beneficial ownership of 15% or more of the then outstanding shares of Class A common stock and prior to an acquisition of 50% or more of the then outstanding shares of Class A common stock, our board of directors may exchange the rights, other than rights owned by such person or group, in whole or in part, at an exchange ratio of one share of Class A common stock, one one-hundredth of a share of the Series A junior participating preference stock or a share of a class or series of our preferred stock having equivalent rights, preferences and privileges as the Series A junior participating preference stock, per right. Prior to the acquisition by a person or group of beneficial ownership at 15% or more of the then outstanding shares of Class A common stock, the rights are redeemable for $0.001 per right at the option of our board of directors. 58 MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS This discussion describes the material U.S. federal income tax consequences of the exchange offer and owning and disposing of the New Notes. It applies to you only if you hold your Old Notes and New Notes as capital assets for U.S. federal income tax purposes. This section does not apply to you if you are a member of a class of holders subject to special rules, such as: - a dealer in securities or currencies; - a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings; - a bank, an insurance company or other financial institution; - a tax-exempt organization; - a person treated as a partnership for U.S. federal income tax purposes or a partner thereof; - a person that owns Old Notes or New Notes that are a hedge or that are hedged against interest rate risks; - a person that owns Old Notes or New Notes as part of a straddle, conversion or other risk reduction transaction for U.S. federal income tax purposes; or - a U.S. holder (as defined below) whose functional currency for U.S. federal income tax purposes is not the U.S. dollar. The summary below does not address all of the tax consequences that may be relevant to you. In particular, it does not address: - the U.S. federal estate, gift or alternative minimum tax consequences of the exchange offer or ownership or disposition of the New Notes; - state, local or foreign tax consequences of the exchange offer or ownership or disposition of the New Notes; or - U.S. federal, state, local or foreign tax consequences of owning or disposing of our Class A common stock. This discussion is based on the Internal Revenue Code of 1986, as amended, or the Code, the Treasury Regulations promulgated under the Code and administrative and judicial interpretations of the Code and the Treasury Regulations, all as of the date of this prospectus, and all of which are subject to differing interpretations and to change, possibly on a retroactive basis. No statutory, administrative or judicial authority directly addresses the treatment of the New Notes for U.S. federal income tax purposes. We have not sought, nor do we expect to seek, a ruling from the Internal Revenue Service, or the IRS, with respect to any of the U.S. federal income tax consequences discussed below. No assurance can be given that the IRS will not take contrary positions to the U.S. federal income tax consequences discussed below. As a result, no assurance can be given that the IRS will agree with the tax characterizations and the tax consequences described below. We urge you to consult your tax advisors with respect to the tax consequences to you of the exchange offer and ownership and disposition of the New Notes and shares of our Class A common stock in light of your own particular circumstances, including the tax consequences under state, local, foreign and other tax laws and the possible effects of changes in U.S. federal or other tax laws. CLASSIFICATION OF THE NEW NOTES We intend to treat the New Notes as debt instruments subject to the rules governing contingent payment debt instruments for U.S. federal income tax purposes. Pursuant to the terms 59 of the New Indenture relating to the New Notes, you agree, for U.S. federal income tax purposes, to treat your New Notes as indebtedness subject to the Treasury Regulations governing contingent payment debt instruments and to be bound by our application of those regulations to the New Notes, including our determination of the rate at which interest will be deemed to accrue on the New Notes. The remainder of this discussion assumes that the New Notes will be treated in accordance with this determination. However, there is some uncertainty as to the proper application of the Treasury Regulations governing contingent payment debt instruments, and no assurance can be given that the IRS will not assert that the New Notes should be treated differently or that such an assertion would not prevail. Such treatment could affect the amount, timing and character of income, gain or loss in respect of an investment in the New Notes. In particular, it might be determined that you should have accrued interest income at a lower rate, should not have recognized ordinary income upon the conversion of your New Notes, or should have recognized capital gain or loss upon a taxable disposition of your New Notes. TREATMENT OF U.S. HOLDERS You are a "U.S. holder" if you are a beneficial owner of an Old Note or a New Note and you are, for United States federal income tax purposes: - a citizen or resident of the United States; - a domestic corporation; - an estate whose income is subject to U.S. federal income tax regardless of its source; or - a trust over whose administration a U.S. court can exercise primary supervision and all substantial decisions of which one or more U.S. persons are authorized to control. If you are a "non-U.S. holder," this Section does not apply to you. You are a non-U.S. holder if you are a beneficial owner of an Old Note or a New Note and you are, for United States federal income tax purposes: - a nonresident alien individual (other than an expatriate); - a foreign corporation; or - a foreign estate or trust that is not subject to U.S. federal income taxation on its worldwide income. If you are a non-U.S. holder, please see the section titled "Treatment of Non-U.S. Holders" below. EXCHANGE OFFER The exchange of Old Notes for New Notes will qualify as a "recapitalization" for U.S. federal income tax purposes. Consequently, a U.S. holder will recognize gain on the exchange of an Old Note for a New Note to the extent of the lesser of (i) the difference between the issue price of the New Note (determined as described below) and the U.S. holder's adjusted tax basis in the Old Note and (ii) the fair market value of the excess of the principal amount of the New Notes over the principal amount of the Old Notes. The issue price of a New Note will be the fair market value of the New Note as of the exchange date. A U.S. holder's adjusted tax basis in an Old Note generally will be its original purchase price for the Old Note, increased by any interest income previously accrued by the U.S. holder with respect to the Old Note (determined without regard to any positive or negative adjustments to such interest accruals), decreased by the amount of any projected payments actually made on the Old Note and increased or decreased by the amount of any positive or negative adjustments, respectively, that a U.S. holder was required to make as a result of having purchased the Old Note at a price other than its adjusted issue price. Gain recognized on the exchange will be treated as ordinary interest income. Any loss realized by a 60 U.S. holder on the exchange of its Old Note for a New Note will not be recognized. A U.S. holder's basis in a New Note received in the exchange will equal its basis in its Old Note, increased by the amount of any gain recognized on the exchange. A U.S. holder's holding period in a New Note will include its holding period for the Old Note exchanged therefor. ACCRUAL OF INTEREST ON THE NEW NOTES Under the rules governing contingent payment debt instruments, a U.S. holder of New Notes generally will be required to accrue interest income on the New Notes, in the amounts described below, regardless of whether the U.S. holder uses the cash or accrual method of tax accounting. Accordingly, U.S. holders will likely be required to include interest in taxable income in each year in excess of the stated interest that accrues on the New Notes and in excess of any contingent interest payments actually received in that year. A U.S. holder of New Notes must accrue an amount of interest as ordinary income for U.S. federal income tax purposes, for each accrual period prior to and including the maturity date of the New Notes that equals: - the product of (i) the adjusted issue price (as defined below) of the New Notes as of the beginning of the accrual period, and (ii) the comparable yield (as defined below) of the New Notes, adjusted for the length of the accrual period; - divided by the number of days in the accrual period; and - multiplied by the number of days during the accrual period that the U.S. holder held the New Notes. The adjusted issue price of a New Note is its issue price (as defined above) increased by any interest income previously accrued, determined without regard to any adjustments to interest accruals described below, and decreased by the amount of any projected payments actually made with respect to the New Notes. Under the rules governing contingent payment debt instruments, we are required to establish the "comparable yield" for the New Notes. We determined that the comparable yield for the New Notes is the annual yield we would incur, as of the exchange date, on a fixed rate nonconvertible debt security with no contingent payments, but with terms and conditions otherwise comparable to those of the New Notes, including the level of subordination, term and general market conditions, but excluding any adjustments for liquidity or the riskiness of the contingencies with respect to the New Notes. Accordingly, while the comparable yield of the New Notes cannot be determined until the date of the exchange offer, if it were to be determined as of the date of the commencement of the exchange offer, the comparable yield would be 8.75% compounded semi-annually. We are required to provide to holders of the New Notes, solely for U.S. federal income tax purposes, a schedule of the projected amounts of payments on the New Notes. This schedule must produce the comparable yield. Our determination of the projected payment schedule for the New Notes includes estimates for payments of contingent interest and an estimate for a payment at maturity taking into account the conversion feature. U.S. HOLDERS OF NEW NOTES MAY OBTAIN THE COMPARABLE YIELD AND THE PROJECTED PAYMENT SCHEDULE BY SUBMITTING A WRITTEN REQUEST TO OUR VICE PRESIDENT OF FINANCE, C/O MEDICIS PHARMACEUTICAL CORPORATION, 8125 NORTH HAYDEN ROAD, SCOTTSDALE, ARIZONA 85258-2463. For U.S. federal income tax purposes, holders must use the comparable yield and projected payment schedule determined by us in calculating interest accruals, and the adjustments thereto described below, in respect of the New Notes, unless the holder timely discloses and justifies the use of other estimates to the IRS. This requirement for holders to use the comparable yield and projected payment schedule determined by us is imposed by Treasury Regulations issued by the IRS, and is in addition to your agreement to treat the New Notes consistently with our treatment pursuant to the indenture. 61 THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT DETERMINED FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF INTEREST ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF THE NEW NOTES OF A HOLDER OF NEW NOTES FOR U.S. FEDERAL INCOME TAX PURPOSES AND DO NOT CONSTITUTE A PROJECTION OR REPRESENTATION REGARDING THE ACTUAL AMOUNTS PAYABLE TO HOLDERS OF NEW NOTES. ADJUSTMENTS TO INTEREST ACCRUALS ON THE NEW NOTES If a U.S. holder of New Notes receives actual payments with respect to the New Notes in a taxable year that in the aggregate exceed the total amount of projected payments for that taxable year, the U.S. holder would incur a net positive adjustment equal to the amount of such excess. The U.S. holder would treat this net positive adjustment as additional interest income for the taxable year. For this purpose, the payments in a taxable year include the fair market value of property received (including any of our Class A common stock received on conversion of the New Notes) in that year. If a U.S. holder receives actual payments with respect to the New Notes in a taxable year that in the aggregate are less than the amount of the projected payments for that taxable year, the U.S. holder would incur a "net negative adjustment" equal to the amount of such deficit. This net negative adjustment would (a) reduce the interest income on the New Notes of the U.S. holder for that taxable year, and (b) to the extent of any excess after the application of (a), give rise to an ordinary loss to the extent of the amount by which the U.S. holder's total interest inclusions with respect to the New Note exceed the total amount of the U.S. holder's net negative adjustments treated as ordinary loss with respect to the New Note in prior taxable years. Any excess would be carried forward to the next taxable year as a net negative adjustment or would reduce the amount realized upon sale, purchase by us at your option, exchange, conversion or redemption of the New Notes. DISCOUNT OR PREMIUM A U.S. holder that acquires a New Note after its initial issuance is required to accrue interest for U.S. federal income tax purposes based upon the original projected payment schedule as if the New Note had been acquired directly from us pursuant to the exchange offer. Except to the extent described in the third paragraph below as to New Notes that are deemed to be "exchange listed," a U.S. holder must allocate any difference between the holder's tax basis in a New Note upon acquisition and the then adjusted issue price of the New Note to daily portions of interest or the projected payments over the remaining term of the New Note on some reasonable basis, taking into account then applicable interest rates and changes in the projected value of our Class A common stock. Thus, if a U.S. holder's basis in a New Note upon its acquisition (either pursuant to the exchange offer or otherwise) is less than the New Note's then adjusted issue price, such U.S. holder would be required to allocate the "discount" among the daily portions of interest or projected payments to be made on the New Note. The portion of the discount allocated to a daily portion of interest would be treated as a positive adjustment on the date the daily portion accrues, and the portion allocated to a projected payment would be treated as a positive adjustment on the date the projected payment was scheduled to be made. A U.S. holder's adjusted basis in the New Note would be increased by the amount of any such positive adjustment. If a U.S. holder's basis in a New Note upon its acquisition (either pursuant to the exchange offer or otherwise) exceeds the New Note's then adjusted issue price, the amount of the "premium" allocated to a daily portion of interest would be treated as a negative adjustment on the date the daily portion accrues, and the amount allocated to a projected payment would be treated as a negative adjustment on the date the projected payment was scheduled to be made. A U.S. holder's adjusted basis in the New Note would be reduced by the amount of any such negative adjustment. 62 Additionally, if a New Note is deemed to be "exchange listed" property at the time of a U.S. holder's acquisition, then, instead of allocating the discount or premium to projected payments, a U.S. holder generally would be permitted, but not required (unless any other method was unreasonable), to allocate the discount or premium pro rata to the accrual of interest on the New Notes. The New Notes will be considered "exchange listed" if they are listed on either a national securities exchange or an interdealer quotation system sponsored by a national securities association. SALE, EXCHANGE, CONVERSION OR REDEMPTION Generally, the sale or exchange of a New Note, or the redemption of a New Note for cash, will result in taxable gain or loss to a U.S. holder of New Notes. In addition, as described above, our calculation of the comparable yield and the schedule of projected payments for the New Notes includes the receipt of Class A common stock upon conversion of a New Note into our Class A common stock as a contingent payment with respect to the New Notes. Accordingly, we intend to treat the receipt of our Class A common stock by a U.S. holder upon the conversion of a New Note, as a contingent payment. As described above, you are generally bound by our determination of the comparable yield and the schedule of projected payments. Under this treatment, a conversion also will result in taxable gain or loss to the U.S. holder. The amount of gain or loss on a taxable sale, purchase by us at your option, exchange, conversion or redemption will equal the difference between (a) the amount of cash plus the fair market value of any other property received by the U.S. holder, including the fair market value of any Class A common stock received, and (b) the adjusted tax basis in the New Notes of the U.S. holder. The adjusted tax basis in a New Note of a U.S. holder generally will equal the original purchase price for the New Note of the U.S. holder, increased by any interest income previously accrued by the U.S. holder with respect to the New Note (determined without regard to any positive or negative adjustments to interest accruals described above), and decreased by the amount of any projected payments actually made on the New Note and increased or decreased by the amount of any positive or negative adjustment, respectively, that a U.S. holder is required to make if the U.S. holder acquires New Notes with a basis upon acquisition other than their adjusted issue price. Gain recognized upon a sale, purchase by us at your option, exchange, conversion or redemption of a New Note generally will be treated as ordinary interest income; any loss will be ordinary loss to the extent of the excess of interest previously included in income over the total negative adjustments previously taken into account as ordinary loss and, thereafter, capital loss (which will be long-term if the New Note is held for more than one year). The deductibility of net capital losses is subject to limitations. The tax basis of a U.S. holder in the Class A common stock received upon a conversion of a New Note will equal the then current fair market value of our Class A common stock. The holding period of the U.S. holder for such Class A common stock received will commence on the day after the date of conversion. CONSTRUCTIVE DIVIDENDS If at any time we make a distribution of property to our stockholders that would be taxable to the stockholders as a dividend for U.S. federal income tax purposes and, in accordance with the anti-dilution provisions of the New Notes, the conversion rate of the New Notes is increased, such increase may be deemed to be the payment of a taxable dividend to U.S. holders of New Notes. For example, in the event we are required to increase the conversion rate of the New Notes because we distribute cash dividends to holders of our common stock (see "Description of the New Notes--Conversion Rights--Conversion Rate Adjustment"), then U.S. holders of New Notes would be treated as currently receiving a constructive distribution, taxable as a dividend, equal to the value, as of the date of the constructive distribution, of the additional common stock that the U.S. holders would be entitled to receive upon a conversion of the New Notes by virtue of the increase in the conversion rate. 63 TREATMENT OF NON-U.S. HOLDERS The following section discusses the U.S. federal income tax consequences of the exchange offer and the ownership and disposition of New Notes to non-U.S. holders (as defined above). If you are not a non-U.S. holder, this section does not apply to you. Please see the section titled "Treatment of U.S. Holders" above. EXCHANGE OFFER AND OWNERSHIP AND DISPOSITION OF NEW NOTES Payments of interest on the New Notes made to a non-U.S. holder, including a payment in common stock pursuant to a conversion, and any gain realized on the exchange or a sale or exchange of the New Notes, will be exempt from United States income or withholding tax, provided that: (i) such non-U.S. holder does not own, actually or constructively, 10% or more of the total combined voting power of all classes of our stock entitled to vote, is not a controlled foreign corporation related, directly or indirectly, to us through stock ownership, and is not a bank receiving certain types of interest; (ii) the statement requirement set forth in section 871(h) or section 881(c) of the Code has been fulfilled with respect to the beneficial owner, as discussed below; (iii) such payments and gain are not effectively connected with the conduct by such non- U.S. holder of a trade or business in the United States; (iv) our common stock continues to be actively traded within the meaning of section 871(h)(4)(C)(v)(I) of the Code; and (v) we are not and have not been a United States real property holding corporation ("USRPHC"). We believe that we are not and have never been, nor do we anticipate becoming, a USRPHC. However, if a non-U.S. holder were deemed to have received a constructive dividend (see "Treatment of U.S. Holders--Constructive Dividends" above), the non-U.S. holder generally would be subject to U.S. withholding tax at a 30% rate, subject to reduction by an applicable treaty, on the taxable amount of such dividend. It is possible that U.S. federal tax on the deemed distributions would be withheld from the interest paid to the non-U.S. holder of the New Notes. The statement requirement referred to in the preceding paragraph will be fulfilled if the non-U.S. holder certifies on the appropriate IRS Form W-8, under penalties of perjury, that it is not a U.S. person and provides its name and address or otherwise satisfies applicable documentation requirements. BACKUP WITHHOLDING AND INFORMATION REPORTING Proceeds from the exchange offer, payments of principal and interest (including interest accrued under the rules discussed above and a payment in common stock pursuant to a conversion) on the Notes, and the proceeds of dispositions of the New Notes may be subject to information reporting and U.S. federal backup withholding tax if the U.S. holder thereof fails to supply an accurate taxpayer identification number or otherwise fails to comply with applicable U.S. information reporting or certification requirements. A non-U.S. holder may be subject to United States backup withholding tax on the exchange offer, payments on the New Notes and the proceeds from a sale or other disposition of the New Notes unless the non-U.S. holder complies with certification procedures to establish that it is not a U.S. person. Any amounts so withheld will be allowed as a credit against a holder's U.S. federal income tax liability and may entitle a holder to a refund, provided the required information is timely furnished to the IRS. THE PROPER TAX TREATMENT OF A HOLDER OF NEW NOTES IS UNCERTAIN. AS A RESULT, YOU ARE URGED TO CONSULT YOUR TAX ADVISORS REGARDING THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE EXCHANGE OFFER AND AN INVESTMENT IN THE NEW NOTES AND WHETHER PARTICIPATION IN THE EXCHANGE OFFER AND AN INVESTMENT IN THE NEW NOTES IS ADVISABLE IN LIGHT OF THE AGREED UPON TAX TREATMENT AND YOUR PARTICULAR TAX SITUATION. 64 LEGAL MATTERS The validity of the New Notes and our Class A Common Stock issuable upon conversion of the New Notes offered by this prospectus will be passed upon for our company by Akin Gump Strauss Hauer & Feld LLP, New York, New York. Customary legal matters will be passed upon for the dealer managers by Davis Polk & Wardwell, New York, New York. EXPERTS Our consolidated financial statements appearing in our Annual Report on Form 10-K for the year ended June 30, 2002 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report included therein and incorporated into this prospectus by reference. Such consolidated financial statements are incorporated into this prospectus by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing. 65 WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, prospectuses and other information with the SEC. The SEC allows us to "incorporate by reference" information into this prospectus, which means that we can disclose important information to you by referring you to another document we have filed separately with the SEC. The information incorporated by reference is deemed part of this prospectus, except for any information superseded by information contained directly in this prospectus. This prospectus incorporates by reference the documents set forth below that we have previously filed with the SEC. These documents contain important information about the financial condition of our company. - Annual Report on Form 10-K for the year ended June 30, 2002, filed on September 30, 2002; - Quarterly Report on Form 10-Q for the quarters ended September 30, 2002, filed on November 14, 2002; December 31, 2002, filed on February 7, 2003; and March 31, 2003, filed on May 15, 2003; - Current Reports on Form 8-K filed on January 16, 2003; February 10, 2003; March 5, 2003; March 10, 2003; April 24, 2003; and June 30, 2003; and - Description of our company's Class A common stock contained in our Registration Statement on Form 8-A filed on August 18, 1995; and the amendment to the description of our company's Class A common stock contained in our Registration Statement on Form 8-A/A filed on June 4, 2002. Any statement contained in a document incorporated by reference shall be deemed to be modified or superseded for the purpose of this prospectus to the extent that a statement contained herein or in another document incorporated by reference that is filed on or before the date of this prospectus modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus. All information appearing in this prospectus is qualified in its entirety by the information and financial statements (including notes thereto) appearing in the documents incorporated by reference, except to the extent set forth in the immediately preceding sentence. Unless indicated to the contrary in the filing, all documents and reports filed by our company with the SEC pursuant to Section 13, 14 or 15(d) of the Exchange Act, after the date of this prospectus but before the exchange offer is terminated or completed, shall also be deemed to be incorporated by reference into this prospectus and to be a part hereof from the date of the filing of such documents and reports. Any statement contained in this prospectus or incorporated herein by reference shall be deemed to be modified or superseded to the extent that a statement contained in any documents and reports filed by our company with the SEC pursuant to Section 13, 14 or 15(d) of the Exchange Act after the date of this prospectus modifies or supersedes such statement. You may request a copy of these filings, at no cost, by writing us at the following address: Medicis Pharmaceutical Corporation 8125 North Hayden Road Scottsdale, Arizona 85258-2463 Attention: Office of Investor Relations You may also obtain copies of any documents incorporated by reference in this prospectus through us, the SEC or the SEC's website as described below. Documents incorporated by reference are available from us without charge, excluding exhibits thereto unless we have specifically incorporated by reference such exhibits in this document. Any person, including any beneficial owner, to whom this document is delivered may obtain documents incorporated by reference in, but not delivered with, this document by requesting them from the Information Agent 66 in writing or by telephone at the address set forth on the back cover of this document. Any request should be made not later than five business days prior to the end of the exchange offer. You may read and copy any reports, statements or other information that our company files at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC filings of our company are also available to the public from commercial document retrieval services and at the website maintained by the SEC at www.sec.gov. If for any reason we are not required to comply with the reporting requirements of the Exchange Act, we are still required under the New Indenture to furnish the holders of the New Notes with the information, documents and other reports specified in Sections 13 and 15(d) of the Exchange Act. EXCHANGE AGENT Deutsche Bank Trust Company Americas has been appointed to act as the exchange agent for the exchange offer. All executed letters of transmittal should be directed to the exchange agent at one of the addresses set forth below. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notices of guaranteed delivery should be directed to the exchange agent, addressed as follows: To: DEUTSCHE BANK TRUST COMPANY AMERICAS BY HAND: BY MAIL: BY OVERNIGHT MAIL OR COURIER: Deutsche Bank Trust Company DB Services Tennessee, Inc. DB Services Tennessee, Inc. Americas Reorganization Unit Corporate Trust & Agency C/O The Depository Trust P.O. Box 292737 Services Clearing Corporation Nashville, TN 37229-2737 Reorganization Unit 55 Water Street, 1(st) floor 648 Grassmere Park Road Jeanette Park Entrance Fax: (615) 835-3701 Nashville, TN 37211 New York, NY 10041 Attn: Karl Shepherd Confirm by Telephone (615) 835-3572
DELIVERY OF A LETTER OF TRANSMITTAL OR AGENT'S MESSAGE TO AN ADDRESS OTHER THAN THE ADDRESSES LISTED ABOVE OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER THAN AS SET FORTH ABOVE IS NOT VALID DELIVERY OF THE LETTER OF TRANSMITTAL OR AGENT'S MESSAGE. INFORMATION AGENT D.F. King & Co., Inc. has been appointed to act as the information agent in connection with the exchange offer. All inquiries relating to this prospectus and the transactions contemplated hereby should be directed to the information agent at the telephone numbers and address set forth below: D.F. King & Co., Inc. 48 Wall Street New York, New York 10005 Banks and brokers please call collect: (212) 269-5550 All others please call toll-free: (888) 542-7446 67 YOU SHOULD ONLY RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVE INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THE CONTENTS OF ANY WEBSITES REFERRED TO IN THIS PROSPECTUS ARE NOT PART OF THIS PROSPECTUS. WE ARE OFFERING, AND SEEKING TO OFFER, TO EXCHANGE ONLY IN JURISDICTIONS WHERE OFFERS AND EXCHANGES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR ANY EXCHANGE OF OUR NOTES. TABLE OF CONTENTS Special Note Regarding Forward-Looking Statements............................ i Summary................................. 1 Risk Factors............................ 13 Use of Proceeds......................... 29 Ratios of Earnings to Fixed Charges..... 29 Book Value Per Share.................... 30 Price Range of Class A Common Stock and Old Notes............................. 30 Dividend Policy......................... 31 Capitalization.......................... 32 Selected Consolidated Financial Data.... 33 The Exchange Offer...................... 34 Description of the New Notes............ 43 Comparison Between the Terms of the Old Notes and the New Notes............... 54 Description of Capital Stock............ 57 Material United States Federal Income Tax Considerations.................... 59 Legal Matters........................... 65 Experts................................. 65 Where You Can Find More Information..... 66 Exchange Agent.......................... 67 Information Agent....................... 67
[MEDICIS LOGO] Offer to Exchange UP TO $492 MILLION OF ITS 1.5% CONTINGENT CONVERTIBLE SENIOR NOTES DUE JUNE 4, 2033 for any and all outstanding 2.5% CONTINGENT CONVERTIBLE SENIOR NOTES DUE JUNE 4, 2032 (CUSIP NOS. 584 690 AA 9 AND 584 70K AA 2) CO-DEALER MANAGERS DEUTSCHE BANK SECURITIES THOMAS WEISEL PARTNERS LLC Prospectus - , 2003 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Our company is a corporation organized under Delaware law. Pursuant to the statutes of the State of Delaware, a director or officer of a corporation is entitled, under specified circumstances, to indemnification by the corporation against reasonable expenses, including attorney's fees, incurred by him/her in connection with the defense of a civil or criminal proceeding to which he/she has been made, or threatened to be made, a party by reason of the fact that he/she was such director or officer. In certain circumstances, indemnity is provided against judgments, fines and amounts paid in settlement. In general, indemnification is available where the director or officer acted in good faith, for a purpose he/she reasonably believed to be in the best interests of the corporation. Specific court approval is required in some cases. The foregoing statement is subject to the detailed provisions of Sections 715, 717 and 721-725 of the Delaware Business Corporation Law. Our By-laws provide that our company is authorized, by a resolution of shareholders, a resolution of directors or an agreement providing for such indemnification, to the fullest extent permitted by applicable law, to provide indemnification and to advance expenses to its directors and officers in respect of claims, actions, suits or proceedings based upon, arising from, relating to or by reason of the fact that any such director or officer serves or served in such capacity with our company or at the request of our company in any capacity with any other enterprise. The directors and officers of Medicis are covered by insurance policies indemnifying against certain liabilities, including certain liabilities arising under the Securities Act, that might be incurred by them in such capacities. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Exhibit No. Document 1.1 Dealer Manager Agreement, dated as of July 16, 2003, by and among Medicis Pharmaceutical Corporation, Thomas Weisel Partners LLC and Deutsche Bank Securities Inc.** 3.1 Certificate of Incorporation of the Company, as amended. (Incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10-K for the fiscal year ended June 30, 1995.) 3.2 Amended and Restated By-laws of the Company, as amended. (Incorporated by reference to Exhibit 3.3 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.) 4.1 Form of Indenture, dated as of June 4, 2002, by and between Medicis Pharmaceutical Corporation, as issuer, and Deutsche Bank Trust Company Americas, as trustee for Old Notes. (Incorporated by reference to Exhibit 4.1 to our current report on Form 8-K filed with the SEC on June 6, 2002.) 4.2 Form of Indenture between Medicis Pharmaceutical Corporation and Deutsche Bank Trust Company Americas, as trustee for the New Notes. 4.3 Rights agreement, dated August 17, 1995, between the Company and American Stock Transfer & Trust Company, as Rights Agent. (Incorporated by reference to Exhibit 4.1 to our Annual Report on Form 10-K for the fiscal year ended June 30, 1995.) 4.4 Amendment No. 2 to Rights Agreement, dated March 17, 1997, between the Company and Norwest Bank Minnesota, N.A. (Incorporated by reference to Exhibit 4.1 to our Quarterly II-1 Report on Form 10-Q for the quarter ended March 31, 1997.) 4.5 Form of specimen certification representing Class A common stock. (Incorporated by reference to Exhibit 4.3 to the Registration Statement of Form S-1 of the Registrant, filed with the SEC on January 16, 1990.) 5.1 Opinion of Akin Gump Strauss Hauer & Feld LLP with respect to the New Notes** 21.1 Subsidiaries of the Registrant. (Incorporated by reference to Exhibit 21.1 to our Annual Report on Form 10-K for the fiscal year ended June 30,2002.) 23.1 Consent of Ernst and Young LLP** 23.2 Consent of Akin Gump Strauss Hauer & Feld LLP (included in Exhibit 5.1) 24.1 Power of Attorney.** 25.1 Statement of Eligibility of Trustee 99.1 Form of Letter of Transmittal.** 99.2 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees.** 99.3 Form of Letter to Clients.** 99.4 Form of Notice of Guaranteed Delivery.** ** Filed previously. ITEM 22. UNDERTAKINGS. (a) The undersigned hereby undertakes to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Item 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first-class mail or equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement throughout the date responding to the request. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of any 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) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report, to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly reports that is specifically incorporated by reference in the prospectus to provide such interim financial information. (d) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have 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. If a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by one of our directors, officers or controlling persons in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the notes being registered, we 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. (e) The undersigned hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction that was not the subject of and included in the registration statement when it became effective. II-2 SIGNATURES FOR MEDICIS PHARMACEUTICAL CORPORATION Pursuant to the requirements of the Securities Act of 1933, Medicis Pharmaceutical Corporation has duly caused this amendment no. 2 to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Scottsdale, State of Arizona, on August 4, 2003. MEDICIS PHARMACEUTICAL CORPORATION By: /s/ Mark A. Prygocki, Sr. ---------------------------------------- Name: Mark A. Prygocki, Sr. Title: Executive Vice President, Chief Financial Officer and Treasurer Pursuant to the requirements of the Securities Act of 1933, this amendment no. 2 to the registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- * Chairman of the Board of Directors and - ---------------------------- Chief Executive Officer Jonah Shacknai (Principal Executive Officer ) August 4, 2003 /s/ Mark A. Prygocki, Sr. Executive Vice President, Chief Financial - ---------------------------- Officer and Treasurer (Principal Financial Mark A. Prygocki, Sr. and Accounting Officer) August 4, 2003 * Director August 4, 2003 - ---------------------------- Arthur G. Altachul * Director August 4, 2003 - ---------------------------- Spencer Davidson * Director August 4, 2003 - ---------------------------- Stuart Diamond * Director August 4, 2003 - ---------------------------- Peter S. Knight, Esq. * Director August 4, 2003 - ---------------------------- Michael A. Pietrangelo * Director August 4, 2003 - ---------------------------- Philip S. Schein, M.D. * Director August 4, 2003 - ---------------------------- Lottie Shackelford
II-3 *The undersigned, by signing his name hereto, does sign and execute this amendment no. 2 to the registration statement pursuant to the Power of Attorney executed by the above-named directors and officers of the registrant and previously filed with the Securities and Exchange Commission on behalf of such directors and officers. By: /s/ Mark A. Prygocki, Sr. ----------------------------- Mark A. Prygocki, Sr. Attorney-in-fact II-4 Index to Exhibits
Exhibit No. Document 1.1 Dealer Manager Agreement, dated as of July 16, 2003, by and among Medicis Pharmaceutical Corporation, Thomas Weisel Partners LLC and Deutsche Bank Securities Inc.** 3.1 Certificate of Incorporation of the Company, as amended. (Incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10-K for the fiscal year ended June 30, 1995.) 3.2 Amended and Restated By-laws of the Company, as amended. (Incorporated by reference to Exhibit 3.3 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.) 4.1 Form of Indenture, dated as of June 4, 2002, by and between Medicis Pharmaceutical Corporation, as issuer, and Deutsche Bank Trust Company Americas, as trustee for Old Notes. (Incorporated by reference to Exhibit 4.1 to our current report on Form 8-K filed with the SEC on June 6, 2002.) 4.2 Form of Indenture between Medicis Pharmaceutical Corporation and Deutsche Bank Trust Company Americas, as trustee for the New Notes. 4.3 Rights agreement, dated August 17, 1995, between the Company and American Stock Transfer & Trust Company, as Rights Agent. (Incorporated by reference to Exhibit 4.1 to our Annual Report on Form 10-K for the fiscal year ended June 30, 1995.) 4.4 Amendment No. 2 to Rights Agreement, dated March 17, 1997, between the Company and Norwest Bank Minnesota, N.A. (Incorporated by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.) 4.5 Form of specimen certification representing Class A common stock. (Incorporated by reference to Exhibit 4.3 to the Registration Statement of Form S-1 of the Registrant, filed with the SEC on January 16, 1990.) 5.1 Opinion of Akin Gump Strauss Hauer & Feld LLP with respect to the New Notes** 21.1 Subsidiaries of the Registrant. (Incorporated by reference to Exhibit 21.1 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2002.) 23.1 Consent of Ernst and Young LLP** 23.2 Consent of Akin Gump Strauss Hauer & Feld LLP (included in Exhibit 5.1) 24.1 Power of Attorney.** 25.1 Statement of Eligibility of Trustee 99.1 Form of Letter of Transmittal.** 99.2 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees.** 99.3 Form of Letter to Clients.** 99.4 Form of Notice of Guaranteed Delivery.**
** Filed previously. EX-4.2 3 p68012a2exv4w2.txt EX-4.2 EXHIBIT 4.2 MEDICIS PHARMACEUTICAL CORPORATION 1.5% Contingent Convertible Senior Notes Due 2033 -------------------------------------------------- INDENTURE Dated as of August , 2003 -------------------------------------------------- DEUTSCHE BANK TRUST COMPANY AMERICAS TRUSTEE CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section - --------------------------- ----------------- 310 (a)(1)................................................................. 7.10 (a)(2)..................................................................... 7.10 (a)(3)..................................................................... N.A. (a)(4)..................................................................... N.A. (a)(5)..................................................................... N.A. (b)........................................................................ 7.08, 7.10 (c)........................................................................ N.A. 311(a)..................................................................... 7.11 (b)........................................................................ 7.11 (c)........................................................................ N.A. 312 (a).................................................................... 2.05 (b)........................................................................ 11.03 (c)........................................................................ 11.03 313(a)..................................................................... 7.06 (b)(1)..................................................................... 7.06 (b)(2)..................................................................... 7.06 (c)........................................................................ 7.06 (d)........................................................................ 7.06 314(a)..................................................................... 4.02, 4.03 (b)........................................................................ N.A. (c)(1)..................................................................... 11.04 (c)(2)..................................................................... 11.04 (c)(3)..................................................................... N.A. (d)........................................................................ N.A. (e)........................................................................ 11.05 (f)........................................................................ N.A. 315 (a).................................................................... 7.01(b) (b)........................................................................ 7.05 (c)........................................................................ 7.01 (d)........................................................................ 7.01(c) (e)........................................................................ 6.11 316(a)(1)(A)............................................................... 6.05 (a)(1)(B).................................................................. 6.04 (a)(2)..................................................................... N.A. (b)........................................................................ 6.07 (c)........................................................................ 1.05(e) 317 (a)(1)................................................................. 6.08 (a)(2)..................................................................... 6.09 (b)........................................................................ 2.04 318 (a).................................................................... N.A.
N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. i Table of Contents
Page ---- ARTICLE 1 Definitions and Incorporation by Reference Section 1.01. Definitions.................................................................. 1 Section 1.02. Other Definitions............................................................ 4 Section 1.03. Incorporation by Reference of Trust Indenture Act............................ 5 Section 1.04. Rules of Construction........................................................ 6 Section 1.05. Acts of Holders.............................................................. 6 ARTICLE 2 The Securities Section 2.01. Form and Dating.............................................................. 7 Section 2.02. Execution and Authentication................................................. 8 Section 2.03. Registrar, Paying Agent and Conversion Agent................................. 9 Section 2.04. Paying Agent to Hold Money in Trust.......................................... 9 Section 2.05. Securityholder Lists......................................................... 10 Section 2.06. Transfer and Exchange........................................................ 10 Section 2.07. Replacement Securities....................................................... 11 Section 2.08. Outstanding Securities; Determinations of Holders' Action.................... 11 Section 2.09. Temporary Securities......................................................... 12 Section 2.10. Cancellation................................................................. 12 Section 2.11. Persons Deemed Owners........................................................ 13 Section 2.12. Global Securities............................................................ 13 Section 2.13. CUSIP Numbers................................................................ 14 ARTICLE 3 Redemption and Purchases Section 3.01. Right To Redeem; Notices To Trustee.......................................... 15 Section 3.02. Selection of Securities to Be Redeemed....................................... 15 Section 3.03. Notice of Redemption......................................................... 15 Section 3.04. Effect of Notice of Redemption............................................... 16 Section 3.05. Deposit of Redemption Price.................................................. 16 Section 3.06. Securities Redeemed in Part.................................................. 17 Section 3.07. Reserved..................................................................... 17 Section 3.08. Purchase of Securities at Option of the Holder............................... 17 Section 3.09. Purchase of Securities at Option of the Holder upon Change in Control........ 19 Section 3.10. Effect of Purchase Notice or Change in Control Purchase Notice............... 22
ii Section 3.11. Deposit of Purchase Price or Change in Control Purchase Price................ 23 Section 3.12. Securities Purchased in Part................................................. 23 Section 3.13. Covenant to Comply with Securities Laws upon Purchase of Securities.......... 23 Section 3.14. Repayment to the Company..................................................... 23 ARTICLE 4 Covenants Section 4.01. Payment of Securities........................................................ 24 Section 4.02. SEC and Other Reports........................................................ 24 Section 4.03. Compliance Certificate....................................................... 25 Section 4.04. Further Instruments and Acts................................................. 25 Section 4.05. Maintenance of Office or Agency.............................................. 25 Section 4.06. Tax Treatment of Securities.................................................. 25 ARTICLE 5 Successor Corporation Section 5.01. When the Company May Merge or Transfer Assets................................ 26 ARTICLE 6 Defaults and Remedies Section 6.01. Events of Default............................................................ 27 Section 6.02. Defaults and Remedies........................................................ 28 Section 6.03. Other Remedies............................................................... 28 Section 6.04. Waiver of Past Defaults...................................................... 29 Section 6.05. Control by Majority.......................................................... 29 Section 6.06. Limitation on Suits.......................................................... 29 Section 6.07. Rights of Holders to Receive Payment......................................... 30 Section 6.08. Collection Suit by Trustee................................................... 30 Section 6.09. Trustee May File Proofs of Claim............................................. 30 Section 6.10. Priorities................................................................... 31 Section 6.11. Priorities................................................................... 31 Section 6.12. Waiver of Stay, Extension or Usury Laws...................................... 31 ARTICLE 7 Trustee Section 7.01. Duties of Trustee............................................................ 32 Section 7.02. Rights of Trustee............................................................ 33 Section 7.03. Individual Rights of Trustee................................................. 34 Section 7.04. Trustee's Disclaimer......................................................... 35 Section 7.05. Notice of Defaults........................................................... 35
iii Section 7.06. Reports by Trustee to Holders................................................ 35 Section 7.07. Compensation and Indemnity................................................... 35 Section 7.08. Replacement of Trustee....................................................... 36 Section 7.09. Successor Trustee by Merger.................................................. 37 Section 7.10. Eligibility; Disqualification................................................ 37 Section 7.11. Preferential Collection of Claims Against Company............................ 37 ARTICLE 8 Discharge of Indenture Section 8.01. Discharge of Liability on Securities......................................... 37 Section 8.02. Repayment to the Company..................................................... 37 ARTICLE 9 Amendments Section 9.01. Without Consent of Holders................................................... 38 Section 9.02. With Consent of Holders...................................................... 38 Section 9.03. Compliance with Trust Indenture Act.......................................... 39 Section 9.04. Revocation and Effect of Consents............................................ 39 Section 9.05. Notation on or Exchange of Securities........................................ 40 Section 9.06. Trustee to Sign Supplemental Indentures...................................... 40 Section 9.07. Effect of Supplemental Indentures............................................ 40 ARTICLE 10 Conversions Section 10.01. Conversion Privilege........................................................ 40 Section 10.02. Conversion Procedure........................................................ 43 Section 10.03. Adjustments Below Par Value................................................. 44 Section 10.04. Taxes on Conversion......................................................... 45 Section 10.05. Company to Provide Stock.................................................... 45 Section 10.06. Adjustment of Conversion Price.............................................. 45 Section 10.07. No Adjustment............................................................... 50 Section 10.08. Equivalent Adjustments...................................................... 51 Section 10.09. Adjustment for Tax Purposes................................................. 51 Section 10.10. Notice of Adjustment........................................................ 51 Section 10.11. Notice of Certain Transactions.............................................. 52 Section 10.12. Effect of Reclassification, Consolidation, Merger, Share Exchange or Sale on Conversion Privilege............................................. 52 Section 10.13. Trustee's Disclaimer........................................................ 53 Section 10.14. Voluntary Reduction......................................................... 54 Section 10.15. Simultaneous Adjustments.................................................... 54
iv ARTICLE 11 Miscellaneous Section 11.01. Trust Indenture Act Controls................................................ 54 Section 11.02. Notices..................................................................... 54 Section 11.03. Communication by Holders with Other Holders................................. 55 Section 11.04. Certificate and Opinion as to Conditions Precedent.......................... 56 Section 11.05. Statements Required in Certificate or Opinion............................... 56 Section 11.06. Separability Clause......................................................... 57 Section 11.07. Rules by Trustee, Paying Agent, Conversion Agent and Registrar.............. 57 Section 11.08. Legal Holidays.............................................................. 57 Section 11.09. Governing Law............................................................... 57 Section 11.10. No Recourse Against Others.................................................. 57 Section 11.11. Successors.................................................................. 57 Section 11.12. Multiple Originals.......................................................... 58 Exhibit A-1 - Form of Global Security Exhibit A-2 - Form of Certificated Security
v INDENTURE dated as of August , 2003 between MEDICIS PHARMACEUTICAL CORPORATION, a Delaware corporation (the "COMPANY"), and DEUTSCHE BANK TRUST COMPANY AMERICAS, a New York banking corporation duly organized and existing under the laws of the State of New York (the "TRUSTEE"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 1.5% Contingent Convertible Senior Notes Due 2033 ("NOTES"): ARTICLE 1 Definitions and Incorporation by Reference Section 1.01. Definitions. "AFFILIATE" of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "CONTROL" when used with respect to any specified person means the power to direct or cause the direction of the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing. "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, in each case to the extent applicable to such transaction and as in effect from time to time. "BOARD OF DIRECTORS" means either the board of directors of the Company or any duly authorized committee of such board. "BOARD RESOLUTION" means a copy of one or more resolutions, certified by an Officer of the Company to have been duly adopted or consented to by the applicable Board of Directors and to be in full force and effect, and delivered to the Trustee. "BUSINESS DAY" means, with respect to any Security, a day that in The City of New York is not a day on which banking institutions are authorized by law or regulation to close. "CAPITAL STOCK" for any corporation means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by that corporation. "CERTIFICATED SECURITIES" means Securities that are in the form of the Securities attached hereto as Exhibit A-2. "CLASS A COMMON STOCK" shall mean shares of the Company's Class A Common Stock, $0.014 par value per share, as they exist on the date of this Indenture or any other shares of Capital Stock of the Company into which the Class A Common Stock shall be reclassified or changed. "CLASS B COMMON STOCK" shall mean shares of the Company's Class B Common Stock, $0.014 par value per share, as they exist on the date of this Indenture or any other shares of Capital Stock of the Company into which the Class B Common Stock shall be reclassified or changed. "COMMON STOCK" shall mean shares of the Company's Class A Common Stock and Class B Common Stock. "COMPANY" means the party named as the "COMPANY" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors. "COMPANY ORDER" means a written request or order signed in the name of the Company by any two Officers. "CORPORATE TRUST OFFICE" means the office of the Trustee at which at any time the trust created by this Indenture shall be administered, which office at the date hereof is located at 60 Wall Street, New York, New York 10005, Attention: Corporate Trust and Agency Services, or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as a successor Trustee may designate from time to time by notice to the Holders and the Company). "DEFAULT" means any event which is, or after notice or passage of time or both would be, an Event of Default. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time. "GLOBAL SECURITIES" means Securities that are in the form of the Securities attached hereto as Exhibit A-1 that is registered in the name of the Depositary (as defined below) or a nominee. "HOLDER" or "SECURITYHOLDER" means a person in whose name a Security is registered on the Registrar's books. "INDENTURE" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof, including the provisions of the TIA that are deemed to be a part hereof. "ISSUE DATE" of any Security means the date on which the Security was originally issued or deemed issued as set forth on the face of the Security. 2 "OFFICER" means the Chairman and Chief Executive Officer, the President, any Executive Vice President, any Senior Vice President, any Vice President, the Chief Financial Officer, the Treasurer, the Secretary, any Assistant Secretary or any Director of the Company. "OFFICERS' CERTIFICATE" means a written certificate containing the information specified in Sections 11.04 and 11.05, signed in the name of the Company by any two Officers, and delivered to the Trustee. An Officers' Certificate given pursuant to Section 4.03 shall be signed by the Treasurer or Chief Financial Officer of the Company but need not contain the information specified in Sections 11.04 and 11.05. "OPINION OF COUNSEL" means a written opinion containing the information specified in Section 11.04 and 11.05, from legal counsel who is acceptable to the Trustee in its reasonable discretion. The counsel may be an employee of, or counsel to, the Company or the Trustee. "PERSON" or "PERSON" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or other entity. "PRINCIPAL AMOUNT" or "PRINCIPAL AMOUNT" of a Security means the Principal Amount as set forth on the face of the Security. "REDEMPTION DATE" or "REDEMPTION DATE" shall mean the date specified for redemption of the Securities in accordance with the terms of the Securities and this Indenture. "REDEMPTION PRICE" or "REDEMPTION PRICE" shall have the meaning set forth in paragraph 5 of the Securities. "RESPONSIBLE OFFICER" shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any director, managing director, vice president, assistant vice president, assistant secretary, assistant treasurer, associate, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "SEC" means the Securities and Exchange Commission. "SECURITIES" means any of the Company's 1.5% Contingent Convertible Senior Notes Due 2033, as amended or supplemented from time to time, issued under this Indenture. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time. "SECURITYHOLDER" or "HOLDER" means a person in whose name a Security is registered on the Registrar's books. 3 "STATED MATURITY", when used with respect to any Security, means the date specified in such Security as the fixed date on which an amount equal to the Principal Amount of such Security is due and payable. "SUBSIDIARY" means any person of which at least a majority of the outstanding Voting Stock shall at the time directly or indirectly be owned or controlled by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries. "TIA" means the Trust Indenture Act of 1939 as in effect on the date of this Indenture, provided, however, that in the event the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended. "TRADING DAY" means a day during which trading in securities generally occurs on the New York Stock Exchange or, if the Class A Common Stock is not listed on the New York Stock Exchange, on the principal other national or regional securities exchange on which the Class A Common Stock is then listed or, if the Class A Common Stock is not listed on a national or regional securities exchange, on the National Association of Securities Dealers Automated Quotation System or, if the Class A Common Stock is not quoted on the National Association of Securities Dealers Automated Quotation System, on the principal other market on which the Class A Common Stock is then traded. "TRUSTEE" means the party named as the "TRUSTEE" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors. "VOTING STOCK" of a person means Capital Stock of such person of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such person (irrespective of whether or not at the time Capital Stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). Section 1.02. Other Definitions.
Defined in Term: Section: - ----- -------- 95% Trading Condition......................................................................... 10.01 Act........................................................................................... 1.05(a) Agent Members................................................................................. 2.12(b)(v) Aggregate Market Premium...................................................................... 10.06 beneficial owner.............................................................................. 3.09(a) cash.......................................................................................... 3.08(b) Change in Control............................................................................. 3.09(a) Change in Control Purchase Date............................................................... 3.09(a) Change in Control Purchase Notice............................................................. 3.09(c) Change in Control Purchase Price.............................................................. 3.09(a)
4
Defined in Term: Section: - ----- -------- Closing Price................................................................................. 10.06 Company Notice................................................................................ 3.08(c) Company Notice Date........................................................................... 3.08(c) Comparable Yield.............................................................................. 4.06 Continuing Directors.......................................................................... 3.09(a) Conversion Agent.............................................................................. 2.03 Conversion Date............................................................................... 10.02 Conversion Price.............................................................................. 10.06 Conversion Shares............................................................................. 10.01 Depositary.................................................................................... 2.01(a) DTC........................................................................................... 2.01(a) Event of Default.............................................................................. 6.01 ex-dividend date.............................................................................. 10.01 Group......................................................................................... 3.09 Legal Holiday................................................................................. 11.08 Market Capitalization......................................................................... 10.06 Notice of Default............................................................................. 6.01 Paying Agent.................................................................................. 2.03 Principal Value Conversion.................................................................... 10.02 Principal Value Conversion Notice............................................................. 10.02 Purchase Date................................................................................. 3.08(a) Purchase Notice............................................................................... 3.08(a) Purchase Price................................................................................ 3.08(a) Quarter....................................................................................... 10.01 Registrar..................................................................................... 2.03 Security Trading Price........................................................................ 10.01 Stockholder Rights Plan....................................................................... 10.06(g)
Section 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Securities. "INDENTURE SECURITY HOLDER" means a Securityholder. "INDENTURE TO BE QUALIFIED" means this Indenture. "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee. 5 "OBLIGOR" on the indenture securities means the Company. All other TIA terms used in this Indenture that are defined by the TIA, defined by a TIA reference to another statute or defined by an SEC rule have the meanings assigned to them by such definitions. Section 1.04. Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time; (c) "or" is not exclusive; (d) "including" means including, without limitation; and (e) words in the singular include the plural, and words in the plural include the singular. Section 1.05. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "ACT" of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to such officer the execution thereof. Where such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Registered Securities shall be proved by the register maintained by the Registrar. 6 (d) Any request, demand, authorization, direction, notice, consent, 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. (e) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. ARTICLE 2 The Securities Section 2.01. Form and Dating. The Securities and the Trustee's certificate of authentication shall be substantially in the forms set forth on Exhibits A-1 and A-2, which are a part of this Indenture and incorporated by reference herein. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage; provided that any such notation, legend or endorsement required by usage is in a form acceptable to the Company. The Company shall provide any such notations, legends or endorsements to the Trustee in writing. Each Security shall be dated the date of its authentication. (a) Global Securities. The Securities shall be issued initially in global form and shall be substantially in the form of Exhibit A-1. Each Global Security shall represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Securities from time to time endorsed thereon and that the aggregate amount of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions and conversions. Any adjustment of the aggregate principal amount of a Global Security to reflect the amount of any increase or decrease in the amount of outstanding Securities represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.12 hereof and shall be made on the records of the Trustee and The Depository Trust Company ("DTC") or the nominee thereof (such depositary, or any successor thereto, and any such nominee being hereinafter referred to as the "DEPOSITARY"). 7 (b) Book-Entry Provisions. The Company shall execute and the Trustee shall, in accordance with this Section 2.01(b), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depositary, (b) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions and (c) shall bear legends substantially to the following effect: "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO MEDICIS PHARMACEUTICAL CORPORATION (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF." (c) Certificated Securities. Securities not issued as interests in the Global Securities will be issued in certificated form substantially in the form of Exhibit A-2 attached hereto. Section 2.02. Execution and Authentication. The Securities shall be executed on behalf of the Company by any Officer, under its corporate seal reproduced thereon. The signature of the officer of the Company on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at the time of the execution of the Securities 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 authentication of such Securities. 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 duly executed by the Trustee by manual signature of an authorized officer, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. 8 The Trustee shall authenticate and deliver Securities for original issue in an aggregate Principal Amount of up to $492,000,000 upon a Company Order without any further action by the Company. The aggregate Principal Amount of Securities outstanding at any time may not exceed the amount set forth in the foregoing sentence, except as provided in Section 2.07. The Securities shall be issued only in registered form without coupons and only in denominations of $1,000 of Principal Amount and any integral multiple thereof. Section 2.03. Registrar, Paying Agent and Conversion Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("REGISTRAR"), an office or agency where Securities may be presented for purchase or payment ("PAYING AGENT") and an office or agency where Securities may be presented for conversion ("CONVERSION AGENT"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars, one or more additional paying agents and one or more additional conversion agents. The term Paying Agent includes any additional paying agent, including any named pursuant to Section 4.05. The term Conversion Agent includes any additional conversion agent, including any named pursuant to Section 4.05. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent, Conversion Agent or co-registrar (other than the Trustee). The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any Subsidiary or an Affiliate of either of them may act as Paying Agent, Registrar, Conversion Agent or co-registrar. The Company initially appoints the Trustee as Registrar, Conversion Agent and Paying Agent in connection with the Securities. Section 2.04. Paying Agent to Hold Money in Trust. Except as otherwise provided herein, on or prior to each due date of payments in respect of any Security, the Company shall deposit with the Paying Agent a sum of money (in immediately available funds if deposited on the due date) sufficient to make such payments when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the making of payments in respect of the Securities and shall notify the Trustee of any Default by the Company in making any such payment. At any time during the continuance of any such Default, the Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all money so held in trust. If the Company, a Subsidiary or an Affiliate of either of them acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by it. Upon doing so, the Paying Agent shall have no further liability for the money. 9 Section 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall cause to be furnished to the Trustee at least semiannually on May 4 and November 4 a listing of Securityholders dated within 15 days of the date on which the list is furnished and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. Section 2.06. Transfer and Exchange. (a) Subject to Section 2.12 hereof, upon surrender for registration of transfer of any Securities, together with a written instrument of transfer satisfactory to the Registrar duly executed by the Securityholder or such Securityholder's attorney duly authorized in writing, at the office or agency of the Company designated as Registrar or co-registrar pursuant to Section 2.03, 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 denomination or denominations, of a like aggregate Principal Amount. The Company shall not charge a service charge for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of the Securities from the Securityholder requesting such transfer or exchange. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denomination or denominations, of a like aggregate Principal Amount, upon surrender of the Securities to be exchanged, together with a written instrument of transfer satisfactory to the Registrar duly executed by the Securityholder or such Securityholder's attorney duly authorized in writing, at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities that the Holder making the exchange is entitled to receive. The Company shall not be required to make, and the Registrar need not register, transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities in respect of which a Purchase Notice or Change in Control Purchase Notice has been given and not withdrawn by the Holder thereof in accordance with the terms of this Indenture (except, in the case of Securities to be purchased in part, the portion thereof not to be purchased) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed. (b) Notwithstanding any provision to the contrary herein, so long as a Global Security remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Security, in whole or in part, shall be made only in accordance with Section 2.12 and this Section 2.06(c)(b). Transfers of a Global Security shall be limited to transfers of such Global Security in whole, or in part, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee. (c) Successive registrations and registrations of transfers and exchanges as aforesaid may be made from time to time as desired, and each such registration shall be noted on the register for the Securities. 10 (d) Any Registrar appointed pursuant to Section 2.03 hereof shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Securities upon transfer or exchange of Securities. (e) No Registrar shall be required to make registrations of transfer or exchange of Securities during any periods designated in the text of the Securities or in this Indenture as periods during which such registration of transfers and exchanges need not be made. Section 2.07. Replacement Securities. If any mutilated Security is surrendered to the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a protected purchaser (within the meaning of Section 8-303 of the Uniform Commercial Code), the Company shall execute, and upon the Company's written request the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and Principal Amount, 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, or is about to be purchased by the Company pursuant to Article 3 hereof, the Company in its discretion may, instead of issuing a new Security, pay or purchase such Security, as the case may be. Upon the issuance of any new Securities under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 2.08. Outstanding Securities; Determinations of Holders' Action. Securities outstanding at any time are all the Securities authenticated by the Trustee, except for those cancelled by it, those paid pursuant to Section 2.07 delivered to it for cancellation and those described in this Section 2.08 as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate thereof holds the Security; provided, however, that in determining whether the Holders of the requisite Principal Amount of Securities have given or concurred in 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 11 Company or such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Subject to the foregoing, only Securities outstanding at the time of such determination shall be considered in any such determination (including, without limitation, determinations pursuant to Articles 6 and 9). If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a protected purchaser. If the Paying Agent holds, in accordance with this Indenture, on a Redemption Date, or on the Business Day following a Purchase Date or a Change in Control Purchase Date, or on Stated Maturity, money sufficient to pay amounts owed with respect to Securities payable on that date, then immediately after such Redemption Date, Purchase Date, Change in Control Purchase Date or Stated Maturity, as the case may be, such Securities shall cease to be outstanding and interest, if any (including contingent interest, if any), on such Securities shall cease to accrue; provided that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made. If a Security is converted in accordance with Article 10, then from and after the time of conversion on the Conversion Date, such Security shall cease to be outstanding and interest, if any (including contingent interest, if any), shall cease to accrue on such Security. Section 2.09. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Company will 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 the office or agency of the Company designated for such purpose pursuant to Section 2.03, 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 deliver 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. Section 2.10. Cancellation. All Securities surrendered for payment, purchased by the Company pursuant to Article 3, conversion, redemption or registration of transfer or exchange (other than Securities exchanged pursuant to Section 10.02) shall, if surrendered to any person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The 12 Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder that the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation or that any Holder has converted pursuant to Article 10. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of by the Trustee in accordance with the Trustee's customary procedure. Section 2.11. 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 the Principal Amount of the Security or the payment of any Redemption Price, Purchase Price or Change in Control Purchase Price in respect thereof, and accrued and unpaid interest thereon, for the purpose of conversion and for all other purposes whatsoever, whether or not such 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 2.12. Global Securities. (a) A Global Security may not be transferred, in whole or in part, to any Person other than the Depositary or a nominee or any successor thereof, and no such transfer to any such other Person may be registered; provided that the foregoing shall not prohibit any transfer of a Security that is issued in exchange for a Global Security but is not itself a Global Security. No transfer of a Security to any Person shall be effective under this Indenture or the Securities unless and until such Security has been registered in the name of such Person. Notwithstanding any other provisions of this Indenture or the Securities, transfers of a Global Security, in whole or in part, shall be made only in accordance with Section 2.06 and this Section 2.12. (b) The provisions of clauses (i), (ii), (iii) and (iv) below shall apply only to Global Securities: (i) Notwithstanding any other provisions of this Indenture or the Securities, a Global Security shall not be exchanged in whole or in part for a Security registered in the name of any Person other than the Depositary or one or more nominees thereof; provided that a Global Security may be exchanged for Securities registered in the names of any person designated by the Depositary in the event that (x) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or such Depositary has ceased to be a "clearing agency" registered under the Exchange Act, and a successor Depositary is not appointed by the Company within 90 days, (y) the Company has provided the Depositary with written notice that it has decided to discontinue use of the system of book-entry transfer through the Depositary or any successor Depositary or (z) an Event of Default has occurred and is continuing with respect to the Securities. Any Global Security exchanged pursuant to clauses (x) or (y) above shall be so exchanged in whole and not in part, and any Global Security exchanged pursuant to clause (z) above may be exchanged in whole or from time to time in part as directed by the Depositary. Any Security issued in exchange for a Global Security or any 13 portion thereof shall be a Global Security; provided that any such Security so issued that is registered in the name of a Person other than the Depositary or a nominee thereof shall not be a Global Security. (ii) Securities issued in exchange for a Global Security or any portion thereof shall be issued in definitive, fully registered form, without interest coupons, shall have an aggregate Principal Amount equal to that of such Global Security or portion thereof to be so exchanged, shall be registered in such names and be in such authorized denominations as the Depositary shall designate and shall bear the applicable legends provided for herein. Any Global Security to be exchanged in whole shall be surrendered by the Depositary to the Trustee, as Registrar. With regard to any Global Security to be exchanged in part, either such Global Security shall be so surrendered for exchange or, if the Trustee is acting as custodian for the Depositary or its nominee with respect to such Global Security, the Principal Amount thereof shall be reduced, by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Trustee. Upon any such surrender or adjustment, the Trustee shall authenticate and deliver the Security issuable on such exchange to or upon the order of the Depositary or an authorized representative thereof. (iii) Subject to the provisions of clause (v) below, the registered Holder may grant proxies and otherwise authorize any Person, including Agent Members (as defined below) and persons that may hold interests through Agent Members, to take any action which a holder is entitled to take under this Indenture or the Securities. (iv) In the event of the occurrence of any of the events specified in clause (i) above, the Company will promptly make available to the Trustee a reasonable supply of Certificated Securities in definitive, fully registered form, without interest coupons. (v) Neither any members of, or participants in, the Depositary (collectively, the "AGENT MEMBERS") nor any other Persons on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Security registered in the name of the Depositary or any nominee thereof, or under any such Global Security, and the Depositary or such nominee, as the case may be, may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or impair, as between the Depositary, its Agent Members and any other person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a holder of any Security. Section 2.13. CUSIP Numbers. The Company may issue the Securities with one or more "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on 14 the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers. ARTICLE 3 Redemption and Purchases Section 3.01. Right To Redeem; Notices To Trustee. (a) Optional Redemption. The Company, at its option, may redeem the Securities in accordance with the provisions of paragraphs 5 and 7 of the Securities and at the Redemption Price specified in paragraph 5 of the Securities, together with accrued and unpaid interest, if any (including contingent interest, if any, thereon up to but not including the Redemption Date; provided that if the Redemption Date is on or after an interest record date, but on or prior to the related interest payment date, interest will be payable to the Holders in whose names the Securities are registered at the close of business on the relevant record date for payment of such interest. (b) Notice to Trustee. If the Company elects to redeem Securities pursuant to this Section 3.01, it shall notify the Trustee in writing of the Redemption Date, the Principal Amount of Securities to be redeemed and the Redemption Price. The Company shall give the notice to the Trustee provided for in this Section 3.01(b) by a Company Order at least 45 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee). Section 3.02. Selection of Securities to Be Redeemed. If less than all the Securities are to be redeemed, unless the procedures of the Depositary provide otherwise, the Trustee shall select the Securities to be redeemed by any method approved by the Trustee. The Trustee may select for redemption portions of the Principal Amount of Securities that have denominations of $1,000 and integral multiples thereof. Securities and portions of them the Trustee selects shall be in Principal Amounts of $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as possible) to be the portion selected for redemption. Securities that have been converted during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection. Section 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail, postage prepaid, to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (a) the Redemption Date; 15 (b) the Redemption Price; (c) the Conversion Price; (d) the name and address of the Paying Agent and Conversion Agent; (e) that Securities called for redemption may be converted at any time before the close of business on the second Business Day immediately preceding the Redemption Date; (f) that Holders who want to convert Securities must satisfy the requirements set forth in paragraph 8 of the Securities; (g) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price therefor, together with all accrued and unpaid interest; (h) if fewer than all the outstanding Securities are to be redeemed, the certificate numbers, if any, and Principal Amounts of the particular Securities to be redeemed; (i) that, unless the Company defaults in making payment of such Redemption Price, interest, if any (including contingent interest, if any), on Securities called for redemption will cease to accrue on and after the Redemption Date and the Securities will cease to be convertible; and (j) the CUSIP number of the Securities. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense; provided that the Company makes such request prior to the date by which such notice of redemption must be given to Holders in accordance with this Section 3.03 and the Company provides the Trustee with all information required for such notice of redemption. Section 3.04. Effect of Notice of Redemption. Once notice of redemption is given, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price stated in the notice, except for Securities which are converted in accordance with the terms of this Indenture. Upon surrender to the Paying Agent, such Securities shall be paid at the Redemption Price stated in the notice, together with accrued and unpaid interest, if any (including contingent interest, if any), thereon, up to but not including the Redemption Date. Section 3.05. Deposit of Redemption Price. Prior to 11:00 a.m. (New York City time) on the Redemption Date the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary or an Affiliate of either of them is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the Redemption Price of all Securities to be redeemed on that date, together with accrued and unpaid interest, if any (including contingent interest, if any), thereon, up to but not including the Redemption Date other than Securities or portions of Securities called for redemption that on or prior thereto have been delivered by the Company to the Trustee for 16 cancellation or have been converted. The Paying Agent shall as promptly as practicable return to the Company any money not required for that purpose because of conversion of Securities pursuant to Article 10. If such money is then held by the Company in trust and is not required for such purpose it shall be discharged from such trust. Section 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder, without service charge, a new 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 Amount of the Security surrendered. Section 3.07. Reserved. Section 3.08. Purchase of Securities at Option of the Holder. (a) General. Securities shall be purchased by the Company in accordance with the provisions of paragraph 6 of the Securities on June 4, 2008, June 4, 2013 and June 4, 2018 (each, a "PURCHASE DATE") at a purchase price per Security equal to 100% of the aggregate Principal Amount of the Security (the "PURCHASE PRICE"), together with accrued and unpaid interest (including contingent interest, if any), thereon, up to but not including the Purchase Date; provided that if the Purchase Date is on or after an interest record date but on or prior to the related interest payment date, interest will be payable to the Holders in whose names the Securities are registered at the close of business on the relevant record date. Purchases of Securities hereunder shall be made, at the option of the Holder thereof, upon: (i) delivery to the Company and the Paying Agent by the Holder of a written notice of purchase (a "PURCHASE NOTICE") at any time from the opening of business on the date that is 20 Business Days prior to the Purchase Date until the close of business on the Business Day prior to such Purchase Date stating: (A) the certificate number of the Security which the Holder will deliver to be purchased (in the case of Certificated Securities); (B) the portion of the Principal Amount of the Security which the Holder will deliver to be purchased, which portion must be in principal amounts at maturity of $1,000 or an integral multiple thereof; (C) that such Security shall be purchased as of the Purchase Date pursuant to the terms and conditions specified in paragraph 6 of the Securities and in this Indenture; and (ii) delivery of such Security to the Paying Agent prior to, on or after the Purchase Date (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Purchase Price therefor, together with accrued and unpaid interest, if any (including contingent interest, if any); provided, however, that such Purchase Price, together with accrued and unpaid interest, if any (including contingent interest, if any), shall be so paid pursuant to this 17 Section 3.08 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Purchase Notice, as determined by the Company in its sole discretion. The Company shall purchase from the Holder thereof, pursuant to this Section 3.08, a portion of a Security if the Principal Amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.08 shall be consummated by the delivery of the consideration to be received by the Holder promptly following the later of the Purchase Date and the time of delivery of the Security. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Purchase Notice contemplated by this Section 3.08(a)shall have the right to withdraw such Purchase Notice at any time prior to the close of business on the Business Day prior to the Purchase Date by delivery of a written notice of withdrawal to the Paying Agent at the principal office of the Paying Agent in accordance with Section 3.10. The Paying Agent shall promptly notify the Company of the receipt by it of any Purchase Notice or written notice of withdrawal thereof. (b) Manner of Payment of Purchase Price. The Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.08 has been given shall be paid in U.S. legal tender ("CASH"). (c) Company Notice. In connection with any purchase of Securities pursuant to Section 3.08, the Company shall give written notice of the Purchase Date to the Holders (the "COMPANY NOTICE"). The Company Notice shall be sent by first-class mail to the Trustee and to each Holder not less than 20 Business Days prior to any Purchase Date (the "COMPANY NOTICE DATE"). Each Company Notice shall include a form of Purchase Notice to be completed by a Securityholder and shall state: (i) the Purchase Price and the Conversion Price; (ii) the name and address of the Paying Agent and the Conversion Agent; (iii) that Securities as to which a Purchase Notice has been given may be converted if they are otherwise convertible only in accordance with Article 10 hereof and paragraph 8 of the Securities if the applicable Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (iv) that Securities must be surrendered to the Paying Agent to collect payment; (v) that the Purchase Price for, and any accrued and unpaid interest (including contingent interest, if any) on, any Security as to which a Purchase Notice has been given 18 and not withdrawn will be paid promptly following the later of the Purchase Date and the time of surrender of such Security as described in subclause (iv) above; (vi) the procedures the Holder must follow to exercise rights under Section 3.08 and a brief description of those rights; (vii) briefly, the conversion rights of the Securities; (viii) the procedures for withdrawing a Purchase Notice (as specified in Section 3.10); (ix) that, unless the Company defaults in making payment on Securities for which a Purchase Notice has been submitted, interest, if any (including contingent interest), on such Securities will cease to accrue on the Purchase Date; and (x) the CUSIP number of the Securities. At the Company's request, the Trustee shall give such Company Notice in the Company's name and at the Company's expense; provided, however, that the Company makes such request at least three (3) Business Days prior to the date by which such Company Notice must be given to the Holders and that, in all cases, the text of such Company Notice shall be prepared by the Company. Section 3.09. Purchase of Securities at Option of the Holder upon Change in Control. (a) If at any time that Securities remain outstanding there shall have occurred a Change in Control (as hereinafter defined), Securities shall be repurchased by the Company, at the option of the Holder thereof, at a purchase price (the "CHANGE IN CONTROL PURCHASE PRICE") equal to the principal amount thereof plus accrued and unpaid interest, if any (including contingent interest, if any), thereon, up to and including the date (the "CHANGE IN CONTROL PURCHASE DATE") fixed by the Company that is not less than 45 days nor more than 60 days after the date of the Company Notice, subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 3.09(c). Whenever in this Indenture there is a reference to the principal of any Security as of any time, such reference shall be deemed to include reference to the Change in Control Purchase Price payable in respect of such Security to the extent that such Change in Control Purchase Price is, was or would be payable at such time, and express mention of the Change in Control Purchase Price in any provision of this Indenture shall not be construed as excluding the Change in Control Purchase Price in those provisions of this Indenture when such express mention is not made. A "CHANGE IN CONTROL" shall be deemed to have occurred at such time after the original issuance of the Securities as any of the following occur: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to any person or group of related persons, as defined in Section 13(d) of the Exchange Act (a "GROUP"); 19 (ii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of this indenture); (iii) any person or Group shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the Company's issued and outstanding Voting Stock of or any successor to all or substantially all of the Company's assets; or (iv) the first day of which a majority of the members of the Company's Board of Directors are not Continuing Directors (as hereinafter defined). "BENEFICIAL OWNER" shall be determined in accordance with Rules 13d-3 and 13d-5 promulgated by the SEC under the Exchange Act or any successor provision, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether exercisable immediately or only after the passage of time. "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of the original issuance of the Securities or (ii) was nominated for election or elected to the Board of Directors with the approval of a majority of the continuing directors who were members of such Board of Directors at the time of such nomination or election. (b) Within 30 days after the occurrence of a Change in Control, the Company shall mail a written notice of the Change in Control by first-class mail to the Trustee and to each Holder (and to beneficial owners as required by applicable law). The notice shall include a form of Change in Control Purchase Notice to be completed by the Securityholder and shall state: (i) briefly, the events causing a Change in Control and the date of such Change in Control; (ii) the date by which the Change in Control Purchase Notice pursuant to this Section 3.09 must be given; (iii) the Change in Control Purchase Date; (iv) the Change in Control Purchase Price; (v) the name and address of the Paying Agent and the Conversion Agent; (vi) the Conversion Price and any adjustments thereto; (vii) that Securities as to which a Change in Control Purchase Notice has been given may be converted pursuant to Article 10 hereof only if the Change in Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (viii) that Securities must be surrendered to the Paying Agent to collect payment; 20 (ix) that the Change in Control Purchase Price for any Security as to which a Change in Control Purchase Notice has been duly given and not withdrawn will be paid promptly following the later of the Change in Control Purchase Date and the time of surrender of such Security as described in clause (viii); (x) briefly, the procedures the Holder must follow to exercise rights under this Section 3.09; (xi) briefly, the conversion rights of the Securities; (xii) the procedures for withdrawing a Change in Control Purchase Notice (as specified in Section 3.10); (xiii) that, unless the Company defaults in making payment of such Change in Control Purchase Price, interest (including contingent interest, if any), on Securities surrendered for purchase by the Company will cease to accrue on and after the Change in Control Purchase Date; and (xiv) the CUSIP number of the Securities. (c) A Holder may exercise its rights specified in Section 3.09(a) upon delivery of a written notice of purchase (a "CHANGE IN CONTROL PURCHASE NOTICE"), together with the securities subject thereto, to the Company and the Paying Agent at any time prior to the close of business on the third Business Day prior to the Change in Control Purchase Date, stating: (i) the certificate number of the Security that the Holder will deliver to be purchased; (ii) the portion of the Principal Amount of the Security which the Holder will deliver to be purchased, which portion must be $1,000 or an integral multiple thereof; and (iii) that such Security shall be purchased pursuant to the terms and conditions specified in paragraph 6 of the Securities. The delivery of such Security to the Paying Agent prior to, on or after the Change in Control Purchase Date (together with all necessary endorsements) at the offices of the Paying Agent shall be a condition to the receipt by the Holder of the Change in Control Purchase Price therefor; provided, however, that such Change in Control Purchase Price shall be so paid pursuant to this Section 3.09 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof set forth in the related Change in Control Purchase Notice. The Company shall purchase from the Holder thereof, pursuant to this Section 3.09, a portion of a Security if the Principal Amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security. 21 Any purchase by the Company contemplated pursuant to the provisions of this Section 3.09 shall be consummated by the delivery of the consideration to be received by the Holder promptly following the later of the Change in Control Purchase Date and the time of delivery of the Security to the Paying Agent in accordance with this Section 3.09. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Change in Control Purchase Notice contemplated by this Section 3.09(c) shall have the right to withdraw such Change in Control Purchase Notice at any time prior to the close of business on the Business Day preceding the Change in Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.10. The Paying Agent shall promptly notify the Company of the receipt by it of any Change in Control Purchase Notice or written withdrawal thereof. Notwithstanding anything herein to the contrary, the Company's obligations pursuant to this Section 3.09 shall be satisfied if a third party makes a change of control offer in the manner and at the times and otherwise in compliance in all material respects with the requirements of this Section 3.09 and purchases all Securities properly tendered and not withdrawn pursuant to the requirements of this Section 3.09. Section 3.10. Effect of Purchase Notice or Change in Control Purchase Notice. Upon receipt by the Paying Agent of the Purchase Notice or Change in Control Purchase Notice specified in Section 3.08 or Section 3.09(c), as applicable, the Holder of the Security in respect of which such Purchase Notice or Change in Control Purchase Notice, as the case may be, was given shall (unless such Purchase Notice or Change in Control Purchase Notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Purchase Price, together with all accrued and unpaid interest, if any (including contingent interest, if any), thereon, to but not including the Purchase Date or Change in Control Purchase Price, as the case may be, with respect to such Security. Such Purchase Price, together with accrued and unpaid interest, if any (including contingent interest, if any), thereon, to but not including the Purchase Date or Change in Control Purchase Price, as the case may be, shall be paid to such Holder, subject to receipt of funds and/or securities by the Paying Agent, promptly following the later of (x) the Purchase Date or the Change in Control Purchase Date, as the case may be, with respect to such Security (provided that the conditions in Section 3.08 or Section 3.09(c), as applicable, have been satisfied) and (y) the time of delivery of such Security to the Paying Agent by the Holder thereof in the manner required by Section 3.08 or Section 3.09(c), as applicable. Securities in respect of which a Purchase Notice or Change in Control Purchase Notice, as the case may be, has been given by the Holder thereof may not be converted pursuant to Article 10 hereof on or after the date of the delivery of such Purchase Notice or Change in Control Purchase Notice, as the case may be, unless such Purchase Notice or Change in Control Purchase Notice, as the case may be, has first been validly withdrawn as specified in the following two paragraphs. A Purchase Notice or Change in Control Purchase Notice, as the case may be, may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent in accordance with the Purchase Notice or Change in Control Purchase Notice, as the case may be, at any time prior to the close of business on the Business Day prior to the Purchase Date 22 or prior to the close of business on the Change in Control Purchase Date, as the case may be, specifying: (i) the certificate number, if any, of the Security in respect of which such notice of withdrawal is being submitted, (ii) the Principal Amount of the Security with respect to which such notice of withdrawal is being submitted, and (iii) the Principal Amount, if any, of such Security which remains subject to the original Purchase Notice or Change in Control Purchase Notice, as the case may be, and which has been or will be delivered for purchase by the Company. Section 3.11. Deposit of Purchase Price or Change in Control Purchase Price. Prior to 11:00 a.m. (New York City time) on the Business Day following the Purchase Date or the Change in Control Purchase Date, as the case may be, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.04) an amount of money (in immediately available funds if deposited on such Business Day) sufficient to pay the aggregate Purchase Price, together with all accrued and unpaid interest, if any (including contingent interest, if any), thereon, to but not including the Purchase Date or Change in Control Purchase Price, as the case may be, of all the Securities or portions thereof which are to be purchased as of the Purchase Date or Change in Control Purchase Date, as the case may be. Section 3.12. Securities Purchased in Part. Any Certificated Security that is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate Principal Amount equal to, and in exchange for, the portion of the Principal Amount of the Security so surrendered which is not purchased. Section 3.13. Covenant to Comply with Securities Laws upon Purchase of Securities. When complying with the provisions of Sections 3.08 or 3.09 hereof (provided that such offer or purchase constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or purchase), the Company shall (i) comply in all material respects with Rule 13e-4 and Rule 14e-1 under the Exchange Act, (ii) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act, and (iii) otherwise comply in all material respects with all Federal and state securities laws so as to permit the rights and obligations under Sections 3.08 or 3.09 to be exercised in the time and in the manner specified in Sections 3.08 or 3.09. Section 3.14. Repayment to the Company. The Trustee and the Paying Agent shall return to the Company any cash that remains unclaimed as provided in paragraph 11 of the Securities, 23 together with interest or dividends, if any, thereon (subject to the provisions of Section 7.01(f)), held by them for the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, and accrued and unpaid interest, if any (including contingent interest, if any); provided, however, that to the extent that the aggregate amount of cash deposited by the Company pursuant to Section 3.11 exceeds the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of the Securities or portions thereof which the Company is obligated to purchase as of the Purchase Date or Change in Control Purchase Date, as the case may be, and accrued and unpaid interest thereon, if any (including contingent interest, if any), then, unless otherwise agreed in writing with the Company, promptly after the Business Day following the Purchase Date or Change in Control Purchase Date, as the case may be, the Trustee shall return any such excess to the Company together with interest or dividends, if any, thereon (subject to the provisions of Section 7.01(f)). ARTICLE 4 Covenants Section 4.01. Payment of Securities. The Company shall promptly make all payments in respect of the Securities on the dates and in the manner provided in the Securities or pursuant to this Indenture. Any amounts to be given to the Trustee or Paying Agent, as the case may be, shall be deposited with the Trustee or Paying Agent, as the case may be, by 11:00 a.m. (New York City time) by the Company. Interest installments, Principal Amount, Redemption Price, Purchase Price, Change in Control Purchase Price and interest, if any, due on overdue amounts shall be considered paid on the applicable date due if at 11:00 a.m. (New York City time) on such date (or, in the case of a Purchase Price or Change in Control Purchase Price, on the Business Day following the applicable Purchase Date or Change in Control Purchase Date, as the case may be) the Trustee or the Paying Agent, as the case may be, holds, in accordance with this Indenture, money sufficient to pay all such amounts then due. The Company shall, to the extent permitted by law, pay interest on overdue amounts at the rate per annum set forth in paragraph 1 of the Securities, compounded semiannually, which interest shall accrue from the date such overdue amount was originally due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand. The accrual of such interest on overdue amounts shall be in addition to the continued accrual of interest on the Securities. Section 4.02. SEC and Other Reports. The Company shall file with the Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. In the event the Company is at any time no longer subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall continue to provide the Trustee with reports containing substantially the same information as would have been required to be filed with the SEC had the Company continued to have been subject to such reporting requirements. In such event, such reports shall be provided to the Trustee at the times the 24 Company would have been required to provide reports had it continued to have been subject to such reporting requirements. In addition, the Company shall comply with the other provisions of TIA Section 314(a). Section 4.03. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company (beginning with the fiscal year ending on June 30, 2004) an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and if the Company shall be in default, specifying all such Defaults and the nature and status thereof of which they may have knowledge. Section 4.04. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. Section 4.05. Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, The City of New York, an office or agency of the Trustee, Registrar, Paying Agent and Conversion Agent where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer, exchange, purchase, redemption or conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Corporate Trust Office of the Trustee shall initially be such office or agency for all of the aforesaid purposes. The Company shall give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency (other than a change in the location of the office of the Trustee). If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 11.02. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. Section 4.06. Tax Treatment of Securities. The Company and the Holders, by purchasing the Securities, agree that (i) the Securities are contingent payment debt instruments as described in Treasury Regulations Section 1.1275-4(b), (ii) each Holder shall be bound by the Company's application of the Treasury Regulations to the Securities, including the Company's determination of the rate at which interest will be deemed to accrue on the Securities for United States federal income tax purposes will be % compounded semi-annually (the "COMPARABLE YIELD"), which is the rate comparable to the rate at which the Company would borrow on a noncontingent, nonconvertible borrowing with terms and conditions otherwise comparable to the Securities, (iii) each Holder shall use the Comparable Yield and the projected payment schedule with respect to the Securities provided by the Company to the Holder, as provided in Treasury Regulations Section 1.1275-4(b)(4), to determine its interest accruals and adjustments as provided in Treasury Regulations Section 1.1275-4(b)(4)(iv), (iv) each Holder shall treat the delivery of Class A Common Stock or cash (including cash delivered in lieu of a fractional share) to a Holder of a Security upon conversion of such Security as a contingent payment (in an amount equal to the sum of the fair market value of such Class A Common Stock and any cash received) under Treasury Regulations Section 1.1275-4(b) and 25 (v) the Company and each Holder will not take any position on a tax return inconsistent with (i), (ii), (iii) or (iv), unless required by applicable law. ARTICLE 5 Successor Corporation Section 5.01. When the Company May Merge or Transfer Assets. The Company shall not consolidate with or merge with or into any other person or convey, transfer or lease its properties and assets substantially as an entirety to any person, unless: (i) (1) the Company shall be the continuing corporation or (2) the person (if other than the Company) formed by such consolidation or into which the Company is merged or the person which acquires by conveyance, transfer or lease the properties and assets of the Company substantially as an entirety (i) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia, and (ii) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of the Company under the Securities and this Indenture; (ii) immediately after giving effect to such transaction, no Default shall have occurred and be continuing; and (iii) the Company shall have 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 5 and that all conditions precedent herein provided for relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise) of the properties and assets of one or more Subsidiaries (other than to the Company or another Subsidiary), which, if such assets were owned by the Company would constitute all or substantially all of the properties and assets of the Company shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. The successor person formed by such consolidation or into which the Company is merged or the successor person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor had been named as the Company herein; and thereafter, except in the case of a lease and obligations the Company may have under a supplemental indenture pursuant to Section 10.12, the Company shall be discharged from all obligations and covenants under this Indenture and the Securities. Subject to Section 9.06, the Company, the Trustee and the successor person shall enter into a supplemental indenture to evidence the succession and substitution of such successor person and such discharge and release of the Company. 26 ARTICLE 6 Defaults and Remedies Section 6.01. Events of Default. Subject to the provisions set forth below in this Section 6.01, an "EVENT OF DEFAULT" occurs if: (a) the Company defaults in the payment of interest, if any (including contingent interest, if any), payable on any Security when the same becomes due and payable and such Default continues for a period of 30 days after receipt by the Company of a Notice of Default; (b) the Company defaults in the payment of the Principal Amount, Redemption Price, Purchase Price or Change in Control Purchase Price on any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration, when due for purchase by the Company or otherwise; (c) the Company fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in clauses (1) and (2) above) and such failure continues for 60 days after receipt by the Company of a Notice of Default from the Trustee or from Holders of not less than 25% in aggregate principal amount of the then outstanding Securities; (d) the Company fails to pay when due the principal of indebtedness for money borrowed by the Company or its Subsidiaries in excess of $20,000,000, or the acceleration of that indebtedness that is not withdrawn within 15 days after the date of written notice 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 then outstanding Securities; (e) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Company or for any substantial part of its property or ordering the winding up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (f) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Company or for any substantial part of its property or make any general assignment for the benefit of creditors. A Default under clause (a) or (b) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate Principal Amount of the 27 Securities at the time outstanding notify the Company and the Trustee, of the Default and the Company does not cure such Default (and such Default is not waived) within the time specified in clause (c) or (d) above, as applicable, after actual receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "NOTICE OF DEFAULT." The Company shall deliver to the Trustee, within 30 days after it becomes aware of the occurrence thereof, written notice of any event which with the giving of notice or the lapse of time, or both, would become an Event of Default under clause (c) or (d) above, its status and what action the Company is taking or proposes to take with respect thereto. Section 6.02. Defaults and Remedies. If an Event of Default (other than an Event of Default specified in Section 6.01(e) or 6.01(f)) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding by notice to the Company and the Trustee, may declare the Principal Amount of all the Securities plus accrued and unpaid interest, if any (including contingent interest, if any), thereon, through the date of declaration to be immediately due and payable. Upon such a declaration, such Principal Amount plus accrued and unpaid interest, if any (including contingent interest, if any), shall become and be immediately due and payable. If an Event of Default specified in Section 6.01(e)or 6.01(f) occurs and is continuing, the Principal Amount of all the Securities plus accrued and unpaid interest, if any (including contingent interest, if any), thereon, shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholder. The Holders of a majority in principal amount of the Securities then outstanding by notice to the Trustee may rescind an acceleration and its consequences if (a) all Existing Events of Default, other than the nonpayment of the principal of and accrued and unpaid interest, if any (including contingent interest, if any), on the Securities which has become due solely by such declaration of acceleration, have been cured or waived; (b) the Company has paid or deposited with the Trustee a sum sufficient to pay (i) all overdue interest (including contingent interest, if any), on the Securities, (ii) the principal of any Security which has become due otherwise then by such declaration of acceleration, and (iii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration; (c) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction; and (d) all payments due to the Trustee and any predecessor Trustee under Section 7.07 have been made. No such rescission shall affect any subsequent Default or impair any right consequent thereon. Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of the Principal Amount of all the Securities plus all accrued and unpaid interest (including contingent interest, if any), thereon or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if the Trustee does not possess any of the Securities or does not produce any of the Securities in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the 28 Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. Section 6.04. Waiver of Past Defaults. The Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding, by notice in writing to the Trustee (and without notice to any other Securityholder), may waive an existing Default and its consequences, except (a) an Event of Default described in Section 6.01(a)or 6.01(b), (b) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected or (c) a Default which constitutes a failure to convert any Security in accordance with the terms of Article 10. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. This Section 6.04 shall be in lieu of Section 316(a)1(B) of the TIA and such Section 316(a)1(B) is hereby expressly excluded from this Indenture, as permitted by the TIA. Section 6.05. Control by Majority. The Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability unless the Trustee is offered indemnity satisfactory to it. This Section 6.05 shall be in lieu of Section 316(a)1(A) of the TIA and such Section 316(a)1(A) is hereby expressly excluded from this Indenture, as permitted by the TIA. Section 6.06. Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (a) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (b) the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer to the Trustee security or indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of such notice, request and offer of security or indemnity; and (e) the Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding do not give the Trustee a direction inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of any other Securityholder or to obtain a preference or priority over any other Securityholder. 29 Section 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of interest installments (including contingent interest, if any), the Principal Amount, Redemption Price, Purchase Price, Change in Control Purchase Price or interest, if any, due on overdue amounts in respect of the Securities held by such Holder, on or after the respective due dates expressed in the Securities, and to convert the Securities in accordance with Article 10, or to bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, shall not be impaired or affected adversely without the consent of such Holder. Section 6.08. Collection Suit by Trustee. If an Event of Default described in Section 6.01(a) or 6.01(b)occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount owing with respect to the Securities and the amounts provided for in Section 7.07. Section 6.09. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether interest installments (including contingent interest, if any), the Principal Amount, Redemption Price, Purchase Price, Change in Control Purchase Price or interest, if any, due on overdue amounts in respect of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of any such amount) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for any accrued and unpaid interest installments (including contingent interest, if any), the whole amount of the Principal Amount, Redemption Price, Purchase Price, Change in Control Purchase Price or interest, if any, due on overdue amounts in respect of the Securities, and to file such other papers or documents 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 counsel or any other amounts due the Trustee under Section 7.07) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, 30 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 in any such proceeding. Section 6.10. Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to Securityholders for amounts due and unpaid on the Securities for any accrued and unpaid interest installments (including contingent interest, if any), the Principal Amount, Redemption Price, Purchase Price, Change in Control Purchase Price or interest, if any, due on overdue amounts in respect of the Securities, as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on the Securities; and THIRD: the balance, if any, to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. At least 15 days before such record date, the Trustee shall mail to each Securityholder and the Company a notice that states the record date, the payment date and the amount to be paid. Section 6.11. Priorities. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in aggregate Principal Amount of the Securities at the time outstanding. This Section 6.11 shall be in lieu of Section 315(e) of the TIA and such Section 315(e) is hereby expressly excluded from this Indenture, as permitted by the TIA. Section 6.12. Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company from paying all or any portion of any interest installment (including contingent interest, if any), the Principal Amount, Redemption Price, Purchase Price, Change in Control Purchase Price or interest, if any, due on overdue amounts in respect of the securities, as contemplated herein, or which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 31 ARTICLE 7 Trustee Section 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others; and (ii) 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 case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein. This Section 7.01(b) shall be in lieu of Section 3.15(a) of the TIA and such Section 315(a) is hereby expressly excluded from this Indenture, as permitted by the TIA. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. Section 7.01(c)(i), (ii) and (iii) shall be in lieu of Sections 315(d)(1), 315(d)(2) and 315 (d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and 315 (d) (3) are hereby expressly excluded from this Indenture, as permitted by the TIA. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to Section 7.01(a), (b), (c) and (e). 32 (e) The Trustee may refuse to perform any duty or exercise any right or power or expend or risk its own funds or otherwise incur any financial liability unless it receives indemnity satisfactory to it against any loss, liability or expense. (f) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee (acting in any capacity hereunder) shall be under no liability for interest on any money received by it hereunder unless otherwise agreed in writing with the Company. Section 7.02. Rights of Trustee. Subject to its duties and responsibilities under the TIA, (a) the Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) 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 obtain and, in the absence of bad faith or negligence on its part, conclusively rely upon an Officers' Certificate and/or an Opinion of Counsel; (c) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent, attorney, custodian or nominee appointed with due care by it hereunder; (d) The Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith which it reasonably believes to be authorized or within its rights or powers conferred under this Indenture; (e) The Trustee may consult with counsel selected by it and any advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion of such counsel; (f) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby; 33 (g) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Order and any resolution of the Board of Directors be sufficiently evidenced by a Board Resolution; (h) 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, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, during normal business hours, to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation; (i) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture; (j) the rights, privileges, protections, immunities and benefits given to the Trustee, including its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder; and (k) the Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded. Neither the Trustee nor any of its officers, directors, employees or agents shall be liable for any action taken or omitted under this Indenture or in connection therewith except to the extent caused by the Trustee's gross negligence, bad faith or willful misconduct, as determined by the final judgment of a court of competent jurisdiction, no longer subject to appeal or review. Anything in this Indenture to the contrary notwithstanding, in no event shall the Trustee be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but no limited to lost profits), even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. Section 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying 34 Agent, Registrar, Conversion Agent or co-registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. Section 7.04. Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use or application of the proceeds from the Securities, it shall not be responsible for any statement in any registration statement for the Securities under the Securities Act or in any offering document for the Securities, the Indenture or the Securities (other than its certificate of authentication), or the determination as to which beneficial owners are entitled to receive any notices hereunder. Section 7.05. Notice of Defaults. If a Default occurs and if it is known to the Trustee, the Trustee shall give to each Securityholder notice of all current Defaults known to it within 90 days after any such Default occurs or, if later, within 15 days after it is known to the Trustee, unless such Default shall have been cured or waived before the giving of such notice. Notwithstanding the preceding sentence, except in the case of a Default described in Sections 6.01(a) and 6.01(b), the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Securityholders. The second sentence of this Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso is hereby expressly excluded from this Indenture, as permitted by the TIA. Section 7.06. Reports by Trustee to Holders. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such May 15 that complies with TIA Section 313(a), if required by such Section 313(a). The Trustee also shall comply with TIA Section 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each securities exchange, if any, on which the Securities are listed. The Company agrees to notify the Trustee promptly whenever the securities become listed on any Securities exchange and of any delisting thereof. Section 7.07. Compensation and Indemnity. The Company agrees: (a) to pay to the Trustee from time to time, and the Trustee shall be entitled to, such 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 (to the extent permitted by law) by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture or any documents executed in connection herewith (including the reasonable compensation and the expenses, advances and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, bad faith or willful misconduct; and 35 (c) to indemnify the Trustee or any predecessor Trustee and their agents, officers, directors and employees for, and to hold them harmless against, any loss, damage, claim, liability, cost or expense (including attorneys' fees and expenses and taxes (other than taxes based upon, measured by or determined by the income of the Trustee)) incurred without negligence, misconduct or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay interest installments (including contingent interest, if any), the Principal Amount, Redemption Price, Purchase Price, Change in Control Purchase Price or interest, if any, due on overdue amounts, as the case may be, in respect of any particular Securities. The Company's payment obligations pursuant to this Section 7.07 shall survive the discharge of this Indenture or the earlier termination or resignation of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(e) or Section 6.01(f), the expenses, including the reasonable charges and expenses of its counsel, are intended to constitute expenses of administration under any bankruptcy law. Section 7.08. Replacement of Trustee. The Trustee may resign by so notifying the Company; provided, however, that no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.08. The Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding may remove the Trustee by so notifying the Trustee and the Company. The Company shall remove the Trustee if: (a) the Trustee fails to comply with Section 7.10; (b) the Trustee is adjudged bankrupt or insolvent; (c) a receiver or public officer takes charge of the Trustee or its property; or (d) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint, by resolution of its Board of Directors, a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company satisfactory in form and substance to the retiring Trustee and the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. 36 If a successor Trustee does not take office within 30 days after the retiring Trustee gives its notice of resignation or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding may petition any court of competent jurisdiction at the expense of the Company for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Section 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets (including the administration of the trust created by this Indenture) to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. Section 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a)(1). The Trustee (or its parent holding company) shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. Nothing herein contained shall prevent the Trustee from filing with the SEC the application referred to in the penultimate paragraph of TIA Section 310(b). The Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. Section 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 Discharge of Indenture Section 8.01. Discharge of Liability on Securities. When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all outstanding Securities have become due and payable and the Company deposits with the Trustee cash sufficient to pay all amounts due and owing on all outstanding Securities (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 7.07, cease to be of further effect. The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture on demand at the cost and expense of the Company and accompanied by an Officers' Certificate and Opinion of Counsel. Section 8.02. Repayment to the Company. The Trustee and the Paying Agent shall return to the Company upon written request any money held by them for the payment of any amount 37 with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property law. After return to the Company, as applicable, Holders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person and the Trustee and the Paying Agent shall have no further liability to the Securityholders with respect to such money or securities for that period commencing after the return thereof. ARTICLE 9 Amendments Section 9.01. Without Consent of Holders. The Company and the Trustee may amend or supplement this Indenture or the Securities without notice to or consent of any Securityholder: (a) to comply with Article 5 or Section 10.12; (b) to cure any ambiguity, omission, defect or inconsistency, or to make any other change that does not adversely affect the rights of any Securityholder; (c) to make provisions with respect to the conversion right of the Holders pursuant to the requirements of Section 10.12 and Section 10.01; (d) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities; or (e) to comply with the provisions of the TIA, or with any requirement of the SEC arising as a result of the qualification of this Indenture under the TIA. Section 9.02. With Consent of Holders. The Company and the Trustee may amend or supplement this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. The Holders of a majority in aggregate principal amount of the Securities then outstanding may waive compliance by the Company with restrictive provisions of this Indenture other than as set forth in this Section 9.02 below, and waive any past Default under this Indenture and its consequences, except a Default in the payment of the principal of or interest on any Security or in respect of a provision which under this Indenture cannot be modified or amended without the consent of the Holder of each outstanding Security affected. Subject to Section 9.04, without the written consent of each Securityholder affected, however, an amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may not: (a) change the Stated Maturity of the principal of, or any payment date of any installment of interest (including contingent interest, if any), on, any Security; 38 (b) reduce the principal amount of, or the rate of interest (including contingent interest, if any), on, any Security, whether upon acceleration, redemption or otherwise, or alter the manner of calculation of interest or the rate of accrual thereof on any Security; (c) change the currency for payment of principal of, or interest (including contingent interest, if any) on any Security; (d) impair the right to institute suit for the enforcement of any payment of principal of, or interest (including contingent interest, if any) on, any Security when due; (e) adversely affect the conversion rights provided in Article 10; (f) modify the provisions of this Indenture requiring the Company to make an offer to repurchase Securities upon a Change in Control or to repurchase the Securities at the option of the Holders pursuant to Section 3.08 in any case in a manner adverse to the Holders of the Securities; (g) reduce the percentage of principal amount of the outstanding Securities necessary to modify or amend this Indenture or to consent to any waiver provided for in this Indenture; (h) waive a Default in the payment of the principal amount of, or interest (including contingent interest, if any) on, any Security (except as provided in Section 6.02); or (i) make any changes in Section 6.04, Section 6.07 or this paragraph. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section 9.02 becomes effective, the Company shall mail to each Holder a notice briefly describing the amendment. Failure to mail the notice or a defect in the notice shall not effect the validity of the amendment. Section 9.03. Compliance with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall comply with the TIA. Section 9.04. Revocation and Effect of Consents. Until an amendment, waiver or other action by Holders becomes effective, a consent thereto by a Holder of a Security hereunder is a continuing consent by the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same obligation as the consenting Holder's Security, even if notation of the consent, waiver or action is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment, waiver or action becomes effective. After an amendment, waiver or action becomes effective, it shall bind every Securityholder. 39 Section 9.05. Notation on or Exchange of Securities. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article 9 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 Trustee and the Board of Directors of the Company, 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 9.06. Trustee to Sign Supplemental Indentures. The Trustee shall sign any supplemental indenture authorized pursuant to this Article 9 if the amendment contained therein does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign such supplemental indenture. In signing such supplemental indenture the Trustee shall receive, and (subject to the provisions of Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. Section 9.07. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article 9, 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 shall be bound thereby. ARTICLE 10 Conversions Section 10.01. Conversion Privilege. Subject to the provisions of this Article 10, a Holder of a Security may convert such Security into Class A Common Stock (the shares of Class A Common Stock issuable upon such conversion, the "CONVERSION SHARES"), at the Conversion Price (as defined below) then in effect, together with those rights, warrants or options specified in Section 10.06(g) hereof, to the extent applicable, if any of the following conditions is satisfied: (a) during any calendar quarter (the "QUARTER") commencing after September 30, 2003, if the Closing Price (as defined hereinafter) per share of Class A Common Stock for at least 20 Trading Days in the period of 30 consecutive Trading Days ending on the last Trading Day of the preceding Quarter is more than 120% of the Conversion Price on such 30th Trading Day; (b) the Security has been called for redemption by the Company pursuant to Section 3.01; (c) the conversion of such Security occurs during the five Trading Day period immediately following a period of nine consecutive Trading Days in which the Security Trading Price (as determined following a request by a Holder of the Securities in accordance with the procedures set forth below in this Section 10.01) for each Trading Day in such period was less than 95% of the product of the Closing Price per share of Class A Common Stock on such Trading Day 40 multiplied by the number of shares of Class A Common Stock issuable (assuming satisfaction of conditions to conversion) upon conversion of $1,000 in principal amount of the Securities (the condition specified in this clause (e) being the "95% TRADING CONDITION"); (d) (i) an issuance of rights, warrants or options referred to in Section 10.06(b) occurs or (ii) a distribution referred to in Section 10.06(c) occurs where the fair market value of such distribution per share of Class A Common Stock (as determined by the Board of Directors of the Company, which determination shall be conclusive evidence of such fair market value) exceeds 10% of the Closing Price per share of Class A Common Stock on the Trading Day immediately preceding the date of declaration of such distribution; or (e) (x) the Company is party to a consolidation, merger, share exchange, sale of all or substantially all of its assets or other similar transaction pursuant to which the Class A Common Stock is subject to conversion into shares of stock, other securities or property (including cash) pursuant to Section 10.12 and (y) the conversion of such Security occurs at any time from and after the date that is 15 days prior to the date of the anticipated effective time of such transaction until and including the date that is 15 days after the actual effective date of such transaction. In the case of the foregoing clause (a), at the end of each Quarter, the Conversion Agent will determine on behalf of the Company whether the Securities are convertible pursuant to the terms described therein. In the case of the foregoing clauses (d)(i) and (ii), the Company must notify the Holders at least 20 days prior to the ex-dividend date for such issuance or distribution. Once the Company has given such notice, Holders may surrender their Securities for conversion at any time thereafter until the earlier of the close of business on the Business Day prior to the ex-dividend date or the Company's announcement that such issuance or distribution will not take place. This provision shall not apply if the Holder of a Security otherwise participates in the distribution without conversion. The "EX-DIVIDEND DATE" for any such issuance or distribution means the date immediately prior to the commencement of "ex-dividend" trading for such issuance or distribution on The New York Stock Exchange or such other national securities exchange or The Nasdaq Stock Market or similar system of automated dissemination of quotations of securities prices on which the Class A Common Stock is then listed or quoted. The number of shares of Class A Common Stock issuable upon conversion of a Security shall be determined by dividing the principal amount of the Security or portion thereof surrendered for conversion by the Conversion Price in effect on the Conversion Date. The initial Conversion Price is set forth in paragraph 8 of the Securities and is subject to adjustment as provided in this Article 10. 41 A Holder may convert a portion of a Security equal to $1,000 or any integral multiple thereof. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security. If a Security is called for redemption pursuant to Article 3, the right to convert such Security shall terminate at the close of business on the second Business Day before the redemption date for such Security (unless the Company shall default in making the redemption payment then due, in which case the conversion right shall terminate on the date such Default is cured and such Security is redeemed). A Security in respect of which a Holder has delivered a Purchase Notice pursuant to Section 3.08 or a Change in Control Purchase Notice pursuant to Section 3.09 exercising the option of such Holder to require the Company to repurchase such Security may be converted only if such Purchase Notice or Change in Control Purchase Notice, as the case may be, is withdrawn by a written notice of withdrawal delivered to the Paying Agent prior to the close of business on the Business Day prior to the Purchase Date or prior to the close of business on the Change in Control Purchase Date, as the case may be, in accordance with Section 3.10. A Holder of Securities is not entitled to any rights of a holder of Class A Common Stock until such Holder has converted its Securities into Class A Common Stock and, upon such conversion, only to the extent such Securities are deemed to have been converted into Class A Common Stock pursuant to this Article 10. The "SECURITY TRADING PRICE" per $1,000 in principal amount of Securities on any date of determination means the average of the secondary market bid quotations per $1,000 in principal amount of Securities obtained by the Conversion Agent for $5,000,000 in principal amount of Securities at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers selected by the Company; provided that if at least three such bids cannot reasonably be obtained by the Conversion Agent, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Conversion Agent, such one bid shall be used. If the Conversion Agent cannot reasonably obtain at least one bid for $5,000,000 in principal amount of Securities from a nationally recognized securities dealer or, in the reasonable judgment of the Company, the bid quotations are not indicative of the secondary market value of the Securities, then the Security Trading Price will be determined in good faith by the calculation agent (which shall initially be the Trustee unless the Trustee shall have appointed a calculation agent, which may be any investment bank with a national or international reputation with experience in such matters, including the Initial Purchaser or its successors) taking into account in such determination such factors as it, in its sole discretion after consultation with the Company, deems appropriate. Other than in connection with a determination of whether contingent interest shall be payable, the Conversion Agent shall have no obligation to determine the Security Trading Price unless the Company has requested such determination; and the Company shall have no obligation to make such request unless a Holder of the Securities provides the Company with reasonable evidence that the Security Trading Price would be less than 95% of the product of the Closing Price per share of the Class A Common Stock and the number of shares of Class A Common Stock issuable upon conversion of $1,000 in principal amount of Securities (assuming satisfaction of conditions to such conversion); at which time the Company shall instruct the Conversion Agent to determine the Security Trading Price beginning on the next Trading Day 42 and on each successive Trading Day until the Security Trading Price is greater than or equal to 95% of the product of the Closing Price per share of Class A Common Stock and the number of shares of Class A Common Stock issuable upon conversion of $1,000 in principal amount of Securities (assuming satisfaction of conditions to such conversion). Section 10.02. Conversion Procedure. To convert a Security, a Holder must satisfy the requirements in paragraph 8 of the Securities and (i) complete and manually sign the conversion notice on the back of the Security and deliver such notice to the Conversion Agent, (ii) surrender the Security to the Conversion Agent, (iii) furnish appropriate endorsements and transfer documents if required by the Registrar or the Conversion Agent, (iv) pay any transfer or other tax, if required by Section 10.04 and (v) if the Security is held in book-entry form, complete and deliver to the Depositary appropriate instructions pursuant to the Depositary's book-entry conversion programs. The date on which the Holder satisfies all of the foregoing requirements is the "CONVERSION DATE". As soon as practicable after the Conversion Date, the Company shall deliver to the Holder through the Conversion Agent either (i) a certificate for or (ii) a book-entry notation of the number of whole shares of Class A Common Stock issuable upon the conversion and cash in lieu of any fractional shares pursuant to Section 10.05; provided, however, that in the event of a Principal Value Conversion referred to below in this Section 10.02, the Company shall deliver to the Holder through the Conversion Agent such cash and/or Class A Common Stock as shall be specified in the Principal Value Conversion Notice pertaining to such Principal Value Conversion. The person in whose name the certificate is registered shall be deemed to be a stockholder of record on the Conversion Date; provided, however, that no surrender of a Security on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Class A Common Stock upon such conversion as the record holder or holders of such shares of Class A Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Class A Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; provided, further, that such conversion shall be at the Conversion Price in effect on the date that such Security shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. Upon conversion of a Security, such person shall no longer be a Holder of such Security. No payment or adjustment will be made for accrued interest, if any (including contingent interest, if any), on a converted Security or for dividends or distributions on shares of Class A Common Stock issued upon conversion of a Security, but if any Holder surrenders a Security for conversion between the record date for the payment of an installment of interest and the next interest payment date, then, notwithstanding such conversion, the interest (including contingent interest, if any) payable on such interest payment date shall be paid to the Holder of such Security on such record date. In such event, such Security, when surrendered for conversion, must be accompanied by delivery of a check payable to the Conversion Agent in an amount equal to the interest (including contingent interest, if any) payable on such interest payment date on the portion so converted. If such payment does not accompany such Security, the Security shall not be converted; provided, however, that no such check shall be required if such Security has been called for redemption on a redemption date within the period between and including 43 such record date and such interest payment date, or if such Security is surrendered for conversion on the interest payment date. If the Company defaults in the payment of interest (including contingent interest, if any) payable on the interest payment date, the Conversion Agent shall repay such funds to the Holder. If a Holder converts more than one Security at the same time, the number of shares of Class A Common Stock issuable upon the conversion shall be based on the aggregate principal amount of Securities converted. Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security equal in principal amount to the unconverted portion of the Security surrendered. If on the date of conversion of a Security pursuant to the 95% Trading Condition the Closing Price per share of Class A Common Stock is greater than the Conversion Price, the Company will pay to the Holder of such Security, in lieu of issuance of Conversion Shares based on the Conversion Price, cash or Class A Common Stock or a combination of cash and Class A Common Stock, at the Company's option, with a value equal to the principal amount of the Security surrendered for conversion as of such Conversion Date (a "PRINCIPAL VALUE CONVERSION"). The Company shall notify the surrendering Holder of any Security whose conversion is a Principal Value Conversion and the Trustee (such notice being a "PRINCIPAL VALUE CONVERSION NOTICE") of such Principal Value Conversion by the second Trading Day following the Conversion Date for such conversion whether the Company shall pay to such Holder all or a portion of the principal amount of such Security in cash, Class A Common Stock or a combination of cash and Class A Common Stock and, if a combination, the percentages of the principal amount in respect of which it will pay in cash or Class A Common Stock. The Company may not change its election with respect to the consideration (or components or percentages of components thereof) to be paid upon a Principal Value Conversion once the Company has given its Principal Value Conversion Notice to the Holder surrendering such Security whose conversion is a Principal Value Conversion. Any Class A Common Stock to be delivered upon a Principal Value Conversion shall be valued at the greater of (x) the Conversion Price on the Conversion Date for such conversion and (y) the Closing Price per share of Class A Common Stock on the third Trading Day after such Conversion Date. The Company shall pay any portion of the principal amount to be paid in cash in a Principal Value Conversion on the third Trading Day after the Conversion Date for such conversion. With respect to any portion of the principal amount to be paid in Class A Common Stock in a Principal Value Conversion, the Company shall deliver the Class A Common Stock to the Holder of the Security surrendered for conversion in such Principal Value Conversion on the fourth Trading Day following the Conversion Date for such conversion. Section 10.03. Adjustments Below Par Value. Before taking any action which would cause an adjustment decreasing the Conversion Price so that the shares of Class A Common Stock issuable upon conversion of the Securities would be issued for less than the par value of such Class A Common Stock, the Company will take all corporate action which may be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of such Class A Common Stock at such adjusted Conversion Price. 44 Section 10.04. Taxes on Conversion. If a Holder converts a Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Class A Common Stock upon such conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder's name. The Conversion Agent may refuse to deliver the certificates representing the Class A Common Stock being issued in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulations. Section 10.05. Company to Provide Stock. The Company shall, prior to issuance of any Securities hereunder, and from time to time as may be necessary, reserve, out of its authorized but unissued Class A Common Stock a sufficient number of shares of Class A Common Stock to permit the conversion of all outstanding Securities for shares of Class A Common Stock. No fractional shares of Class A Common Stock shall be issued upon conversion of Securities. If more than one Security shall be surrendered for conversion at one time by the same holder, the number of full shares which shall be issuable upon conversion shall be computed on the basis of the aggregate principal amount of the Securities (or specified portions thereof to the extent permitted hereby) so surrendered. If any fractional share of Class A Common Stock would be issuable upon the conversion of any Security or Securities, the Company shall make an adjustment thereof in cash at the current market value thereof. For these purposes, the current market value of a share of Class A Common Stock shall be the Closing Price per share of Class A Common Stock on the first Business Day immediately preceding the day on which the Securities (or specified portions thereof) are deemed to have been converted. The Company covenants that all shares of Class A Common Stock delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly authorized, validly issued, fully paid and non-assessable and shall be free from preemptive rights and free of any lien or adverse claim. The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Class A Common Stock upon conversion of Securities, if any, and will list or cause to have quoted such shares of Class A Common Stock on each national securities exchange or in the over-the-counter market or such other market on which the Class A Common Stock is then listed or quoted. Section 10.06. Adjustment of Conversion Price. The conversion price (the "CONVERSION PRICE") shall be that price set forth in paragraph 8 of the form of Security attached hereto as Exhibit A-1 and shall be adjusted from time to time by the Company as follows: (a) In case the Company shall (i) pay a dividend or other distribution in shares of Class A Common Stock or other Capital Stock to all holders of Common Stock, (ii) subdivide its outstanding Common Stock into a greater number of shares, (iii) combine its outstanding Common Stock into a smaller number of shares or 45 (iv) reclassify its outstanding Common Stock, the Conversion Price in effect immediately prior thereto shall be adjusted so that the Holder of any Security thereafter surrendered for conversion shall be entitled to receive the number of shares of Capital Stock which it would have owned or have been entitled to receive had such Security been converted immediately prior to the happening of such event. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of subdivision, combination or reclassification. (b) In case the Company shall issue to all holders of its Class A Common Stock, rights, warrants or options entitling such holders (for a period commencing no earlier than the record date described below and expiring not more than 60 days after such record date) to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price per share less than the current market price per share of Common Stock (as defined in subsection (f) below) at the record date for the determination of stockholders entitled to receive such rights, warrants or options, the Conversion Price in effect immediately prior thereto shall be adjusted so that the Conversion Price shall equal the price determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date, plus the number of shares which the aggregate subscription or purchase price for the total number of shares of Common Stock offered by the rights, warrants or options so issued (or the aggregate conversion price of the convertible securities offered by such rights, warrants or options) would purchase at such current market price, and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered by such rights, warrants or options (or into which the convertible securities so offered by such rights, warrants or options are convertible). Such adjustment shall be made successively whenever any such rights, warrants or options are issued, and shall become effective immediately after such record date. If at the end of the period during which such rights, warrants or options are exercisable not all rights, warrants or options shall have been exercised, the adjusted Conversion Price shall be immediately readjusted to what it would have been upon application of the foregoing adjustment substituting the number of additional shares of Common Stock actually issued (or the number of shares of Common Stock issuable upon conversion of convertible securities actually issued) for the total number of shares of Common Stock offered (or the convertible securities offered). (c) In case the Company shall distribute to all holders of its Class A Common Stock any shares of Capital Stock of the Company (other than Common Stock) or evidences of its indebtedness, cash, other securities or other assets, or shall distribute to all holders of its Class A Common Stock, rights, warrants or options to subscribe for or purchase any of its securities (excluding (i) rights, 46 options and warrants referred to in Section 10.06(b) above; (ii) those dividends, distributions, subdivisions and combinations referred to in Section 10.06(a) above; and (iii) dividends and distributions paid in cash referred to in subsection (f) below), then in each such case the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of such distribution by a fraction, the numerator of which shall be the current market price per share (as defined in subsection (f) below) of the Common Stock on the record date mentioned below less the fair market value on such record date (as determined by the Board of Directors of the Company, whose determination shall be conclusive evidence of such fair market value) of the portion of the Capital Stock or evidences of indebtedness, securities or assets so distributed or of such rights, warrants or options, in each case as applicable, to one share of Common Stock, and the denominator of which shall be the current market price per share (as defined in subsection (f) below) of the Common Stock on such record date. Such adjustment shall become effective immediately after the record date for the determination of stockholders entitled to receive such distribution. (d) In case the Company shall, by dividend or otherwise, distribute cash to all or substantially all of the holders of its Class A Common Stock (an "EXTRAORDINARY CASH DIVIDEND") (excluding any quarterly cash dividend or distribution on the Class A Common Stock to the extent the aggregate cash dividends or distributions per share of Class A Common Stock in any twelve month period) does not exceed (A) on or prior to June 11, 2008, $0.05 per issued and outstanding share of Class A Common Stock per fiscal quarter (subject to appropriate adjustment to give effect to any subdivisions, combinations, stock dividends and stock splits), and (B) after June 11, 2008, together with any and all other cash distributions and consideration payable in respect of any tender or exchange offer by the Company or any of its Subsidiaries for shares of Class A Common Stock made within the preceding twelve months, 5% of the Market Capitalization (as defined in subsection (f) below) of the Company immediately prior to the date of declaration of such distribution, in such case, the Conversion Price shall be adjusted so that the same shall equal the price determined by dividing the Conversion Price in effect immediately prior to the close of business on such date of declaration by a fraction, (i) the numerator of which shall be the current market price per share (as defined in subsection (f) below) of the Class A Common Stock on the date of declaration of such distribution less the amount of cash so distributed (and not excluded as provided above) applicable to one share of Class A Common Stock, and (ii) the denominator of which shall be such current market price per share (as defined in subsection (f) below) of the Class A Common Stock, such adjustment to be effective immediately prior to the opening of business on the day following the date of declaration of such distribution; provided, 47 however, that in the event the portion of the cash so distributed applicable to one share of Class A Common Stock is equal to or greater than the current market price per share (as defined in subsection (f) below) of the Class A Common Stock on the date of declaration of such distribution, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive upon conversion the amount of cash such holder would have received had such holder converted each Security on the date of declaration of such distribution. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price that would then be in effect if such dividend or distribution had not been declared. If any adjustment is required to be made as set forth in this Section 10.06(d) as a result of a distribution that is a quarterly dividend, such adjustment shall be based upon the amount by which such distribution exceeds the amount of the quarterly cash dividend permitted to be excluded pursuant hereto. If an adjustment is required to be made as set forth in this Section 10.06(d) above as a result of a distribution that is not a quarterly dividend, such adjustment shall be based upon the full amount of the distribution. (e) In case the Company or any of its Subsidiaries shall complete a repurchase (including by way of a tender offer) of shares of Common Stock, and the fair market value of the sum of (i) the aggregate consideration paid for such Common Stock, (ii) the aggregate amount of any cash dividends paid within the twelve (12) months preceding the date of purchase of such shares of Common Stock in respect of which no adjustment pursuant to this Section 10.06 previously has been made, and (iii) the aggregate fair market value of any amounts previously paid for the repurchase of Common Stock of a type described in this paragraph (e) within the twelve (12) months preceding the date of purchase of such shares of Common Stock in respect of which no adjustment pursuant to this Section 10.06 previously has been made, exceeds 5% of Market Capitalization (as defined in Section 10.06(f) below) on the date of, and after giving effect to, such repurchase, then the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of such purchase by a fraction, the numerator of which shall be the current market price per share (as defined in subsection (f) below) of the Class A Common Stock on the date of such repurchase, less the quotient obtained by dividing the Aggregate Market Premium involved in such repurchase (as defined hereinafter) by the difference between the number of shares of Common Stock outstanding before such repurchase and the number of shares of Common Stock the subject of such repurchase, and the denominator of which shall be the current market price per share (as defined in subsection (f) below) of the Common Stock on the date of such repurchase. Such adjustment shall become effective immediately after the date of such repurchase. For purposes of this subsection (e), the "AGGREGATE MARKET PREMIUM" is the excess, if any, of the aggregate repurchase price paid for all such Common Stock over the aggregate current market value per share (as defined in subsection (f) below) of all such repurchased stock, determined 48 with respect to each share involved in each such repurchase as of the date of repurchase with respect to such share. (f) In case someone other than the Company or one of its subsidiaries makes a payment in respect of a tender offer or exchange offer for shares of Class A Common Stock in which, as of the closing date of the offer, the Company's board of directors is not recommending rejection of the offer, the Conversion Price will be adjusted as provided in subsection (e) above. The adjustment referred to in this clause will only be made if: (i) the tender offer or exchange offer is for an amount that increases the offeror's ownership of common stock to more than 25% of the total shares of the Company's Common Stock outstanding; and (ii) cash and value of any other consideration included in the payment per share of Common Stock exceeds the current market price per share of Common Stock on the next Business Day succeeding the last date on which tenders or exchanges may be made pursuant to the tender or exchange offer. However, the adjustment referred to in this subsection (f) will not be made if as of the closing of the offer, the offering documents disclose a plan or an intention to cause the Company to engage in a consolidation or merger of the Company or a sale of all or substantially all of the Company's assets. For the purpose of any computation under Section 10.06(b), (c), (d), and (e) above and this Section 10.06(f), the "CURRENT MARKET PRICE PER SHARE" of Common Stock on any date shall be deemed to be the average of the Closing Prices per share of Class A Common Stock for 20 consecutive Trading Days commencing 30 Trading Days before the record date with respect to any distribution, issuance or other event requiring such computation. The "CLOSING PRICE" with respect to the Class A Common Stock for any day shall mean the closing sale price, regular way, per share of Class A Common Stock on such day or, in case no such sale of Class A Common Stock takes place on such day, the average of the reported closing bid and asked prices, regular way, per share of Class A Common Stock in each case on the New York Stock Exchange, the Nasdaq Stock Market or principal national security exchange or other quotation system on which the Class A Common Stock is quoted or listed or admitted to trading on such day, or, if the Class A Common Stock is not so quoted or listed or admitted to trading on any national securities exchange or quotation system, the average of the closing bid and asked prices per share of Class A 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 such average is not so available, determined 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 not so determinable as provided under any applicable alternative above, a price per share of Class A Common Stock determined in good faith by the Board of Directors or, to the extent 49 permitted by applicable law, a duly authorized committee thereof, whose determination shall be conclusive. "MARKET CAPITALIZATION" means, as of any date of calculation, the Closing Price of the Class A Common Stock on the Trading Day immediately prior to such date of calculation multiplied by the aggregate number of shares of Class A Common Stock and Class B Common Stock outstanding on the Trading Day immediately prior to such date of calculation. (g) If the rights provided for in the Company's rights agreement dated as of August 17, 1995, as amended, (the "STOCKHOLDER RIGHTS PLAN") have separated from the Company's Class A Common Stock in accordance with the provisions of the Stockholder Rights Plan so that the Holders of the Securities would not be entitled to receive any rights in respect of Class A Common Stock issuable upon conversion of the Securities, the Conversion Price will be adjusted as provided in paragraph (c) above, subject to readjustment in the event of the expiration, termination or redemption of the rights. In lieu of any such adjustment, the Company may amend its Stockholder Rights Plan to provide that upon conversion of the Securities the Holders will receive, in addition to Class A Common Stock issuable upon such conversion, the rights which would have attached to such shares of Class A Common Stock if the rights had not become separated from the Class A Common Stock under the Company's Stockholder Rights Plan. To the extent that the Company adopts any future rights plan, upon conversion of the Securities into Class A Common Stock, Securityholders will receive, in addition to Class A Common Stock, the rights under the future rights plan whether or not the rights have separated from the Class A Common Stock at the time of conversion and no adjustment to the Conversion Price will be made in accordance with paragraph (c). In any case in which this Section 10.06 shall require that an adjustment be made immediately following a record date established for purposes of Section 10.06, the Company may elect to defer (but only until five Business Days following the filing by the Company with the Trustee of the certificate described in Section 10.06) issuing to the holder of any Security converted after such record date the shares of Class A Common Stock and other Capital Stock of the Company issuable upon such conversion over and above the shares of Class A Common Stock and other Capital Stock of the Company issuable upon such conversion only on the basis of the Conversion Price prior to adjustment; and, in lieu of the shares the issuance of which is so deferred, the Company shall issue or cause its transfer agents to issue due bills or other appropriate evidence of the right to receive such shares. If after an adjustment a Holder of a Security upon conversion of such Security may receive shares of two or more classes of Capital Stock of the Company, the Conversion Price shall thereafter be subject to adjustment upon the occurrence of an action taken with respect to any such class of Capital Stock as is contemplated by this Article 10 with respect to the Class A Common Stock, on terms comparable to those applicable to Class A Common Stock in this Article 10. Section 10.07. No Adjustment. No adjustment in the Conversion Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Conversion 50 Price as last adjusted; provided, however, that any adjustments which by reason of this Section 10.07 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 10 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment need be made for a transaction referred to in Section 10.06 if Holders are to participate in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Class A Common Stock participate in the transaction. Such participation by Holders may include participation upon conversion; provided that an adjustment shall be made at such time as the Holders are no longer entitled to participate. No adjustment need be made for rights to purchase Class A Common Stock or issuances of Class A Common Stock pursuant to a Company plan for reinvestment of dividends or interest payable on the Company's securities and the investment of any additional optional amounts of shares of Class A Common Stock under any Company sponsored plan. No adjustment need be made for a change in the par value or a change to no par value of the Class A Common Stock. No adjustment need be made upon the issuance of any shares of Class A Common Stock or options or rights to purchase those shares pursuant to any present or future Company employee, director or consultant benefit plan or program. No adjustment need be made upon the issuance of any shares of Class A Common Stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of the date the Securities were first issued. To the extent that the Securities become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. Section 10.08. Equivalent Adjustments. In the event that, as a result of an adjustment made pursuant to Section 10.06 above, the holder of any Security thereafter surrendered for conversion shall become entitled to receive any shares of Capital Stock of the Company other than shares of its Class A Common Stock, thereafter the Conversion Price of such other shares so receivable upon conversion of any Securities shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Class A Common Stock contained in this Article 10. Section 10.09. Adjustment for Tax Purposes. The Company shall be entitled to make such reductions in the Conversion Price, in addition to those required by Section 10.06, as it in its discretion shall determine to be advisable in order that any stock dividends, subdivision of shares, distribution of rights to purchase stock or securities, or a distribution or securities convertible into or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable. Section 10.10. Notice of Adjustment. Whenever the Conversion Price is adjusted, or Securityholders become entitled to other securities or due bills, the Company shall promptly mail 51 to Securityholders a notice of the adjustment and file with the Trustee an Officers' Certificate briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence of the correctness of such adjustment and the Trustee may conclusively assume that, unless and until such certificate is received by it, no such adjustment is required. Section 10.11. Notice of Certain Transactions. In case: (a) the Company shall declare a dividend (or any other distribution) on its Class A Common Stock (other than in cash out of retained earnings); or (b) the Company shall authorize the granting to the holders of its Class A Common Stock of rights, warrants or options to subscribe for or purchase any share of any class or any other rights, warrants or options; or (c) of any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value, or a conversion or reclassification of its Class B Common Stock solely into Class A Common Stock), 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 sale or transfer 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; the Company shall cause to be filed with the Trustee and the Conversion Agent and to be mailed to each Holder of Securities at its address appearing on the list provided for in Section 2.05, as promptly as possible but in any event at least ten days prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights, warrants or options, or, if a record is not to be taken, the date as of which the holders of Class A Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Class A Common Stock of record shall be entitled to exchange their Class A Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding-up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reclassification, consolidation, merger, sale, share exchange, transfer, dissolution, liquidation or winding-up. Section 10.12. Effect of Reclassification, Consolidation, Merger, Share Exchange or Sale on Conversion Privilege. If any of the following shall occur, namely: (i) any reclassification or change of outstanding shares of Common Stock (other than a change in par value, or from par value to no 52 par value, or from no par value to par value, or as a result of a subdivision or combination, or a conversion or reclassification of its Class B Common Stock solely into Class A Common Stock); (ii) any consolidation, combination, merger or share exchange to which the Company is a party other than a merger in which the Company is the continuing corporation and which does not result in any reclassification of, or change (other than a change in name, or par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination, or a conversion or reclassification of its Class B Common Stock solely into Class A Common Stock) in, outstanding shares of Class A Common Stock; or (iii) any sale or conveyance of all or substantially all of the assets of the Company, then the Company, or such successor or purchasing corporation, as the case may be, shall, as a condition precedent to such reclassification, change, consolidation, merger, share exchange, sale or conveyance, execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then outstanding shall have the right to convert such Security into the kind and amount of shares of Capital Stock and other securities and property (including cash) receivable upon such reclassification, change, consolidation, merger, share exchange, sale or conveyance by a holder of the number of shares of Class A Common Stock deliverable upon conversion of such Security immediately prior to such reclassification, change, consolidation, merger, share exchange, sale or conveyance. Such supplemental indenture shall provide for adjustments of the Conversion Price which shall be as nearly equivalent as may be practicable to the adjustments of the Conversion Price provided for in this Article 10. If, in the case of any such consolidation, merger, share exchange, sale or conveyance, the stock or other securities and property (including cash) receivable thereupon by a holder of Class A Common Stock includes shares of Capital Stock or other securities and property of a corporation other than the successor or purchasing corporation, as the case may be, in such consolidation, merger, share exchange, sale or conveyance, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Holders of the Securities as the Board of Directors of the Company shall reasonably consider necessary by reason of the foregoing. The provision of this Section 10.12 shall similarly apply to successive consolidations, mergers, share exchanges, sales or conveyances. Notwithstanding the foregoing, a distribution by the Company to all or substantially all holders of its Class A Common Stock for which an adjustment to the Conversion Price or provision for conversion of the Securities may be made pursuant to Section 10.06 shall not be deemed to be a sale or conveyance of all or substantially all of the assets of the Company for purposes of this Section 10.12. In the event the Company shall execute a supplemental indenture pursuant to this Section 10.12, the Company shall promptly file with the Trustee an Opinion of Counsel stating that such supplemental indenture is authorized or permitted by this Indenture and an Officers' Certificate briefly stating the reasons therefor, the kind or amount of shares of stock or securities or property (including cash) receivable by Holders of the Securities upon the conversion of their Securities after any such reclassification, change, consolidation, merger, share exchange, sale or conveyance, any adjustment to be made with respect thereto and that all conditions precedent have been complied with. Section 10.13. Trustee's Disclaimer. The Trustee has no duty to determine when an adjustment under this Article 10 should be made, how it should be made or what such adjustment should be made, but may accept as 53 conclusive evidence of the correctness of any such adjustment, and shall be protected in relying upon, the Officers' Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 10.10. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities, and the Trustee shall not be responsible for the Company's failure to comply with any provisions of this Article 10. Each Conversion Agent (other than the Company or an Affiliate of the Company) shall have the same protection under this Section 10.13 as the Trustee. The Trustee shall not be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture executed pursuant to Section 10.12, but may accept as conclusive evidence of the correctness thereof, and shall be protected in relying upon, the Officers' Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 10.12. Section 10.14. Voluntary Reduction. The Company from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least 20 Trading Days or such longer period as may be required by law and if the reduction is irrevocable during the period; provided that in no event may the Conversion Price be less than the par value of a share of Class A Common Stock. Section 10.15. Simultaneous Adjustments. In the event that this Article 10 requires adjustments to the Conversion Price under more than one of Sections 10.06(c), (d), (e) and (f), and the record dates for the distributions giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of Section 10.06(d), (e) or (f), as applicable, and, second, the provisions of Section 10.06(c). If more than one event requiring adjustment pursuant to Section 10.06 shall occur before completing the determination of the Conversion Price for the first event requiring such adjustment, then the Board of Directors (whose determination shall, if made in good faith, be conclusive) shall make such adjustments to the Conversion Price (and the calculation thereof) after giving effect to all such events as shall preserve for Securityholders the Conversion Price protection provided in Section 10.06. ARTICLE 11 Miscellaneous Section 11.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. Section 11.02. Notices. 54 Any request, demand, authorization, notice, waiver, consent or communication shall be in writing and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows, or transmitted by facsimile transmission (confirmed orally) to the following facsimile numbers: if to the Company, to: Medicis Pharmaceutical Corporation 8125 North Hayden Road Scottsdale, Arizona 85258-2463 Attention: Chief Financial Officer Facsimile No.: (602) 808-3888 in either case, with a copy to: Akin Gump Strauss Hauer & Feld LLP 590 Madison Avenue New York, New York 10022 Attention Stephen E. Older, Esq. Facsimile No.: (212) 872-1002 if to the Trustee, to: Deutsche Bank Trust Company Americas 60 Wall Street, 27th Floor New York, NY 10005 Attention: Corporate Trust and Agency Services Facsimile No.: (212) 797-8614 The Company or the Trustee by notice given to the other in the manner provided above may designate additional or different addresses for subsequent notices or communications. Any notice or communication given to a Securityholder shall be mailed to the Securityholder, by first-class mail, postage prepaid, at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. If the Company mails a notice or communication to the Securityholders, it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion Agent or co-registrar. Section 11.03. Communication by Holders with Other Holders. 55 Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar, the Paying Agent, the Conversion Agent and anyone else shall have the protection of TIA Section 312(c). Section 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. 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 mattes 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 eligible and qualified 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 case should know, that the certificate or opinion or representations with respect to the matters upon which his or her 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 stating the information on which counsel is relying 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 11.05. Statements Required in Certificate or Opinion. Each Officers' Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include: (a) a statement that each person making such Officers' Certificate or Opinion of Counsel has read such covenant or condition; 56 (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers' Certificate or Opinion of Counsel are based; (c) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable such person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement that, in the opinion of such person, such covenant or condition has been complied with. Section 11.06. Separability Clause. In case any provision in this Indenture or in 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 11.07. Rules by Trustee, Paying Agent, Conversion Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar, the Conversion Agent and the Paying Agent may make reasonable rules for their functions. Section 11.08. Legal Holidays. A "Legal Holiday" is any day other than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding day that is not a Legal Holiday, and, if the action to be taken on such date is a payment in respect of the Securities, no interest (including contingent interest, if any) shall accrue for the intervening period. Section 11.09. Governing Law. THIS INDENTURE AND EACH NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Section 11.10. No Recourse Against Others. A 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 for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. Section 11.11. Successors. 57 All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. Section 11.12. Multiple Originals. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. 58 IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first above written. MEDICIS PHARMACEUTICAL CORPORATION By: ---------------------------------- Name: Title: DEUTSCHE BANK TRUST COMPANY AMERICAS By: ---------------------------------- Name: Title: EXHIBIT A-1 [FORM OF FACE OF GLOBAL SECURITY] THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S. FEDERAL INCOME TAX PURPOSES. HOLDERS OF THIS SECURITY MAY OBTAIN INFORMATION REGARDING THE ISSUE PRICE, THE ISSUE DATE, THE COMPARABLE YIELD, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE YIELD TO MATURITY AND THE PROJECTED PAYMENT SCHEDULE FOR THIS SECURITY BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO: MEDICIS PHARMACEUTICAL CORPORATION, 8125 NORTH HAYDEN ROAD, SCOTTSDALE, ARIZONA 85258-2463, ATTN.: VICE PRESIDENT OF FINANCE, SUCH INFORMATION TO BE MADE AVAILABLE, BEGINNING NO LATER THAN 10 DAYS AFTER THE ISSUE DATE, PROMPTLY UPON REQUEST. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO MEDICIS PHARMACEUTICAL CORPORATION (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. A-1-1 MEDICIS PHARMACEUTICAL CORPORATION 1.5% Contingent Convertible Senior Notes Due 2033 No.: CUSIP: Issue Date: Principal Amount: MEDICIS PHARMACEUTICAL CORPORATION, a Delaware corporation, promises to pay to Cede & Co. or registered assigns, the Principal Amount as set forth on Schedule I hereto, on June 4, 2033, subject to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Security is convertible as specified on the other side of this Security. Interest Payment Dates: June 4 and December 4, commencing December 4, 2003, Record Dates: May 15 and November 15, commencing November 15, 2003 Dated: MEDICIS PHARMACEUTICAL CORPORATION By: ------------------------------------- Name: Title: A-1-2 TRUSTEE'S CERTIFICATE OF AUTHENTICATION DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture. By: --------------------------------- Authorized Signatory Dated: A-1-3 [FORM OF REVERSE SIDE OF NOTE] MEDICIS PHARMACEUTICAL CORPORATION 1.5% Contingent Convertible Senior Notes Due 2033 1. Interest. This Security shall accrue interest at an initial rate of 1.5% per annum. The Company promises to pay interest on the Securities in cash semiannually on each June 4 and December 4, commencing December 4, 2003, to Holders of record on the immediately preceding May 15 and November 15, respectively. Interest on the Securities will accrue from and including August , 2003, until the Principal Amount is paid or duly made available for payment. The Company will pay interest on any overdue Principal Amount at the interest rate borne by the Securities at the time such interest on the overdue Principal Amount accrues, compounded semiannually, and it shall pay interest on overdue installments of interest at the same interest rate compounded semiannually. Interest (including contingent interest, if any) on the Securities will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Company shall pay contingent interest to the Holders during any six-month period (a "CONTINGENT INTEREST PERIOD") from June 4 to December 3 and from December 4 to June 3, commencing June 4, 2008, if the average Security Trading Price for the five Trading Day period ending on the third Trading Day immediately preceding the first day of the applicable Contingent Interest Period equals $1,200 or more. The amount of contingent interest payable per $1,000 principal amount of Notes in respect of any Contingent Interest Period shall equal 0.5% per annum. The Company will pay contingent interest, if any, in the same manner as it will pay interest as described above. 2. Method of Payment. The Company will pay interest (including contingent interest, if any) on this Security (except defaulted interest) to the Person who is the registered Holder of this Security at the close of business on May 15 or November 15, as the case may be, next preceding the related interest payment date. Subject to the terms and conditions of the Indenture, the Company will make payments in respect of the Redemption Price, Purchase Price, Change in Control Purchase Price and the Principal Amount at Stated Maturity, as the case may be, to the Holder who surrenders a Security to a Paying Agent to collect such payments in respect of the Security. The Company will pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay interest (including contingent interest, if any), the Redemption Price, Purchase Price, Change in Control Purchase Price and the Principal Amount at Stated Maturity, as the case may be, by check or wire payable in such money; provided, however, that a Holder holding Securities with an aggregate Principal Amount in excess of $1,000,000 will be paid by wire transfer in immediately available funds at the election of such Holder. The Company may mail an interest check to the Holder's registered address. Notwithstanding the foregoing, so long as this Security is registered in the name of a A-1-4 Depositary or its nominee, all payments hereon shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee. 3. Paying Agent, Conversion Agent and Registrar. Initially, DEUTSCHE BANK TRUST COMPANY AMERICAS (the "TRUSTEE") will act as Paying Agent, Conversion Agent and Registrar. The Company may appoint and change any Paying Agent, Conversion Agent or Registrar without notice, other than notice to the Trustee; provided that the Company will maintain at least one Paying Agent in the State of New York, City of New York, Borough of Manhattan, which shall initially be an office or agency of The Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent or Registrar. 4. Indenture. The Company issued the Securities under an Indenture dated as of August 18, 2003 (the "INDENTURE"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as in effect from time to time (the "TIA"). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are general unsecured obligations of the Company limited to up to $492,000,000 in aggregate Principal Amount subject to Section 2.07 of the Indenture. The Indenture does not limit other indebtedness of the Company, secured or unsecured. 5. Redemption at the Option of the Company. No sinking fund is provided for the Securities. The Securities are not redeemable prior to June 11, 2008. Beginning on June 11, 2008 and during the periods thereafter to maturity, the Securities are redeemable as a whole, or from time to time in part, in any integral multiple of $1,000, at any time at the option of the Company at a Redemption Price equal to 100% of the Principal Amount), together with accrued and unpaid interest (including contingent interest, if any) thereon, up to but not including the Redemption Date; provided that, if the Redemption Date is on or after an interest record date but on or prior to the related interest payment date, interest will be payable to the Holders in whose names the Securities are registered at the close of business on the relevant record date. 6. Purchase By the Company at the Option of the Holder. Subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase, at the option of the Holder, all or any portion of the Securities held by such Holder, in any integral multiple of $1,000, on June 4, 2008, June 4, 2013 and June 4, 2018 (each, a "PURCHASE DATE") for cash at a purchase price per Security equal to 100% of the aggregate Principal Amount of the Security (the "PURCHASE PRICE"), together with accrued and unpaid interest (including contingent interest, if any) thereon, up to but not including the Purchase Date (provided that, if the Purchase Date is on or after an interest record date but on or A-1-5 prior to the related interest payment date, accrued and unpaid interest, if any (including contingent interest, if any), will be payable to the Holders in whose names the Securities are registered at the close of business on the relevant record date) upon delivery of a Purchase Notice containing the information set forth in the Indenture, together with the Securities subject thereto, at any time from the opening of business on the date that is 20 Business Days prior to such Purchase Date until the close of business on the Business Day prior to such Purchase Date, and upon delivery of the Securities to the Paying Agent by the Holder as set forth in the Indenture. At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase the Securities held by such Holder after the occurrence of a Change in Control of the Company for a Change in Control Purchase Price equal to 100% of the Principal Amount thereof plus accrued and unpaid interest (including contingent interest, if any) thereon, up to but not including the Change in Control Purchase Date which Change in Control Purchase Price shall be paid in cash. Holders have the right to withdraw any Purchase Notice or Change in Control Purchase Notice, as the case may be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture. If cash sufficient to pay the Purchase Price or Change in Control Purchase Price, as the case may be, and accrued and unpaid interest (including contingent interest, if any) of all Securities or portions thereof to be purchased as of the Purchase Date or the Change in Control Purchase Date, as the case may be, is deposited with the Paying Agent on the Business Day following the Purchase Date or the Change in Control Purchase Date, interest (including contingent interest, if any) cease to accrue on such Securities (or portions thereof) immediately after such Purchase Date or Change in Control Purchase Date, and the Holder thereof shall have no other rights as such other than the right to receive the Purchase Price or Change in Control Purchase Price, as the case may be, upon surrender of such Security. 7. Notice of Redemption. Notice of redemption pursuant to paragraph 5 of this Security will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at the Holder's registered address. If money sufficient to pay the Redemption Price of all Securities (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent prior to or on the Redemption Date, immediately after such Redemption Date interest (including contingent interest, if any) cease to accrue on such Securities or portions thereof. Securities in denominations larger than $1,000 of Principal Amount may be redeemed in part but only in integral multiples of $1,000 of Principal Amount. 8. Conversion. Subject to the provisions of Article X of the Indenture, a Holder of a Note may convert such Note into shares of Class A Common Stock of the Company if any of the conditions specified in paragraphs (a) through (e) of Section 10.01 of the Indenture is satisfied; provided, however, that if such Note is called for redemption, the conversion right will terminate at the close of business on the second Business Day before the redemption date of such Note (unless the Company shall default in making the redemption payment when due, in which case the conversion right shall terminate at the close of business on the date such Default is cured and A-1-6 such Note is redeemed). The initial conversion price is $77.52 per share, subject to adjustment under certain circumstances as described in the Indenture (the "CONVERSION PRICE"). The number of shares issuable upon conversion of a Note is determined by dividing the principal amount converted by the Conversion Price in effect on the Conversion Date. In the event of a conversion of a Note in a Principal Value Conversion the Company has the option to deliver cash and/or Class A Common Stock to the Holder of the Note surrendered for such conversion as provided in Section 10.02 of the Indenture. Upon conversion, no adjustment for interest, if any (including contingent interest, if any), or dividends will be made. No fractional shares will be issued upon conversion; in lieu thereof, an amount will be paid in cash based upon the current market price (as defined in the Indenture) of the Common Stock on the last Trading Day prior to the date of conversion. To convert a Note, a Holder must (a) complete and sign the conversion notice set forth below and deliver such notice to the Conversion Agent, (b) surrender the Note to the Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by the Registrar or the Conversion Agent, (d) pay any transfer or similar tax, if required and (e) if the Note is held in book-entry form, complete and deliver to the Depositary appropriate instructions pursuant to the Depositary's book-entry conversion programs. If a Holder surrenders a Note for conversion between the record date for the payment of an installment of interest and the next interest payment date, the Note must be accompanied by payment of an amount equal to the interest (including contingent interest, if any) payable on such interest payment date on the principal amount of the Note or portion thereof then converted; provided, however, that no such payment shall be required if such Note has been called for redemption on a redemption date within the period between and including such record date and such interest payment date, or if such Note is surrendered for conversion on the interest payment date. A Holder may convert a portion of a Note equal to $1,000 or any integral multiple thereof. A Note in respect of which a Holder has delivered a Purchase Notice or a Change of Control Repurchase Notice exercising the option of such Holder to require the Company to repurchase such Note as provided in Section 3.08 or Section 3.09, respectively, of the Indenture may be converted only if such notice of exercise is withdrawn as provided above and in accordance with the terms of the Indenture. 9. Denominations; Transfer; Exchange. The Securities are in fully registered form, without coupons, in denominations of $1,000 of Principal Amount and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities in respect of which a Purchase Notice or a Change in Control Purchase Notice has been given and not withdrawn (except, in the case of a Security to be purchased in part, the portion of the Security not to be purchased) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed. A-1-7 10. Persons Deemed Owners. The registered Holder of this Security may be treated as the owner of this Security for all purposes. 11. Unclaimed Money or Securities. The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property law. After return to the Company, Holders entitled to the money or securities must look to the Company, for payment as general creditors unless an applicable abandoned property law designates another person. 12. Amendment; Waiver. Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in aggregate Principal Amount of the Securities at the time outstanding and (ii) certain Defaults may be waived with the written consent of the Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency or to make any other changes that do not adversely affect the rights of any holder, (ii) to comply with Article 5 or Section 10.01(e) or Section 10.12 of the Indenture, (iii) to evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee, or (iv) to comply with the provisions of the TIA, or with any requirement of the SEC in connection with the qualification of the Indenture under the TIA. 13. Defaults and Remedies. Under the Indenture, Events of Default include, in summary form, (i) default for 30 days in payment of any interest (including contingent interest, if any) on any Securities after receipt by the Company of a Notice of Default; (ii) default in payment of the Principal Amount, Redemption Price, Purchase Price or Change in Control Purchase Price, as the case may be, in respect of the Securities when the same becomes due and payable; (iii) failure by the Company to comply with other agreements in the Indenture or the Securities, subject to notice and lapse of time; (iv) default by the Company in the payment at the final maturity thereof, after the expiration of any applicable grace period, of principal of indebtedness for money borrowed, other than nonrecourse indebtedness, in the principal amount then outstanding in excess of $20,000,000, or acceleration of any indebtedness in such principal amount so that it becomes due and payable prior to the date on which it would otherwise have become due and payable and such acceleration is not rescinded within 15 business days after notice to the Company in accordance with the Indenture; and (v) certain events of bankruptcy or insolvency. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in A-1-8 aggregate Principal Amount of the Securities at the time outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of amounts specified in clause (i) or (ii) above) if it determines that withholding notice is in their interests. 14. Trustee Dealings with the Company. Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 15. No Recourse Against Others. A director, officer, employee or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 16. Authentication. This Security shall not be valid until an authorized signatory of the Trustee manually signs the Trustee's Certificate of Authentication on the other side of this Security. 17. Abbreviations. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM ("TENANTS IN COMMON"), TEN ENT ("TENANTS BY THE ENTIRETIES"), JT TEN ("JOINT TENANTS WITH RIGHT OF SURVIVORSHIP AND NOT AS TENANTS IN COMMON"), CUST ("CUSTODIAN") and U/G/M/A ("UNIFORM GIFT TO MINORS ACT"). 18. Governing Law. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS SECURITY. The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Medicis Pharmaceutical Corporation 8125 North Hayden Road Scottsdale, Arizona 85258-2463 Attn.: Chief Financial Officer A-1-9 - ------------------------------------------------------------------------------------------------------- ASSIGNMENT FORM CONVERSION NOTICE To assign this Security, fill in the form below: To convert this Security into Class A Common Stock of the Company, check the box [ ] - ------------------------------------------------------------------------------------------------------- I or we assign and transfer this Security to To convert only part of this Security, state the Principal Amount to be converted (which must be - ------------------------------------------------- $1,000 or an integral multiple of $1,000): - ------------------------------------------------- (Insert assignee's soc. sec. or tax ID no.) If you want the stock certificate made out in - ------------------------------------------------- another person's name fill in the form below: - ------------------------------------------------- - ------------------------------------------------- (Print or type assignee's name, address and zip code) ------------------------------------------------ ------------------------------------------------ and irrevocably appoint (Insert the other person's soc. sec. tax ID no.) ____________________ agent to transfer this Security on the books of the Company. The agent ------------------------------------------------ may substitute another to act for him. ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ (Print or type other person's name, address and zip code) - ------------------------------------------------------------------------------------------------------- Date: Your Signature: ------------ ------------------------------------------- (Sign exactly as your name appears on the other side of this Security) Signature Guaranteed - -------------------------------------- Participant in a Recognized Signature Guarantee Medallion Program By: ------------------------ Authorized Signatory
A-1-10 SCHEDULE I MEDICIS PHARMACEUTICAL CORPORATION 1.5% Contingent Convertible Senior Notes Due 2033 Date Principal Amount Notation A-1-11 EXHIBIT A-2 [Form of Certificated Security] THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S. FEDERAL INCOME TAX PURPOSES. HOLDERS OF THIS SECURITY MAY OBTAIN INFORMATION REGARDING THE ISSUE PRICE, THE ISSUE DATE, THE COMPARABLE YIELD, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE YIELD TO MATURITY AND THE PROJECTED PAYMENT SCHEDULE FOR THIS SECURITY BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO: MEDICIS PHARMACEUTICAL CORPORATION, 8125 NORTH HAYDEN ROAD, SCOTTSDALE, ARIZONA 85258-2463, ATTN.: VICE PRESIDENT OF FINANCE, SUCH INFORMATION TO BE MADE AVAILABLE, BEGINNING NO LATER THAN 10 DAYS AFTER THE ISSUE DATE, PROMPTLY UPON REQUEST. A-2-1 MEDICIS PHARMACEUTICAL CORPORATION 1.5% Contingent Convertible Senior Notes Due 2033 No.: CUSIP: Issue Date: Principal Amount: MEDICIS PHARMACEUTICAL CORPORATION, a Delaware corporation, promises to pay to _________________________________________________________________________ ________________________________________________________________________________ or registered assigns, the Principal Amount of _______________________________, on June 4, 2033, subject to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Security is convertible as specified on the other side of this Security. Interest Payment Dates: June 4 and December 4, commencing December 4, 2003, Record Dates: May 15 and November 15, commencing November 15, 2003 Dated: MEDICIS PHARMACEUTICAL CORPORATION By: ------------------------------------- Name: Title: A-2-2 TRUSTEE'S CERTIFICATE OF AUTHENTICATION DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture. By: -------------------------------------- Authorized Signatory Dated: A-2-3 [FORM OF REVERSE SIDE IS IDENTICAL TO EXHIBIT A-1] A-2-4 B-1 EX-25.1 4 p68012a2exv25w1.txt EX-25.1 Exhibit 25.1 - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ------------------------------ DEUTSCHE BANK TRUST COMPANY AMERICAS (FORMERLY BANKERS TRUST COMPANY) (Exact name of trustee as specified in its charter) NEW YORK 13-4941247 (Jurisdiction of Incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification no.) 60 WALL STREET NEW YORK, NEW YORK 10005 (Address of principal (Zip Code) executive offices) DEUTSCHE BANK TRUST COMPANY AMERICAS ATTENTION: WILL CHRISTOPH LEGAL DEPARTMENT 1301 6TH AVENUE, 8TH FLOOR NEW YORK, NEW YORK 10019 (212) 469-0378 (Name, address and telephone number of agent for service) ------------------------------------------------------ MEDICIS PHARMACEUTICAL CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 52-1574808 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 8125 NORTH HAYDEN ROAD SCOTTSDALE, ARIZONA 85258-2463 (602)-808-8800 (Address, including zip code and telephone number, including area code, of registrant's principal executive offices) 1.5% CONTINGENT CONVERTIBLE SENIOR NOTES DUE 2033 (TITLE OF THE INDENTURE SECURITIES) ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee. (a) Name and address of each examining or supervising authority to which it is subject. NAME ADDRESS ---- ------- Federal Reserve Bank (2nd District) New York, NY Federal Deposit Insurance Corporation Washington, D.C. New York State Banking Department Albany, NY (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the Trustee, describe each such affiliation. None. ITEM 3. -15. NOT APPLICABLE ITEM 16. LIST OF EXHIBITS. EXHIBIT 1 - Restated Organization Certificate of Bankers Trust Company dated August 6, 1998, Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated September 25, 1998, Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated December 16, 1998, and Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated February 22, 2002, copies attached. EXHIBIT 2 - Certificate of Authority to commence business - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 3 - Authorization of the Trustee to exercise corporate trust powers - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as amended on April 15, 2002. Copy attached. -2- EXHIBIT 5 - Not applicable. EXHIBIT 6 - Consent of Bankers Trust Company required by Section 321(b) of the Act. - Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 22-18864. EXHIBIT 7 - The latest report of condition of Deutsche Bank Trust Company Americas dated as of March 31, 2003. Copy attached. EXHIBIT 8 - Not Applicable. EXHIBIT 9 - Not Applicable. -3- SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Deutsche Bank Trust Company Americas, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on this 31st day of July, 2003. DEUTSCHE BANK TRUST COMPANY AMERICAS By: _______________________________ Susan Johnson Vice President -4- SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Deutsche Bank Trust Company Americas, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on this 31st day of July 2003. DEUTSCHE BANK TRUST COMPANY AMERICAS /s/ Susan Johnson ------------------------------------ By: Susan Johnson Vice President -5- STATE OF NEW YORK, BANKING DEPARTMENT I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION 8005 OF THE BANKING LAW," dated September 16, 1998, providing for an increase in authorized capital stock from $3,001,666,670 consisting of 200,166,667 shares with a par value of $10 each designated as Common Stock and 1,000 shares with a par value of $1,000,000 each designated as Series Preferred Stock to $3,501,666,670 consisting of 200,166,667 shares with a par value of $10 each designated as Common Stock and 1,500 shares with a par value of $1,000,000 each designated as Series Preferred Stock. WITNESS, my hand and official seal of the Banking Department at the City of New York, this 25TH day of SEPTEMBER in the Year of our Lord one thousand nine hundred and NINETY-EIGHT. Manuel Kursky ------------------------------ Deputy Superintendent of Banks RESTATED ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY ---------------------------- Under Section 8007 Of the Banking Law ---------------------------- Bankers Trust Company 1301 6th Avenue, 8th Floor New York, N.Y. 10019 Counterpart Filed in the Office of the Superintendent of Banks, State of New York, August 31, 1998 RESTATED ORGANIZATION CERTIFICATE OF BANKERS TRUST Under Section 8007 of the Banking Law ----------------------------- We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing Director and an Assistant Secretary and a Vice President and an Assistant Secretary of BANKERS TRUST COMPANY, do hereby certify: 1. The name of the corporation is Bankers Trust Company. 2. The organization certificate of the corporation was filed by the Superintendent of Banks of the State of New York on March 5, 1903. 3. The text of the organization certificate, as amended heretofore, is hereby restated without further amendment or change to read as herein-set forth in full, to wit: Certificate of Organization of Bankers Trust Company Know All Men By These Presents That we, the undersigned, James A. Blair, James G. Cannon, E. C. Converse, Henry P. Davison, Granville W. Garth, A. Barton Hepburn, Will Logan, Gates W. McGarrah, George W. Perkins, William H. Porter, John F. Thompson, Albert H. Wiggin, Samuel Woolverton and Edward F. C. Young, all being persons of full age and citizens of the United States, and a majority of us being residents of the State of New York, desiring to form a corporation to be known as a Trust Company, do hereby associate ourselves together for that purpose under and pursuant to the laws of the State of New York, and for such purpose we do hereby, under our respective hands and seals, execute and duly acknowledge this Organization Certificate in duplicate, and hereby specifically state as follows, to wit: I. The name by which the said corporation shall be known is Bankers Trust Company. II. The place where its business is to be transacted is the City of New York, in the State of New York. III. Capital Stock: The amount of capital stock which the corporation is hereafter to have is Three Billion One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($3,001,666,670), divided into Two Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (200,166,667) shares with a par value of $10 each designated as Common Stock and 1,000 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock. (a) Common Stock 1. Dividends: Subject to all of the rights of the Series Preferred Stock, dividends may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the corporation legally available for the payment of dividends. 2. Voting Rights: Except as otherwise expressly provided with respect to the Series Preferred Stock or with respect to any series of the Series Preferred Stock, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, each holder of the Common Stock being entitled to one vote for each share thereof held. 3. Liquidation: Upon any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, and after the holders of the Series Preferred Stock of each series shall have been paid in full the amounts to which they respectively shall be entitled, or a sum sufficient for the payment in full set aside, the remaining net assets of the corporation shall be distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interests, to the exclusion of the holders of the Series Preferred Stock. 4. Preemptive Rights: No holder of Common Stock of the corporation shall be entitled, as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of stock of any class or series whatsoever, any rights or options to purchase stock of any class or series whatsoever, or any securities convertible into, exchangeable for or carrying rights or options to purchase stock of any class or series whatsoever, whether now or hereafter authorized, and whether issued for cash or other consideration, or by way of dividend or other distribution. (b) Series Preferred Stock 1. Board Authority: The Series Preferred Stock may be issued from time to time by the Board of Directors as herein provided in one or more series. The designations, relative rights, preferences and limitations of the Series Preferred Stock, and particularly of the shares of each series thereof, may, to the extent permitted by law, be similar to or may differ from those of any other series. The Board of Directors of the corporation is hereby expressly granted authority, subject to the provisions of this Article III, to issue from time to time Series Preferred Stock in one or more series and to fix from time to time before issuance thereof, by filing a certificate pursuant to the Banking Law, the number of shares in each such series of such class and all designations, relative rights (including the right, to the extent permitted by law, to convert into shares of any class or into shares of any series of any class), preferences and limitations of the shares in each such series, including, buy without limiting the generality of the foregoing, the following: (i) The number of shares to constitute such series (which number may at any time, or from time to time, be increased or decreased by the Board of Directors, notwithstanding that shares of the series may be outstanding at the time of such increase or decrease, unless the Board of Directors shall have otherwise provided in creating such series) and the distinctive designation thereof; (ii) The dividend rate on the shares of such series, whether or not dividends on the shares of such series shall be cumulative, and the date or dates, if any, from which dividends thereon shall be cumulative; (iii) Whether or not the share of such series shall be redeemable, and, if redeemable, the date or dates upon or after which they shall be redeemable, the amount or amounts per share (which shall be, in the case of each share, not less than its preference upon involuntary liquidation, plus an amount equal to all dividends thereon accrued and unpaid, whether or not earned or declared) payable thereon in the case of the redemption thereof, which amount may vary at different redemption dates or otherwise as permitted by law; (iv) The right, if any, of holders of shares of such series to convert the same into, or exchange the same for, Common Stock or other stock as permitted by law, and the terms and conditions of such conversion or exchange, as well as provisions for adjustment of the conversion rate in such events as the Board of Directors shall determine; (v) The amount per share payable on the shares of such series upon the voluntary and involuntary liquidation, dissolution or winding up of the corporation; (vi) Whether the holders of shares of such series shall have voting power, full or limited, in addition to the voting powers provided by law and, in case additional voting powers are accorded, to fix the extent thereof; and (vii) Generally to fix the other rights and privileges and any qualifications, limitations or restrictions of such rights and privileges of such series, provided, however, that no such rights, privileges, qualifications, limitations or restrictions shall be in conflict with the organization certificate of the corporation or with the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of which there are shares outstanding. All shares of Series Preferred Stock of the same series shall be identical in all respects, except that shares of any one series issued at different times may differ as to dates, if any, from which dividends thereon may accumulate. All shares of Series Preferred Stock of all series shall be of equal rank and shall be identical in all respects except that to the extent not otherwise limited in this Article III any series may differ from any other series with respect to any one or more of the designations, relative rights, preferences and limitations described or referred to in subparagraphs (I) to (vii) inclusive above. 2. Dividends: Dividends on the outstanding Series Preferred Stock of each series shall be declared and paid or set apart for payment before any dividends shall be declared and paid or set apart for payment on the Common Stock with respect to the same quarterly dividend period. Dividends on any shares of Series Preferred Stock shall be cumulative only if and to the extent set forth in a certificate filed pursuant to law. After dividends on all shares of Series Preferred Stock (including cumulative dividends if and to the extent any such shares shall be entitled thereto) shall have been declared and paid or set apart for payment with respect to any quarterly dividend period, then and not otherwise so long as any shares of Series Preferred Stock shall remain outstanding, dividends may be declared and paid or set apart for payment with respect to the same quarterly dividend period on the Common Stock out the assets or funds of the corporation legally available therefor. All Shares of Series Preferred Stock of all series shall be of equal rank, preference and priority as to dividends irrespective of whether or not the rates of dividends to which the same shall be entitled shall be the same and when the stated dividends are not paid in full, the shares of all series of the Series Preferred Stock shall share ratably in the payment thereof in accordance with the sums which would be payable on such shares if all dividends were paid in full, provided, however, that any two or more series of the Series Preferred Stock may differ from each other as to the existence and extent of the right to cumulative dividends, as aforesaid. 3. Voting Rights: Except as otherwise specifically provided in the certificate filed pursuant to law with respect to any series of the Series Preferred Stock, or as otherwise provided by law, the Series Preferred Stock shall not have any right to vote for the election of directors or for any other purpose and the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes. 4. Liquidation: In the event of any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, each series of Series Preferred Stock shall have preference and priority over the Common Stock for payment of the amount to which each outstanding series of Series Preferred Stock shall be entitled in accordance with the provisions thereof and each holder of Series Preferred Stock shall be entitled to be paid in full such amount, or have a sum sufficient for the payment in full set aside, before any payments shall be made to the holders of the Common Stock. If, upon liquidation, dissolution or winding up of the corporation, the assets of the corporation or proceeds thereof, distributable among the holders of the shares of all series of the Series Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid, then such assets, or the proceeds thereof, shall be distributed among such holders ratably in accordance with the respective amounts which would be payable if all amounts payable thereon were paid in full. After the payment to the holders of Series Preferred Stock of all such amounts to which they are entitled, as above provided, the remaining assets and funds of the corporation shall be divided and paid to the holders of the Common Stock. 5. Redemption: In the event that the Series Preferred Stock of any series shall be made redeemable as provided in clause (iii) of paragraph 1 of section (b) of this Article III, the corporation, at the option of the Board of Directors, may redeem at any time or times, and from time to time, all or any part of any one or more series of Series Preferred Stock outstanding by paying for each share the then applicable redemption price fixed by the Board of Directors as provided herein, plus an amount equal to accrued and unpaid dividends to the date fixed for redemption, upon such notice and terms as may be specifically provided in the certificate filed pursuant to law with respect to the series. 6. Preemptive Rights: No holder of Series Preferred Stock of the corporation shall be entitled, as such, as a matter or right, to subscribe for or purchase any part of any new or additional issue of stock of any class or series whatsoever, any rights or options to purchase stock of any class or series whatsoever, or any securities convertible into, exchangeable for or carrying rights or options to purchase stock of any class or series whatsoever, whether now or hereafter authorized, and whether issued for cash or other consideration, or by way of dividend. (c) Provisions relating to Floating Rate Non-Cumulative Preferred Stock, Series A. (Liquidation value $1,000,000 per share.) 1. Designation: The distinctive designation of the series established hereby shall be "Floating Rate Non-Cumulative Preferred Stock, Series A" (hereinafter called "Series A Preferred Stock"). 2. Number: The number of shares of Series A Preferred Stock shall initially be 250 shares. Shares of Series A Preferred Stock redeemed, purchased or otherwise acquired by the corporation shall be cancelled and shall revert to authorized but unissued Series Preferred Stock undesignated as to series. 3. Dividends: (a) Dividend Payments Dates. Holders of the Series A Preferred Stock shall be entitled to receive non-cumulative cash dividends when, as and if declared by the Board of Directors of the corporation, out of funds legally available therefor, from the date of original issuance of such shares (the "Issue Date") and such dividends will be payable on March 28, June 28, September 28 and December 28 of each year ("Dividend Payment Date") commencing September 28, 1990, at a rate per annum as determined in paragraph 3(b) below. The period beginning on the Issue Date and ending on the day preceding the first Dividend Payment Date and each successive period beginning on a Dividend Payment Date and ending on the date preceding the next succeeding Dividend Payment Date is herein called a "Dividend Period". If any Dividend Payment Date shall be, in The City of New York, a Sunday or a legal holiday or a day on which banking institutions are authorized by law to close, then payment will be postponed to the next succeeding business day with the same force and effect as if made on the Dividend Payment Date, and no interest shall accrue for such Dividend Period after such Dividend Payment Date. (b) Dividend Rate. The dividend rate from time to time payable in respect of Series A Preferred Stock (the "Dividend Rate") shall be determined on the basis of the following provisions: (i) On the Dividend Determination Date, LIBOR will be determined on the basis of the offered rates for deposits in U.S. dollars having a maturity of three months commencing on the second London Business Day immediately following such Dividend Determination Date, as such rates appear on the Reuters Screen LIBO Page as of 11:00 A.M. London time, on such Dividend Determination Date. If at least two such offered rates appear on the Reuters Screen LIBO Page, LIBOR in respect of such Dividend Determination Dates will be the arithmetic mean (rounded to the nearest one-hundredth of a percent, with five one-thousandths of a percent rounded upwards) of such offered rates. If fewer than those offered rates appear, LIBOR in respect of such Dividend Determination Date will be determined as described in paragraph (ii) below. (ii) On any Dividend Determination Date on which fewer than those offered rates for the applicable maturity appear on the Reuters Screen LIBO Page as specified in paragraph (I) above, LIBOR will be determined on the basis of the rates at which deposits in U.S. dollars having a maturity of three months commencing on the second London Business Day immediately following such Dividend Determination Date and in a principal amount of not less than $1,000,000 that is representative of a single transaction in such market at such time are offered by three major banks in the London interbank market selected by the corporation at approximately 11:00 A.M., London time, on such Dividend Determination Date to prime banks in the London market. The corporation will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, LIBOR in respect of such Dividend Determination Date will be the arithmetic mean (rounded to the nearest one-hundredth of a percent, with five one-thousandths of a percent rounded upwards) of such quotations. If fewer than two quotations are provided, LIBOR in respect of such Dividend Determination Date will be the arithmetic mean (rounded to the nearest one-hundredth of a percent, with five one-thousandths of a percent rounded upwards) of the rates quoted by three major banks in New York City selected by the corporation at approximately 11:00 A.M., New York City time, on such Dividend Determination Date for loans in U.S. dollars to leading European banks having a maturity of three months commencing on the second London Business Day immediately following such Dividend Determination Date and in a principal amount of not less than $1,000,000 that is representative of a single transaction in such market at such time; provided, however, that if the banks selected as aforesaid by the corporation are not quoting as aforementioned in this sentence, then, with respect to such Dividend Period, LIBOR for the preceding Dividend Period will be continued as LIBOR for such Dividend Period. (ii) The Dividend Rate for any Dividend Period shall be equal to the lower of 18% or 50 basis points above LIBOR for such Dividend Period as LIBOR is determined by sections (I) or (ii) above. As used above, the term "Dividend Determination Date" shall mean, with respect to any Dividend Period, the second London Business Day prior to the commencement of such Dividend Period; and the term "London Business Day" shall mean any day that is not a Saturday or Sunday and that, in New York City, is not a day on which banking institutions generally are authorized or required by law or executive order to close and that is a day on which dealings in deposits in U.S. dollars are transacted in the London interbank market. 4. Voting Rights: The holders of the Series A Preferred Stock shall have the voting power and rights set forth in this paragraph 4 and shall have no other voting power or rights except as otherwise may from time to time be required by law. So long as any shares of Series A Preferred Stock remain outstanding, the corporation shall not, without the affirmative vote or consent of the holders of at least a majority of the votes of the Series Preferred Stock entitled to vote outstanding at the time, given in person or by proxy, either in writing or by resolution adopted at a meeting at which the holders of Series A Preferred Stock (alone or together with the holders of one or more other series of Series Preferred Stock at the time outstanding and entitled to vote) vote separately as a class, alter the provisions of the Series Preferred Stock so as to materially adversely affect its rights; provided, however, that in the event any such materially adverse alteration affects the rights of only the Series A Preferred Stock, then the alteration may be effected with the vote or consent of at least a majority of the votes of the Series A Preferred Stock; provided, further, that an increase in the amount of the authorized Series Preferred Stock and/or the creation and/or issuance of other series of Series Preferred Stock in accordance with the organization certificate shall not be, nor be deemed to be, materially adverse alterations. In connection with the exercise of the voting rights contained in the preceding sentence, holders of all series of Series Preferred Stock which are granted such voting rights (of which the Series A Preferred Stock is the initial series) shall vote as a class (except as specifically provided otherwise) and each holder of Series A Preferred Stock shall have one vote for each share of stock held and each other series shall have such number of votes, if any, for each share of stock held as may be granted to them. The foregoing voting provisions will not apply if, in connection with the matters specified, provision is made for the redemption or retirement of all outstanding Series A Preferred Stock. 5. Liquidation: Subject to the provisions of section (b) of this Article III, upon any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, the holders of the Series A Preferred Stock shall have preference and priority over the Common Stock for payment out of the assets of the corporation or proceeds thereof, whether from capital or surplus, of $1,000,000 per share (the "liquidation value") together with the amount of all dividends accrued and unpaid thereon, and after such payment the holders of Series A Preferred Stock shall be entitled to no other payments. 6. Redemption: Subject to the provisions of section (b) of this Article III, Series A Preferred Stock may be redeemed, at the option of the corporation in whole or part, at any time or from time to time at a redemption price of $1,000,000 per share, in each case plus accrued and unpaid dividends to the date of redemption. At the option of the corporation, shares of Series A Preferred Stock redeemed or otherwise acquired may be restored to the status of authorized but unissued shares of Series Preferred Stock. In the case of any redemption, the corporation shall give notice of such redemption to the holders of the Series A Preferred Stock to be redeemed in the following manner: a notice specifying the shares to be redeemed and the time and place of redemption (and, if less than the total outstanding shares are to be redeemed, specifying the certificate numbers and number of shares to be redeemed) shall be mailed by first class mail, addressed to the holders of record of the Series A Preferred Stock to be redeemed at their respective addresses as the same shall appear upon the books of the corporation, not more than sixty (60) days and not less than thirty (30) days previous to the date fixed for redemption. In the event such notice is not given to any shareholder such failure to give notice shall not affect the notice given to other shareholders. If less than the whole amount of outstanding Series A Preferred Stock is to be redeemed, the shares to be redeemed shall be selected by lot or pro rata in any manner determined by resolution of the Board of Directors to be fair and proper. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the corporation in providing moneys at the time and place of redemption for the payment of the redemption price) all dividends upon the Series A Preferred Stock so called for redemption shall cease to accrue, and all rights of the holders of said Series A Preferred Stock as stockholders in the corporation, except the right to receive the redemption price (without interest) upon surrender of the certificate representing the Series A Preferred Stock so called for redemption, duly endorsed for transfer, if required, shall cease and terminate. The corporation's obligation to provide moneys in accordance with the preceding sentence shall be deemed fulfilled if, on or before the redemption date, the corporation shall deposit with a bank or trust company (which may be an affiliate of the corporation) having an office in the Borough of Manhattan, City of New York, having a capital and surplus of at least $5,000,000 funds necessary for such redemption, in trust with irrevocable instructions that such funds be applied to the redemption of the shares of Series A Preferred Stock so called for redemption. Any interest accrued on such funds shall be paid to the corporation from time to time. Any funds so deposited and unclaimed at the end of two (2) years from such redemption date shall be released or repaid to the corporation, after which the holders of such shares of Series A Preferred Stock so called for redemption shall look only to the corporation for payment of the redemption price. IV. The name, residence and post office address of each member of the corporation are as follows:
Name RESIDENCE POST OFFICE ADDRESS ---- --------- ------------------- James A. Blair 9 West 50th Street, 33 Wall Street, Manhattan, New York City Manhattan, New York City James G. Cannon 72 East 54th Street, 14 Nassau Street, Manhattan New York City Manhattan, New York City E. C. Converse 3 East 78th Street, 139 Broadway, Manhattan, New York City Manhattan, New York City Henry P. Davison Englewood, 2 Wall Street,
New Jersey Manhattan, New York City Granville W. Garth 160 West 57th Street, 33 Wall Street Manhattan, New York City Manhattan, New York City A. Barton Hepburn 205 West 57th Street 83 Cedar Street Manhattan, New York City Manhattan, New York City William Logan Montclair, 13 Nassau Street New Jersey Manhattan, New York City George W. Perkins Riverdale, 23 Wall Street, New York Manhattan, New York City William H. Porter 56 East 67th Street 270 Broadway, Manhattan, New York City Manhattan, New York City John F. Thompson Newark, 143 Liberty Street, New Jersey Manhattan, New York City Albert H. Wiggin 42 West 49th Street, 214 Broadway, Manhattan, New York City Manhattan, New York City Samuel Woolverton Mount Vernon, 34 Wall Street, New York Manhattan, New York City Edward F.C. Young 85 Glenwood Avenue, 1 Exchange Place, Jersey City, New Jersey Jersey City, New Jersey
V. The existence of the corporation shall be perpetual. VI. The subscribers, the members of the said corporation, do, and each for himself does, hereby declare that he will accept the responsibilities and faithfully discharge the duties of a director therein, if elected to act as such, when authorized accordance with the provisions of the Banking Law of the State of New York. VII. The number of directors of the corporation shall not be less than 10 nor more than 25." 4. The foregoing restatement of the organization certificate was authorized by the Board of Directors of the corporation at a meeting held on July 21, 1998. IN WITNESS WHEREOF, we have made and subscribed this certificate this 6th day of August, 1998. IN WITNESS WHEREOF, we have made and subscribed this certificate this 6th day of August, 1998. James T. Byrne, Jr. ------------------------------- James T. Byrne, Jr. Managing Director and Secretary Lea Lahtinen ------------------------------- Lea Lahtinen Vice President and Assistant Secretary Lea Lahtinen ------------------------------- Lea Lahtinen State of New York ) ) ss: County of New York ) Lea Lahtinen, being duly sworn, deposes and says that she is a Vice President and an Assistant Secretary of Bankers Trust Company, the corporation described in the foregoing certificate; that she has read the foregoing certificate and knows the contents thereof, and that the statements herein contained are true. Lea Lahtinen ------------------------------ Lea Lahtinen Sworn to before me this 6th day of August, 1998. Sandra L. West - ----------------------------- Notary Public SANDRA L. WEST Notary Public State of New York No. 31-4942101 Qualified in New York County Commission Expires September 19, 1998 STATE OF NEW YORK, BANKING DEPARTMENT I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled "RESTATED ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION 8007 OF THE BANKING LAW," dated August 6, 1998, providing for the restatement of the Organization Certificate and all amendments into a single certificate. WITNESS, my hand and official seal of the Banking Department at the City of New York, this 31ST day of AUGUST in the Year of our Lord one thousand nine hundred and NINETY-EIGHT. Manuel Kursky ------------------------------ DEPUTY Superintendent of Banks CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST Under Section 8005 of the Banking Law ----------------------------- We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing Director and Secretary and a Vice President and an Assistant Secretary of Bankers Trust Company, do hereby certify: 1. The name of the corporation is Bankers Trust Company. 2. The organization certificate of said corporation was filed by the Superintendent of Banks on the 5th of March, 1903. 3. The organization certificate as heretofore amended is hereby amended to increase the aggregate number of shares which the corporation shall have authority to issue and to increase the amount of its authorized capital stock in conformity therewith. 4. Article III of the organization certificate with reference to the authorized capital stock, the number of shares into which the capital stock shall be divided, the par value of the shares and the capital stock outstanding, which reads as follows: "III. The amount of capital stock which the corporation is hereafter to have is Three Billion, One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($3,001,666,670), divided into Two Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (200,166,667) shares with a par value of $10 each designated as Common Stock and 1000 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." is hereby amended to read as follows: "III. The amount of capital stock which the corporation is hereafter to have is Three Billion, Five Hundred One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($3,501,666,670), divided into Two Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (200,166,667) shares with a par value of $10 each designated as Common Stock and 1500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." 5. The foregoing amendment of the organization certificate was authorized by unanimous written consent signed by the holder of all outstanding shares entitled to vote thereon. IN WITNESS WHEREOF, we have made and subscribed this certificate this 25th day of September, 1998 James T. Byrne, Jr. --------------------------------------- James T. Byrne, Jr. Managing Director and Secretary Lea Lahtinen --------------------------------------- Lea Lahtinen Vice President and Assistant Secretary State of New York ) ) ss: County of New York ) Lea Lahtinen, being fully sworn, deposes and says that she is a Vice President and an Assistant Secretary of Bankers Trust Company, the corporation described in the foregoing certificate; that she has read the foregoing certificate and knows the contents thereof, and that the statements herein contained are true. Lea Lahtinen ------------------------------ Lea Lahtinen Sworn to before me this 25th day of September, 1998 Sandra L. West - ------------------------------ Notary Public SANDRA L. WEST Notary Public State of New York No. 31-4942101 Qualified in New York County Commission Expires September 19, 2000 STATE OF NEW YORK, BANKING DEPARTMENT I, P. VINCENT CONLON, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION 8005 OF THE BANKING LAW," dated December 16, 1998, providing for an increase in authorized capital stock from $3,501,666,670 consisting of 200,166,667 shares with a par value of $10 each designated as Common Stock and 1,500 shares with a par value of $1,000,000 each designated as Series Preferred Stock to $3,627,308,670 consisting of 212,730,867 shares with a par value of $10 each designated as Common Stock and 1,500 shares with a par value of $1,000,000 each designated as Series Preferred Stock. WITNESS, my hand and official seal of the Banking Department at the City of New York, this 18TH day of DECEMBER in the Year of our Lord one thousand nine hundred and NINETY-EIGHT. P. Vincent Conlon ------------------------------ Deputy Superintendent of Banks CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST Under Section 8005 of the Banking Law ----------------------------- We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing Director and Secretary and a Vice President and an Assistant Secretary of Bankers Trust Company, do hereby certify: 1. The name of the corporation is Bankers Trust Company. 2. The organization certificate of said corporation was filed by the Superintendent of Banks on the 5th of March, 1903. 3. The organization certificate as heretofore amended is hereby amended to increase the aggregate number of shares which the corporation shall have authority to issue and to increase the amount of its authorized capital stock in conformity therewith. 4. Article III of the organization certificate with reference to the authorized capital stock, the number of shares into which the capital stock shall be divided, the par value of the shares and the capital stock outstanding, which reads as follows: "III. The amount of capital stock which the corporation is hereafter to have is Three Billion, Five Hundred One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($3,501,666,670), divided into Two Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (200,166,667) shares with a par value of $10 each designated as Common Stock and 1500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." is hereby amended to read as follows: "III. The amount of capital stock which the corporation is hereafter to have is Three Billion, Six Hundred Twenty-Seven Million, Three Hundred Eight Thousand, Six Hundred Seventy Dollars ($3,627,308,670), divided into Two Hundred Twelve Million, Seven Hundred Thirty Thousand, Eight Hundred Sixty- Seven (212,730,867) shares with a par value of $10 each designated as Common Stock and 1500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." 5. The foregoing amendment of the organization certificate was authorized by unanimous written consent signed by the holder of all outstanding shares entitled to vote thereon. IN WITNESS WHEREOF, we have made and subscribed this certificate this 16th day of December, 1998 James T. Byrne, Jr. -------------------------------------- James T. Byrne, Jr. Managing Director and Secretary Lea Lahtinen -------------------------------------- Lea Lahtinen Vice President and Assistant Secretary State of New York ) ) ss: County of New York ) Lea Lahtinen, being fully sworn, deposes and says that she is a Vice President and an Assistant Secretary of Bankers Trust Company, the corporation described in the foregoing certificate; that she has read the foregoing certificate and knows the contents thereof, and that the statements herein contained are true. Lea Lahtinen ------------------------------ Lea Lahtinen Sworn to before me this 16th day of December, 1998 Sandra L. West - ----------------------------- Notary Public SANDRA L. WEST Notary Public State of New York No. 31-4942101 Qualified in New York County Commission Expires September 19, 2000 BANKERS TRUST COMPANY ASSISTANT SECRETARY'S CERTIFICATE I, Lea Lahtinen, Vice President and Assistant Secretary of Bankers Trust Company, a corporation duly organized and existing under the laws of the State of New York, the United States of America, do hereby certify that attached copy of the Certificate of Amendment of the Organization Certificate of Bankers Trust Company, dated February 27, 2002, providing for a change of name of Bankers Trust Company to Deutsche Bank Trust Company Americas and approved by the New York State Banking Department on March 14, 2002 to effective on April 15, 2002, is a true and correct copy of the original Certificate of Amendment of the Organization Certificate of Bankers Trust Company on file in the Banking Department, State of New York. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of Bankers Trust Company this 4th day of April, 2002. [SEAL] /s/ Lea Lahtinen ---------------------------------------------------- Lea Lahtinen, Vice President and Assistant Secretary Bankers Trust Company State of New York ) ) ss.: County of New York ) On the 4th day of April in the year 2002 before me, the undersigned, a Notary Public in and for said state, personally appeared Lea Lahtinen, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that she executed the same in her capacity, and that by her signature on the instrument, the individual, or the person on behalf of which the individual acted, executed the instrument. /s/ Sonja K. Olsen - ------------------------------------ Notary Public SONJA K. OLSEN Notary Public, State of New York No. 01OL4974457 Qualified in New York County Commission Expires November 13, 2002 State of New York, Banking Department I, P. VINCENT CONLON, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY under Section 8005 of the Banking Law" dated February 27, 2002, providing for a change of name of BANKERS TRUST COMPANY to DEUTSCHE BANK TRUST COMPANY AMERICAS. Witness, my hand and official seal of the Banking Department at the City of New York, this 14th day of March two thousand and two. /s/ P. Vincent Conlon ------------------------------ Deputy Superintendent of Banks CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section 8005 of the Banking Law ----------------- We, James T. Byrne Jr., and Lea Lahtinen, being respectively the Secretary, and Vice President and an Assistant Secretary of Bankers Trust Company, do hereby certify: 1. The name of corporation is Bankers Trust Company. 2. The organization certificate of said corporation was filed by the Superintendent of Banks on the 5th day of March, 1903. 3. Pursuant to Section 8005 of the Banking Law, attached hereto as Exhibit A is a certificate issued by the State of New York, Banking Department listing all of the amendments to the Organization Certificate of Bankers Trust Company since its organization that have been filed in the Office of the Superintendent of Banks. 4. The organization certificate as heretofore amended is hereby amended to change the name of Bankers Trust Company to Deutsche Bank Trust Company Americas to be effective on April 15, 2002. 5. The first paragraph number 1 of the organization of Bankers Trust Company with the reference to the name of the Bankers Trust Company, which reads as follows: "1. The name of the corporation is Bankers Trust Company." is hereby amended to read as follows effective on April 15, 2002: "1. The name of the corporation is Deutsche Bank Trust Company Americas." -2- 6. The foregoing amendment of the organization certificate was authorized by unanimous written consent signed by the holder of all outstanding shares entitled to vote thereon. IN WITNESS WHEREOF, we have made and subscribed this certificate this 27th day of February, 2002. /s/ James T. Byrne Jr. --------------------------------------------- James T. Byrne Jr. Secretary /s/ Lea Lahtinen ------------------------------------------- Lea Lahtinen Vice President and Assistant Secretary State of New York ) ) ss.: County of New York ) Lea Lahtinen, being duly sworn, deposes and says that she is a Vice President and an Assistant Secretary of Bankers Trust Company, the corporation described in the foregoing certificate; that she has read the foregoing certificate and knows the contents thereof, and that the statements therein contained are true. /s/ Lea Lahtinen ------------------------------ Lea Lahtinen Sworn to before me this 27th day of February, 2002 /s/ Sandra L. West - ------------------------------------ Notary Public SANDRA L. WEST Notary Public, State of New York No. 01WE4942401 Qualified in New York County Commission Expires September 19, 2002 -1- EXHIBIT A State of New York Banking Department I, P. VINCENT CONLON, Deputy Superintendent of Banks of the State of New York, DO HEREBY CERTIFY: THAT, the records in the Office of the Superintendent of Banks indicate that BANKERS TRUST COMPANY is a corporation duly organized and existing under the laws of the State of New York as a trust company, pursuant to Article III of the Banking Law; and THAT, the Organization Certificate of BANKERS TRUST COMPANY was filed in the Office of the Superintendent of Banks on March 5, 1903, and such corporation was authorized to commence business on March 24, 1903; and THAT, the following amendments to its Organization Certificate have been filed in the Office of the Superintendent of Banks as of the dates specified: Certificate of Amendment of Certificate of Incorporation providing for an increase in number of directors - filed on January 14, 1905 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on August 4, 1909 Certificate of Amendment of Certificate of Incorporation providing for an increase in number of directors - filed on February 1, 1911 Certificate of Amendment of Certificate of Incorporation providing for an increase in number of directors - filed on June 17, 1911 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on August 8, 1911 Certificate of Amendment of Certificate of Incorporation providing for an increase in number of directors - filed on August 8, 1911 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on March 21, 1912 Certificate of Amendment of Certificate of Incorporation providing for a decrease in number of directors - filed on January 15, 1915 -2- Certificate of Amendment of Certificate of Incorporation providing for a decrease in number of directors - filed on December 18, 1916 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on April 20, 1917 Certificate of Amendment of Certificate of Incorporation providing for an increase in number of directors - filed on April 20, 1917 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on December 28, 1918 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on December 4, 1919 Certificate of Amendment of Certificate of Incorporation providing for an increase in number of directors - filed on January 15, 1926 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on June 12, 1928 Certificate of Amendment of Certificate of Incorporation providing for a change in shares - filed on April 4, 1929 Certificate of Amendment of Certificate of Incorporation providing for a minimum and maximum number of directors - filed on January 11, 1934 Certificate of Extension to perpetual - filed on January 13, 1941 Certificate of Amendment of Certificate of Incorporation providing for a minimum and maximum number of directors - filed on January 13, 1941 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on December 11, 1944 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed January 30, 1953 Restated Certificate of Incorporation - filed November 6, 1953 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on April 8, 1955 -3- Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on February 1, 1960 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on July 14, 1960 Certificate of Amendment of Certificate of Incorporation providing for a change in shares - filed on September 30, 1960 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on January 26, 1962 Certificate of Amendment of Certificate of Incorporation providing for a change in shares - filed on September 9, 1963 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on February 7, 1964 Certificate of Amendment of Certificate of Incorporation providing for an increase in capital stock - filed on February 24, 1965 Certificate of Amendment of the Organization Certificate providing for a decrease in capital stock - filed January 24, 1967 Restated Organization Certificate - filed June 1, 1971 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed October 29, 1976 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed December 22, 1977 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed August 5, 1980 Restated Organization Certificate - filed July 1, 1982 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed December 27, 1984 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed September 18, 1986 -4- Certificate of Amendment of the Organization Certificate providing for a minimum and maximum number of directors - filed January 22, 1990 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed June 28, 1990 Restated Organization Certificate - filed August 20, 1990 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed June 26, 1992 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed March 28, 1994 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed June 23, 1995 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed December 27, 1995 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed March 21, 1996 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed December 27, 1996 Certificate of Amendment to the Organization Certificate providing for an increase in capital stock - filed June 27, 1997 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed September 26, 1997 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed December 29, 1997 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed March 26, 1998 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed June 23, 1998 -5- Restated Organization Certificate - filed August 31, 1998 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed September 25, 1998 Certificate of Amendment of the Organization Certificate providing for an increase in capital stock - filed December 18, 1998; and Certificate of Amendment of the Organization Certificate providing for a change in the number of directors - filed September 3, 1999; and THAT, no amendments to its Restated Organization Certificate have been filed in the Office of the Superintendent of Banks except those set forth above; and attached hereto; and I DO FURTHER CERTIFY THAT, BANKERS TRUST COMPANY is validly existing as a banking organization with its principal office and place of business located at 130 Liberty Street, New York, New York. WITNESS, my hand and official seal of the Banking Department at the City of New York this 16th day of October in the Year Two Thousand and One. /s/ P. Vincent Conlon ------------------------------ Deputy Superintendent of Banks -6- DEUTSCHE BANK TRUST COMPANY AMERICAS BY-LAWS APRIL 15, 2002 DEUTSCHE BANK TRUST COMPANY AMERICAS NEW YORK -7- BY-LAWS OF DEUTSCHE BANK TRUST COMPANY AMERICAS ARTICLE I MEETINGS OF STOCKHOLDERS SECTION 1. The annual meeting of the stockholders of this Company shall be held at the office of the Company in the Borough of Manhattan, City of New York, in January of each year, for the election of directors and such other business as may properly come before said meeting. SECTION 2. Special meetings of stockholders other than those regulated by statute may be called at any time by a majority of the directors. It shall be the duty of the Chairman of the Board, the Chief Executive Officer, the President or any Co-President to call such meetings whenever requested in writing to do so by stockholders owning a majority of the capital stock. SECTION 3. At all meetings of stockholders, there shall be present, either in person or by proxy, stockholders owning a majority of the capital stock of the Company, in order to constitute a quorum, except at special elections of directors, as provided by law, but less than a quorum shall have power to adjourn any meeting. SECTION 4. The Chairman of the Board or, in his absence, the Chief Executive Officer or, in his absence, the President or any Co-President or, in their absence, the senior officer present, shall preside at meetings of the stockholders and shall direct the proceedings and the order of business. The Secretary shall act as secretary of such meetings and record the proceedings. ARTICLE II DIRECTORS SECTION 1. The affairs of the Company shall be managed and its corporate powers exercised by a Board of Directors consisting of such number of directors, but not less than seven nor more than fifteen, as may from time to time be fixed by resolution adopted by a majority of the directors then in office, or by the stockholders. In the event of any increase in the number of directors, additional directors may be elected within the limitations so fixed, either by the stockholders or within the limitations imposed by law, by a majority of directors then in office. One-third of the number of directors, as fixed from time to time, shall constitute a quorum. Any one or more members of the Board of Directors or any Committee thereof may participate in a meeting of the Board of Directors or Committee thereof by means of a conference telephone, video conference or similar communications equipment which allows all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at such a meeting. All directors hereafter elected shall hold office until the next annual meeting of the stockholders and until their successors are elected and have qualified. -8- No Officer-Director who shall have attained age 65, or earlier relinquishes his responsibilities and title, shall be eligible to serve as a director. SECTION 2. Vacancies not exceeding one-third of the whole number of the Board of Directors may be filled by the affirmative vote of a majority of the directors then in office, and the directors so elected shall hold office for the balance of the unexpired term. SECTION 3. The Chairman of the Board shall preside at meetings of the Board of Directors. In his absence, the Chief Executive Officer or, in his absence the President or any Co-President or, in their absence such other director as the Board of Directors from time to time may designate shall preside at such meetings. SECTION 4. The Board of Directors may adopt such Rules and Regulations for the conduct of its meetings and the management of the affairs of the Company as it may deem proper, not inconsistent with the laws of the State of New York, or these By-Laws, and all officers and employees shall strictly adhere to, and be bound by, such Rules and Regulations. SECTION 5. Regular meetings of the Board of Directors shall be held from time to time provided, however, that the Board of Directors shall hold a regular meeting not less than six times a year, provided that during any three consecutive calendar months the Board of Directors shall meet at least once, and its Executive Committee shall not be required to meet at least once in each thirty day period during which the Board of Directors does not meet. Special meetings of the Board of Directors may be called upon at least two day's notice whenever it may be deemed proper by the Chairman of the Board or, the Chief Executive Officer or, the President or any Co-President or, in their absence, by such other director as the Board of Directors may have designated pursuant to Section 3 of this Article, and shall be called upon like notice whenever any three of the directors so request in writing. SECTION 6. The compensation of directors as such or as members of committees shall be fixed from time to time by resolution of the Board of Directors. ARTICLE III COMMITTEES SECTION 1. There shall be an Executive Committee of the Board consisting of not less than five directors who shall be appointed annually by the Board of Directors. The Chairman of the Board shall preside at meetings of the Executive Committee. In his absence, the Chief Executive Officer or, in his absence, the President or any Co-President or, in their absence, such other member of the Committee as the Committee from time to time may designate shall preside at such meetings. The Executive Committee shall possess and exercise to the extent permitted by law all of the powers of the Board of Directors, except when the latter is in session, and shall keep minutes of its proceedings, which shall be presented to the Board of Directors at its next subsequent meeting. All acts done and powers and authority conferred by the Executive Committee from time to time -9- shall be and be deemed to be, and may be certified as being, the act and under the authority of the Board of Directors. A majority of the Committee shall constitute a quorum, but the Committee may act only by the concurrent vote of not less than one-third of its members, at least one of who must be a director other than an officer. Any one or more directors, even though not members of the Executive Committee, may attend any meeting of the Committee, and the member or members of the Committee present, even though less than a quorum, may designate any one or more of such directors as a substitute or substitutes for any absent member or members of the Committee, and each such substitute or substitutes shall be counted for quorum, voting, and all other purposes as a member or members of the Committee. SECTION 2. There shall be an Audit Committee appointed annually by resolution adopted by a majority of the entire Board of Directors which shall consist of such number of directors, who are not also officers of the Company, as may from time to time be fixed by resolution adopted by the Board of Directors. The Chairman shall be designated by the Board of Directors, who shall also from time to time fix a quorum for meetings of the Committee. Such Committee shall conduct the annual directors' examinations of the Company as required by the New York State Banking Law; shall review the reports of all examinations made of the Company by public authorities and report thereon to the Board of Directors; and shall report to the Board of Directors such other matters as it deems advisable with respect to the Company, its various departments and the conduct of its operations. In the performance of its duties, the Audit Committee may employ or retain, from time to time, expert assistants, independent of the officers or personnel of the Company, to make studies of the Company's assets and liabilities as the Committee may request and to make an examination of the accounting and auditing methods of the Company and its system of internal protective controls to the extent considered necessary or advisable in order to determine that the operations of the Company, including its fiduciary departments, are being audited by the General Auditor in such a manner as to provide prudent and adequate protection. The Committee also may direct the General Auditor to make such investigation as it deems necessary or advisable with respect to the Company, its various departments and the conduct of its operations. The Committee shall hold regular quarterly meetings and during the intervals thereof shall meet at other times on call of the Chairman. SECTION 3. The Board of Directors shall have the power to appoint any other Committees as may seem necessary, and from time to time to suspend or continue the powers and duties of such Committees. Each Committee appointed pursuant to this Article shall serve at the pleasure of the Board of Directors. -10- ARTICLE IV OFFICERS SECTION 1. The Board of Directors shall elect from among their number a Chairman of the Board and a Chief Executive Officer; and shall also elect a President, or two or more Co-Presidents, and may also elect, one or more Vice Chairmen, one or more Executive Vice Presidents, one or more Managing Directors, one or more Senior Vice Presidents, one or more Directors, one or more Vice Presidents, one or more General Managers, a Secretary, a Controller, a Treasurer, a General Counsel, a General Auditor, a General Credit Auditor, who need not be directors. The officers of the corporation may also include such other officers or assistant officers as shall from time to time be elected or appointed by the Board. The Chairman of the Board or the Chief Executive Officer or, in their absence, the President or any Co-President, or any Vice Chairman, may from time to time appoint assistant officers. All officers elected or appointed by the Board of Directors shall hold their respective offices during the pleasure of the Board of Directors, and all assistant officers shall hold office at the pleasure of the Board or the Chairman of the Board or the Chief Executive Officer or, in their absence, the President, or any Co-President or any Vice Chairman. The Board of Directors may require any and all officers and employees to give security for the faithful performance of their duties. SECTION 2. The Board of Directors shall designate the Chief Executive Officer of the Company who may also hold the additional title of Chairman of the Board, or President, or any Co-President, and such person shall have, subject to the supervision and direction of the Board of Directors or the Executive Committee, all of the powers vested in such Chief Executive Officer by law or by these By-Laws, or which usually attach or pertain to such office. The other officers shall have, subject to the supervision and direction of the Board of Directors or the Executive Committee or the Chairman of the Board or, the Chief Executive Officer, the powers vested by law or by these By-Laws in them as holders of their respective offices and, in addition, shall perform such other duties as shall be assigned to them by the Board of Directors or the Executive Committee or the Chairman of the Board or the Chief Executive Officer. The General Auditor shall be responsible, through the Audit Committee, to the Board of Directors for the determination of the program of the internal audit function and the evaluation of the adequacy of the system of internal controls. Subject to the Board of Directors, the General Auditor shall have and may exercise all the powers and shall perform all the duties usual to such office and shall have such other powers as may be prescribed or assigned to him from time to time by the Board of Directors or vested in him by law or by these By-Laws. He shall perform such other duties and shall make such investigations, examinations and reports as may be prescribed or required by the Audit Committee. The General Auditor shall have unrestricted access to all records and premises of the Company and shall delegate such authority to his subordinates. He shall have the duty to report to the Audit Committee on all matters concerning the internal audit program and the adequacy of the system of internal controls of the Company which he deems advisable or which the Audit Committee may request. Additionally, the General Auditor shall have the duty of reporting independently of all officers of the Company to the Audit Committee at least quarterly on any matters concerning the internal audit program and the adequacy of the system of internal controls of the Company that should be brought to the attention of the directors except those matters responsibility for which has been vested in the General Credit Auditor. Should the General Auditor deem any matter to be of special immediate importance, he shall -11- report thereon forthwith to the Audit Committee. The General Auditor shall report to the Chief Financial Officer only for administrative purposes. The General Credit Auditor shall be responsible to the Chief Executive Officer and, through the Audit Committee, to the Board of Directors for the systems of internal credit audit, shall perform such other duties as the Chief Executive Officer may prescribe, and shall make such examinations and reports as may be required by the Audit Committee. The General Credit Auditor shall have unrestricted access to all records and may delegate such authority to subordinates. SECTION 3. The compensation of all officers shall be fixed under such plan or plans of position evaluation and salary administration as shall be approved from time to time by resolution of the Board of Directors. SECTION 4. The Board of Directors, the Executive Committee, the Chairman of the Board, the Chief Executive Officer or any person authorized for this purpose by the Chief Executive Officer, shall appoint or engage all other employees and agents and fix their compensation. The employment of all such employees and agents shall continue during the pleasure of the Board of Directors or the Executive Committee or the Chairman of the Board or the Chief Executive Officer or any such authorized person; and the Board of Directors, the Executive Committee, the Chairman of the Board, the Chief Executive Officer or any such authorized person may discharge any such employees and agents at will. ARTICLE V INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS SECTION 1. The Company shall, to the fullest extent permitted by Section 7018 of the New York Banking Law, indemnify any person who is or was made, or threatened to be made, a party to an action or proceeding, whether civil or criminal, whether involving any actual or alleged breach of duty, neglect or error, any accountability, or any actual or alleged misstatement, misleading statement or other act or omission and whether brought or threatened in any court or administrative or legislative body or agency, including an action by or in the right of the Company to procure a judgment in its favor and an action by or in the right of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer of the Company is servicing or served in any capacity at the request of the Company by reason of the fact that he, his testator or intestate, is or was a director or officer of the Company, or is serving or served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement, and costs, charges and expenses, including attorneys' fees, or any appeal therein; provided, however, that no indemnification shall be provided to any such person if a judgment or other final adjudication adverse to the director or officer establishes that (i) his acts were committed in bad faith or were the result of active and deliberate dishonesty and, in either case, were material to the cause of action so adjudicated, or (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled. SECTION 2. The Company may indemnify any other person to whom the Company is permitted to provide indemnification or the advancement of expenses by applicable law, whether pursuant to rights granted pursuant to, or provided by, the New York Banking Law or other rights -12- created by (i) a resolution of stockholders, (ii) a resolution of directors, or (iii) an agreement providing for such indemnification, it being expressly intended that these By-Laws authorize the creation of other rights in any such manner. SECTION 3. The Company shall, from time to time, reimburse or advance to any person referred to in Section 1 the funds necessary for payment of expenses, including attorneys' fees, incurred in connection with any action or proceeding referred to in Section 1, upon receipt of a written undertaking by or on behalf of such person to repay such amount(s) if a judgment or other final adjudication adverse to the director or officer establishes that (i) his acts were committed in bad faith or were the result of active and deliberate dishonesty and, in either case, were material to the cause of action so adjudicated, or (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled. SECTION 4. Any director or officer of the Company serving (i) another corporation, of which a majority of the shares entitled to vote in the election of its directors is held by the Company, or (ii) any employee benefit plan of the Company or any corporation referred to in clause (i) in any capacity shall be deemed to be doing so at the request of the Company. In all other cases, the provisions of this Article V will apply (i) only if the person serving another corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise so served at the specific request of the Company, evidenced by a written communication signed by the Chairman of the Board, the Chief Executive Officer, the President or any Co-President, and (ii) only if and to the extent that, after making such efforts as the Chairman of the Board, the Chief Executive Officer, the President or any Co-President shall deem adequate in the circumstances, such person shall be unable to obtain indemnification from such other enterprise or its insurer. SECTION 5. Any person entitled to be indemnified or to the reimbursement or advancement of expenses as a matter of right pursuant to this Article V may elect to have the right to indemnification (or advancement of expenses) interpreted on the basis of the applicable law in effect at the time of occurrence of the event or events giving rise to the action or proceeding, to the extent permitted by law, or on the basis of the applicable law in effect at the time indemnification is sought. SECTION 6. The right to be indemnified or to the reimbursement or advancement of expense pursuant to this Article V (i) is a contract right pursuant to which the person entitled thereto may bring suit as if the provisions hereof were set forth in a separate written contract between the Company and the director or officer, (ii) is intended to be retroactive and shall be available with respect to events occurring prior to the adoption hereof, and (iii) shall continue to exist after the rescission or restrictive modification hereof with respect to events occurring prior thereto. SECTION 7. If a request to be indemnified or for the reimbursement or advancement of expenses pursuant hereto is not paid in full by the Company within thirty days after a written claim has been received by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled also to be paid the expenses of prosecuting such claim. Neither the failure of the Company (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of or reimbursement or advancement of expenses to the claimant is proper in the circumstance, nor an actual determination by the Company (including its Board of Directors, -13- independent legal counsel, or its stockholders) that the claimant is not entitled to indemnification or to the reimbursement or advancement of expenses, shall be a defense to the action or create a presumption that the claimant is not so entitled. SECTION 8. A person who has been successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding of the character described in Section 1 shall be entitled to indemnification only as provided in Sections 1 and 3, notwithstanding any provision of the New York Banking Law to the contrary. ARTICLE VI SEAL SECTION 1. The Board of Directors shall provide a seal for the Company, the counterpart dies of which shall be in the charge of the Secretary of the Company and such officers as the Chairman of the Board, the Chief Executive Officer or the Secretary may from time to time direct in writing, to be affixed to certificates of stock and other documents in accordance with the directions of the Board of Directors or the Executive Committee. SECTION 2. The Board of Directors may provide, in proper cases on a specified occasion and for a specified transaction or transactions, for the use of a printed or engraved facsimile seal of the Company. ARTICLE VII CAPITAL STOCK SECTION 1. Registration of transfer of shares shall only be made upon the books of the Company by the registered holder in person, or by power of attorney, duly executed, witnessed and filed with the Secretary or other proper officer of the Company, on the surrender of the certificate or certificates of such shares properly assigned for transfer. ARTICLE VIII CONSTRUCTION SECTION 1. The masculine gender, when appearing in these By-Laws, shall be deemed to include the feminine gender. -14- ARTICLE IX AMENDMENTS SECTION 1. These By-Laws may be altered, amended or added to by the Board of Directors at any meeting, or by the stockholders at any annual or special meeting, provided notice thereof has been given. I, Susan Johnson, Vice President, of Deutsche Bank Trust Company Americas, New York, New York, hereby certify that the foregoing is a complete, true and correct copy of the By-Laws of Deutsche Bank Trust Company Americas, and that the same are in full force and effect at this date. ------------------------------------- Vice President DATED AS OF: July 31, 2003 -15- DEUTSCHE BANK TRUST COMPANY AMERICAS FFIEC 031 - ----------------------------------- Legal Title of Bank RC-1 NEW YORK - ----------------------------------- City 11 NY 10019 - ----------------------------------- State Zip Code FDIC Certificate Number - 00623 CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 2003 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, reported the amount outstanding as of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
Dollar Amounts in Thousands RCFD - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS ////////////////// 1. Cash and balances due from depository institutions (from Schedule RC-A): ////////////////// a. Noninterest-bearing balances and currency and coin (1) ............ 0081 1,882,000 1.a. b. Interest-bearing balances (2) ..................................... 0071 208,000 1.b. 2. Securities: ////////////////// a. Held-to-maturity securities (from Schedule RC-B, column A) ........ 1754 0 2.a. b. Available-for-sale securities (from Schedule RC-B, column D)....... 1773 88,000 2.b. 3. Federal funds sold and securities purchased under agreements to resell.. RCON 3. a. Federal funds sold in domestic offices............................. B987 237,000 3.a RCFD b. Securities purchased under agreements to resell (3)................ B989 10,547,000 3.b 4. Loans and lease financing receivables (from Schedule RC-C): ////////////////// a. Loans and leases held for sale 5369 8,000 4.a b. Loans and leases, net unearned income.............................. B528 10,097,000 ////////////////// 4.b. c. LESS: Allowance for loan and lease losses ....................... 3123 406,000 ////////////////// 4.c. d. Loans and leases, net of unearned income and ////////////////// allowance (item 4.b minus 4.c) .................................... B529 9,691,000 4.d. 5. Trading Assets (from schedule RC-D) ................................... 3545 9,872,00 5. 6. Premises and fixed assets (including capitalized leases) ............... 2145 301,000 6. 7. Other real estate owned (from Schedule RC-M) ........................... 2150 60,000 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) 2130 2,990,000 8. 9. Customers' liability to this bank on acceptances outstanding ........... 2155 0 9. 10. Intangible assets ...................................................... ////////////////// a. Goodwill........................................................... 3163 0 10.a b. Other intangible assets (from Schedule RC-M) 0426 31,000 10.b 11. Other assets (from Schedule RC-F) ...................................... 2160 2,327,000 11. 12. Total assets (sum of items 1 through 11) ............................... 2170 38,242,000 12.
- -------------------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. (3) Includes all securities resale agreements in domestic and foreign offices, regardless of maturity. -16- DEUTSCHE BANK TRUST COMPANY AMERICAS FFIEC 031 - ------------------------------------------ Legal Title of Bank RC-2 FDIC Certificate Number - 00623 12 SCHEDULE RC--CONTINUED
Dollar Amounts in Thousands RCFD - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES 13. Deposits: ///////////////////// a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) RCON 2200 9,834,000 13.a. (1) Noninterest-bearing(1) .............................. RCON 6631 3,050,000 ///////////////////// 13.a.(1) (2) Interest-bearing ..................................... RCON 6636 6,784,000 ///////////////////// 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E part II) ///////////////////// RCFN 2200 9,423,000 13.b. (1) Noninterest-bearing ................................. RCFN 6631 1,814,000 ///////////////////// 13.b.(1) (2) Interest-bearing.................................... RCFN 6636 7,609,000 ///////////////////// 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase: RCON a. Federal Funds purchased in domestic offices (2)........... B993 6,602,000 14.a RCFD b. Securities sold under agreements to repurchase (3)........ 8995 0 14.b 15. Trading liabilities (from Schedule RC-D)....................... RCFD 3548 1,284,000 15. 16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): /////////////////// (from Schedule RC-M): RCFD 3190 882,000 16. 17. Not Applicable. //////////////////// 17. 18. Bank's liability on acceptances executed and outstanding ...... RCFD 2920 0 18. 19. Subordinated notes and debentures (2).......................... RCFD 3200 225,000 19. 20. Other liabilities (from Schedule RC-G) ........................ RCFD 2930 2,315,000 20. 21. Total liabilities (sum of items 13 through 20) ................ RCFD 2948 30,565,000 21. 22. Minority interest in consolidated subsidiaries RCFD 3000 624,000 22. //////////////////// EQUITY CAPITAL //////////////////// 23. Perpetual preferred stock and related surplus ................. RCFD 3838 1,500,000 23. 24. Common stock .................................................. RCFD 3230 2,127,000 24. 25. Surplus (exclude all surplus related to preferred stock) ...... RCFD 3839 584,000 25. 26. a. Retained earnings ........................................ RCFD 3632 2,883,000 26.a. b. Accumulated other comprehensive Income (3) ............... RCFD B530 (41,000) 26.b. 27. Other equity capital components (4) ........................... RCFD A130 0 27. 28. Total equity capital (sum of items 23 through 27) ............. RCFD 3210 7,053,000 28. 29. Total liabilities, minority interest, and equity capital (sum of items 21, 22, and 28)....................................... RCFD 3300 38,242,000 29. ----------------
Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the Number most comprehensive level of auditing work performed for the bank by independent external ------------------------------- auditors as of any date during 2001......................................................... RCFD 6724 2 M.1 -------------------------------
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Attestation on bank management's assertion on the effectiveness of the bank's internal control over financial reporting by a certified public accounting firm 4 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 5 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 6 = Review of the bank's financial statements by external auditors 7 = Compilation of the bank's financial statements by external auditors 8 = Other audit procedures (excluding tax preparation work) 9 = No external audit work - ---------------------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. (2) Report overnight Federal Home Loan Bank advances in Schedule RC, Item 16, "other borrowed money." (3) Includes all securities repurchase agreements in domestic and foreign offices, regardless of maturity. (4) Includes limited-life preferred stock and related surplus. (5) Includes net unrealized holding gains (losses) on available-for-sale securities, accumulated net gains (losses) on cash flow hedges, cumulative foreign currency translation adjustments, and minimum pension liability adjustments. (6) Includes treasury stock and unearned Employee Stock Plan shares. -----END PRIVACY-ENHANCED MESSAGE-----