INDENTURE dated as of January 15, 1998,
between AUTOBOND ACCEPTANCE CORPORATION, a Texas
corporation (the "Company"), and BankBoston, N.A., as
Agent (the "Agent").
The Company has duly authorized the execution and delivery of this
Indenture to provide for the creation of an issue of 15% Senior Subordinated
Notes Due 2001 (the "Series A Securities") and its 15% Convertible Subordinated
Notes Due 2001 (the "Series B Securities" and together with the Series A
Securities, the "Securities"), of substantially the tenor and amount hereinafter
set forth, and to provide therefor the Company has duly authorized the execution
and delivery of this Indenture.
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Securities:
ARTICLE 1.
Definitions and Incorporation by Reference
SECTION 1.1 Definitions.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) used or useful in a Related Business, (ii) the
Capital Stock of a Person that becomes a Restricted Subsidiary as a result of
the acquisition of such Capital Stock by the Company or another Restricted
Subsidiary, (iii) Capital Stock constituting a minority interest in any Person
that at such time is a Restricted Subsidiary; provided, however, that any such
Restricted Subsidiary described in clause (ii) or (iii) above is primarily
engaged in a Related Business or (iv) the Capital Stock or Indebtedness of a
Strategic Alliance Client.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 51% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) of
assets (of any kind, nature, or description) by the Company or any Subsidiary,
including any disposition by means of a
merger, consolidation or similar transaction.
"Associate" of any Person, means (1) any corporation or organization
(other than the Company or a Subsidiary of the Company) of which such Person is
an officer, employee or partner or is, directly or indirectly, the beneficial
owner of 10% or more of any class of equity securities, (2) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary capacity, and (3) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person or who is a director or officer of the Company or any
of its Affiliates.
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means, (i) in the case of a corporation,
corporate stock, (ii) in the case of an association, trust or business entity,
any and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock, (iii) in the case of a partnership,
partnership interests (whether general or limited) and (iv) any other interest
or participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition, in one or a series
of related transactions, of all or substantially all of the assets of the
Company to any Person, other than any of the Principals, (ii) the adoption of a
plan relating to the liquidation or dissolution of the Company, or (iii) the
acquisition by any Person, together with any Affiliates or Associates, other
than any of the Principals, of a direct or indirect interest in more than 51% of
the voting power of the voting stock of the Company, by way of merger or
consolidation or otherwise.
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"Class B Indebtedness" mean non-recourse indebtedness of the Company's
securitization subsidiaries secured by and payable from Class B Certificates.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means any stock of any class of the Company which has
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. However, subject to the
provisions of Section 8.11, shares issuable on conversion of Series B Securities
shall include only shares of the class designated as Common Stock of the Company
at the date of this instrument (or, at the option of the Holder, non-voting
Common Stock) or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company and which are
not subject to redemption by the Company; provided that if any time there shall
be more than one such resulting class, the shares of each such class then so
issuable shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Consolidated Leverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of all Indebtedness of the Company and its
Restricted Subsidiaries on a consolidated basis, excluding Excluded Debt, to
(ii) the Consolidated Net Worth of the Company.
"Consolidated Net Income" means, for any period, the Net Income of the
Company and its consolidated Subsidiaries.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company for which financial statements are available, as
(i) the par or stated value of all outstanding Capital Stock of the Company plus
(ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus.
"Consolidated Restricted Subsidiary" means a Restricted Subsidiary (i)
80% of the Capital Stock and 80% of the Voting Stock of which is owned by the
Company or one or more Consolidated Restricted Subsidiaries and (ii) which is
treated as a consolidated subsidiary for the purpose of the Company's U.S.
Federal income tax reporting.
"Cumulative Repossession Ratio" means as of any date of determination,
the cumulative static pool repossession percentage determined by a fraction (i)
the
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numerator of which is equal to the aggregate unpaid principal balance of all
Receivables which have been repossessed from the related cut-off date through
the end of the most recent calendar month and (ii) the denominator of which is
the unpaid principal balance of all Receivables as of such cut-off date.
"Current Market Price" shall have the meaning specified in Section
8.04(6).
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency option, currency swap agreement or other similar agreement to
which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"EBITDA to Interest Expense" means, for any period, the ratio of the
Company's Consolidated Net Income (as increased by interest expense, provision
for taxes, depreciation and amortization to the extent included in determining
net income) to the interest expense for such period.
"Excess Spread" means, over the life of a "pool" of Receivables that
have been sold by a Person to a trust or other Person in a securitization or
sale, the rights retained by such Person or its Restricted Subsidiaries at or
subsequent to the closing of such securitization or sale to receive cash flows
attributable to such "pool."
"Excess Spread Receivables" of a Person means the contractual or
certificated right to Excess Spread capitalized on such Person's consolidated
balance sheet (the amount of which shall be the present value of the Excess
Spread, calculated in accordance with GAAP).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Debt" means Indebtedness of the Company which is:
(1) Permitted Warehouse Indebtedness;
(2) Indebtedness owed to and held by the Company or a Consolidated
Restricted Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock which results in any such Consolidated
Restricted Subsidiary ceasing to be a Consolidated Restricted Subsidiary or
any subsequent transfer of such Indebtedness (other than to the Company or
another Consolidated Restricted Subsidiary) shall be deemed, in each case,
to constitute the incurrence of such Indebtedness by the Company;
(3) Hedging Obligations with respect to warehouse or repurchase
facilities;
(4) Class B Indebtedness to the extent constituting Non-Recourse
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Debt; and
(5) Non-Recourse Debt.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, as set forth (i) in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, (ii) in the statements and
pronouncements of the Financial Accounting Standards Board and (iii) in such
other statements by such other entity as approved by a significant segment of
the accounting profession.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any Person; provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person; (iii) all obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable and expense accruals
arising in the ordinary course of business); (iv) all obligations of such Person
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with respect to
letters of credit securing obligations (other than obligations described in (i)
through (iii) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the tenth Business
Day following receipt by such Person of a demand for reimbursement following
payment on the letter of credit); (v) accrued net liabilities under Hedging
Obligations; (vi) Warehouse Indebtedness; (vii) in connection with each sale by
such Person of any Receivables, the maximum aggregate contractual claim (if any)
that the purchaser thereof could have against such Person if the amounts
anticipated at the time of such sale to be received by such purchaser in
connection with such Receivables are not received by such purchaser; (viii) all
obligations of the type referred to in clauses (i) through (vii) of other
Persons and all dividends of other Persons for the payment of which, in either
case, such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee; and (ix) all
obligations of the type referred to in clauses (i) through (viii) of other
Persons secured by any Lien on any property or asset of
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such Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date. Notwithstanding the foregoing, any
securities issued in a securitization by a special purpose corporation
(including a Subsidiary) or similar entity formed by or on behalf of a Person
and to which Receivables or Excess Spread Receivables have been sold or
otherwise transferred by or on behalf of such Person or its Subsidiaries shall
not be treated as Indebtedness of such Person or its Subsidiaries under this
Indenture, regardless of whether such securities are treated as indebtedness for
tax purposes.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Initial Purchaser" means BancBoston Investments, Inc., a
Massachusetts corporation.
"interest," when used with respect to any Security, means the amount
of all interest accruing on such Security.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, repurchase agreement, futures contract or other
financial agreement or arrangement designed to protect the Company or any
Restricted Subsidiary against fluctuations in interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to (a) officers, directors or employees made in the
ordinary course of business for commissions, travel or similar activities, or
(b) customers in the ordinary course of business that are recorded as trade
accounts on the balance sheet of the lender) or other extensions of credit
(including by way of Guarantee or similar arrangement) or capital contribution
to (by means of any transfer of cash or other property to others or any payment
for property or services for the account or use of others), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar instruments issued
by such Person. For purposes of the definition of "Unrestricted Subsidiary", the
definition of "Restricted Payment" and Section 3.05, (i) "Investment" shall
include the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of any Subsidiary of the
Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if
positive) equal to (x) the Company's "Investment" in such Subsidiary at the time
of such redesignation less (y) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of such Subsidiary at the time of such redesignation; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as
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determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Securities are originally
issued.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provisions for taxes on such gain, realized in
connection with (a) the extinguishment of any Indebtedness of such Person or any
of its Restricted Subsidiaries or (b) currency exchange transactions not in the
ordinary course of business and (ii) any extraordinary gain (but not loss),
together with any related provisions for taxes on such extraordinary gain.
"Non-Recourse Debt" means indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against and Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries other than the assets pledged to secure such Indebtedness.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means the Chairman of the Board, the Vice Chairman, the
President, the Chief Financial Officer, or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
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acceptable to the Agent. The counsel may be an employee of or counsel to the
Company or the Agent.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) a Strategic Alliance Client to the extent such Investment
consists of options, warrants or other securities that are convertible or
exchangeable for equity securities of such Strategic Alliance Client and is
received by the Company or a Restricted Subsidiary without the payment of any
consideration other than the concurrent provision by the Company or such
Restricted Subsidiary to such Strategic Alliance Client of origination,
servicing, financing or asset securitization expertise; (iii) another Person if
as a result of such Investment such other Person is merged or consolidated with
or into, or transfers or conveys all or substantially all its assets to, the
Company or a Restricted Subsidiary; provided, however, that such Person's
primary business is a Related Business; (iv) Temporary Cash Investments; (v)
receivables owing to the Company or any Restricted Subsidiary if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; (vi) payroll, travel and similar advances
to cover matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the ordinary
course of business; (vii) loans or advances to employees made in the ordinary
course of business consistent with past practices of the Company or such
Restricted Subsidiary and not exceeding $1 million on the aggregate; (viii)
stock, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (ix) any Person to the extent such
Investment represents the non-cash portion of the consideration received for an
Asset Disposition as permitted pursuant to Section 3.07; (x) Receivables; (xi) a
Strategic Alliance Client to the extent such Investment consists of (A)
Indebtedness of such Strategic Alliance Client that is secured by Receivables
owned by such Strategic Alliance Client in an aggregate principal amount at any
time outstanding not to exceed 100% of the aggregate market value of such
Receivables; provided, however, that such Receivables are eligible to be
characterized under GAAP as held for sale on the balance sheet of such Strategic
Alliance Client and such Indebtedness has not been outstanding in excess of 364
days; and (B) Indebtedness of such Strategic Alliance Client that is secured by
Excess Spread Receivables owned by such Strategic Alliance Client; provided,
however, that such Excess Spread Receivables are attributed solely to one or
more "pools" of Receivables that were securitized in one or more transactions in
which the Company or its Restricted Subsidiaries either acted as underwriters or
placement agent or provided all or a portion of the financing for such "pool"
prior to such securitization; and (xii) Excess Spread Receivables; provided,
however, that such Excess Spread Receivables represent interests in one or more
"pools" of Receivables that were securitized in one or more transactions in
which the Company or its Restricted Subsidiaries acted as sponsor, underwriter
or placement agent or provided all or a portion of the financing for such "pool"
prior to such securitization.
"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
8
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government
bonds to secure surety or appeal bonds to which such Person is a party, or
deposits as security for contested taxes or import duties or for the payment
of rent, in each case incurred in the ordinary course of business; (b) Liens
imposed by law, such as carriers', warehousemen's and mechanics' Liens, in
each case for sums not yet due or being contested in good faith by appropriate
proceedings or other Liens arising out of judgments or awards against such
Person with respect to which such Person shall then be proceeding with an appeal
or other proceedings for review; (c) Liens for property taxes not yet subject
to penalties for non-payment or which are being contested in good faith and by
appropriate proceedings; (d) Liens in favor of issuers of surety bonds or
letters of credit issued pursuant to the request of and for the account of
such Person in the ordinary course of its business; provided, however, that
such letters of credit do not constitute Indebtedness; (e) minor survey
exceptions, minor encumbrances, easements or reservations of, or rights of
others for, licenses, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions
as to the use of real property or Liens incidental to the conduct of the
business of such Person or to the ownership of its properties which were not
incurred in connection with Indebtedness and which do not in the aggregate
materially adversely affect the value of said properties or materially impair
their use in the operation of the business of such Person; (f) Liens securing
Indebtedness incurred to finance the construction, purchase or lease of, or
repairs, improvements or additions to, property of such Person (but excluding
Capital Stock of another Person); (g) Liens on Receivables owned by the Company
or a Restricted Subsidiary, as the case may be, to secure Permitted Warehouse
Indebtedness or Class B Indebtedness; (h) Liens existing on the Issue Date on
Excess Spread Receivables to secure the Company's 18% Convertible Secured Notes;
(i) Liens on property or shares of Capital Stock of another Person at the time
such other Person becomes a Subsidiary of such Person; (j) Liens on property at
the time such Person or any of its Subsidiaries acquires the property, including
any acquisition by means of a merger or consolidation with or into such Person
or a Subsidiary of such Person; (k) Liens securing Indebtedness or other
obligations of a Subsidiary of such Person owing to such Person or a
Consolidated Restricted Subsidiary of such Person; (l) Liens securing Hedging
Obligations; (m) Liens on cash or other assets securing Warehouse Indebtedness
(other than Permitted Warehouse Indebtedness) of the Company or its Restricted
Subsidiaries; (n) Liens to secure any Refinancing (or successive Refinancings)
as a whole, or in part, of any Indebtedness secured by any Lien referred to in
the foregoing clauses (f), (h), (i), or (j); (o) Liens incurred in the ordinary
course of business of the Company or any Restricted Subsidiary of the Company
with respect to obligations that do not exceed $2.0 million at any one time
outstanding and that (i) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (ii) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Restricted Subsidiary; and (p)
Liens granted under this Indenture; provided, however, that (x) such new Lien
specified in (n) above shall be limited to all or part of the same property that
secured the original Lien (plus improvements to or on such property) and (y) the
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Indebtedness secured by such Lien at such time is not increased to any amount
greater than the sum of (A) the outstanding principal amount or, if greater,
committed amount of the Indebtedness described under clauses (f), (h), (i) or
(j), as the case may be, at the time the original Lien became a Permitted Lien
and (B) an amount necessary to pay any fees and expenses, including premiums,
related to such refinancing, refunding, extension, renewal or replacement.
"Permitted Warehouse Indebtedness" means Warehouse Indebtedness in
connection with a Warehouse Facility; provided, however, that any such
Indebtedness has not been outstanding in excess of 364 days.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.
"Principals" means each of Xxxxxxx X. Xxxxxxxx, Xxxxxx Xxxx and Xxxx
X. Xxxxxxxx.
"Purchase Agreement" means the Purchase Agreement dated as of January
30, 1998, between the Company and the Initial Purchaser.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Receivables" means consumer loans, leases and receivables acquired by
the Company, any Restricted Subsidiary or a Strategic Alliance Client in the
ordinary course of business; provided, however, that for purposes of determining
the amount of a Receivable at any time, such amount shall be determined in
accordance with GAAP, consistently applied, as of the most recent practicable
date.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
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"Refinancing Indebtedness" means Indebtedness incurred by the Company
or any Restricted Subsidiary that Refinances any Indebtedness of the Company or
such Restricted Subsidiary existing on the Issue Date or incurred in compliance
with this Indenture, including Indebtedness that Refinances Refinancing
Indebtedness; provided, however, that (a) such Refinancing Indebtedness has an
aggregate principal amount (or if incurred with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate principal
amount (or if Incurred with original issue discount, the aggregate accreted
value) then outstanding or committed (plus fees and expenses, including any
premium and defeasance costs) under the Indebtedness being Refinanced, (b) such
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a weighted Average Life equal to or greater than the weighted
Average Life of, such Refinancing Indebtedness and (c) if the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment of the Securities, such Refinancing Indebtedness is
subordinated in right of payment to the Securities on terms at least as
favorable to the Holders of Securities as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Related Business" means any consumer finance business or any consumer
financial services business.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock (other than (A) dividends or
distributions payable solely in its Capital Stock, (B) dividends or
distributions payable solely to the Company or a Restricted Subsidiary, (C) so
long as no Event of Default has occurred and is continuing, dividends or
distributions on the Company's ___% Series A Cumulative Preferred Stock (subject
to the registration statement on Form #S-1 (No. 333-41257), as amended solely to
effectuate the issuance thereof) and (D) pro rata dividends or other
distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to
minority stockholders (or owners of an equivalent interest in the case of a
Subsidiary that is an entity other than a corporation)), (ii) the purchase,
redemption or other acquisition or retirement for value of any Capital Stock of
the Company held by any Person or of any Capital Stock of a Restricted
Subsidiary held by any Affiliate of the Company (other than a Restricted
Subsidiary), including the exercise of any option to exchange any Capital Stock
(other than into Capital Stock of the Company), (iii) any payments due on
Subordinated Obligations, or the purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any Subordinated
Obligations (other than the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition) or (iv) the making of any Investment (other
than a Permitted Investment) in any Person.
11
"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" has the meaning stated in the first recital of this
Indenture. "Securities Act" means the Securities Act of 1933.
"Senior Indebtedness" means the principal, premium, if any, and unpaid
interest on (i) any Indebtedness for borrowed money of the Company now
outstanding or hereafter incurred or assumed, (ii) all deferrals, renewals,
extensions and refundings of any such Indebtedness for borrowed money, (iii)
obligations of the Company under foreign exchange contracts, and (iv)
reimbursement obligations of the Company under bankers acceptances, letters of
credit, and bid, performance and surety bonds; provided, that the following
shall not constitute Senior Indebtedness: (a) any Indebtedness for borrowed
money as to which, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is expressly provided that such
Indebtedness is subordinate in right of payment to all other indebtedness of the
Company, (b) any Indebtedness for borrowed money which by its terms refers
explicitly to the Securities issued hereunder and states that such Indebtedness
for borrowed money shall not be senior in right of payment thereto, (c)
Indebtedness for borrowed money of the Company in respect of the Securities; and
(d) Indebtedness incurred by the Company which results in the occurrence of a
Default or Event of Default hereunder.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any obligation, the date
specified in such security as the fixed date on which the final payment of
principal of such obligation is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such obligation at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Strategic Alliance Client" means any Person (other than a Restricted
Subsidiary) engaged in a Related Business to which the Company provides, or
reasonably expects to provide, origination, servicing, financing or asset
securitization expertise.
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter incurred) which is pari
passu, subordinate or junior in right of payment to the Series A or Series B
Securities pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association,
12
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company that is not an Affiliate of the
Company and which is organized under the laws of the United States of America,
any state thereof or any foreign country recognized by the United States, and
which bank or trust company has capital, surplus and undivided profits
aggregating in excess of $50,000,000 (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Xxxxx'x Investors Service, Inc. or "A-1" (or higher) according to Standard
and Poor's Ratings Group, and (v) investments in securities with maturities of
six months or less from the date of acquisition issued or fully guaranteed by
any state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or "A" by Xxxxx'x Investors Service, Inc.
"Uniform Commercial Code" means the Texas Uniform Commercial Code as
in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed Subsidiary) to be
an Unrestricted Subsidiary, but only so long as such Subsidiary (a) has no
Indebtedness other than Non-Recourse Debt, (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time
13
from Persons who are not Affiliates of the Company, (c) is a person with respect
to which neither the Company nor any of its Restricted Subsidiaries has any
direct or indirect obligation (i) to subscribe for additional equity or (ii) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results, and (d) has not guaranteed
or otherwise directly or indirectly provided credit support for any Indebtedness
of the Company or any of its Restricted Subsidiaries. Any such designation by
the Board of Directors shall be evidenced by the Company to the Agent by
promptly filing with the Agent a copy of the board resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests or membership interests) of such
Person then outstanding and normally entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
thereof.
"Warehouse Facility" means any funding arrangement with a financial
institution or other lender or purchaser exclusively to finance the acquisition
of Receivables by the Company, a Subsidiary of the Company or a Strategic
Alliance Client for the purpose of pooling such Receivables prior to
securitization or sale in the ordinary course of business, including purchase
and sale facilities pursuant to which the Company or a Subsidiary of the Company
sells Receivables or debt of a Strategic Alliance Client secured by Receivables
owned or financed by such Strategic Alliance Client to a financial institution
and retains a right of first refusal upon the subsequent resale of such
Receivables or debt by such financial institution.
"Warehouse Indebtedness" means advances outstanding to the borrower
under a Warehouse Facility.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares and shares held
by other Persons to the extent such shares are required by applicable law to be
held by a Person other than the Company or a Restricted Subsidiary) is owned by
the Company or one or more Wholly Owned Subsidiaries.
SECTION 1.2 Other Definitions.
Defined in
Term Section
"Bankruptcy Law"..............................................5.01
"Custodian"...................................................5.01
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"Event of Default"............................................5.01
"Legal Holiday"..............................................11.05
"Registrar"...................................................2.03
"Successor Company"...........................................4.01
SECTION 1.3 Rules of Construction. Unless the context otherwise
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) "including" means including without limitation;
(e) words in the singular include the plural and words in the plural
include the singular;
(f) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(g) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP and accretion of principal on such security shall be
deemed to be the incurrence of Indebtedness; and
(h) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE 2.
The Securities
SECTION 2.1 Form and Dating. The Series A Securities shall be
substantially in the form of Exhibit A which is hereby incorporated in and
expressly made a part of this Indenture. The Series B Securities shall be
substantially in the form of Exhibit B, which is hereby incorporated in and
expressly made a part of this Indenture. In addition, the Series A Securities
and Series B Securities may be evidenced by a combined certificate. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the
15
Company and the Agent). Each Security shall be dated the date of its
authentication. The terms of the Securities set forth in Exhibit A and Exhibit B
are part of the terms of this Indenture.
The Securities are being sold by the Company to the Initial Purchaser
pursuant to the Purchase Agreement.
SECTION 2.2 Execution and Authentication. Any Officer may sign the
Securities for the Company by manual signature.
The aggregate principal amount outstanding at any time may not exceed
$6,284,075.40 for the Series A Securities and $1,215,924.60 for the Series B
Securities, in each case except as provided in Section 2.07, and except that the
combined aggregate principal amount of the Securities may be increased to
$10,000,000 pursuant to the Purchase Agreement.
SECTION 2.3 Registrar and Paying Agent. The Company shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar") and an office or agency where Securities may
be presented for payment (the "Paying 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 and one or more additional paying agents. The
term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture. The
agreement shall implement the provisions of this Indenture that relate to such
agent. The Company shall notify the Agent of the name and address of any such
agent. If the Company fails to maintain a Registrar or Paying Agent, the Agent
shall act as such and shall be entitled to appropriate compensation therefor
pursuant to Section 6.07. The Company may act as Paying Agent, Registrar,
co-registrar or transfer agent.
The Company initially will act as Paying Agent and appoints the Agent
as Registrar in connection with the Securities.
SECTION 2.4 Paying Agent. By 11:00 a.m., New York time, on each due
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent a sum sufficient to pay such principal and interest when
so becoming due. The Company shall require each Paying Agent (other than the
Agent) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders all money held by the Paying Agent for the payment of
principal of or interest on the Securities and shall notify the Agent of any
default by the Company in making any such payment. The Paying Agent shall make
payments to Holders in immediately available funds when due. The Company at any
time may require a Paying Agent to pay all money held by it to the Agent and to
account for any funds disbursed by the Paying Agent. Upon complying with this
Section, the Paying Agent shall have no further liability for the money paid to
the Agent.
16
SECTION 2.5 Securityholder Lists. The Agent 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 Agent is not the
Registrar, the Company shall furnish to the Agent, in writing at least five
Business Days before each interest payment date and at such other times as the
Agent may request in writing, a list in such form and as of such date as the
Agent may reasonably require of the names and addresses of Securityholders.
SECTION 2.6 Transfer and Exchange. The Securities shall be issued in
registered form and shall be transferable only upon the surrender of a Security
for registration of transfer. Subject to the restrictions on transfer set forth
in Section 2.12, when a Security is presented to the Registrar or a co-registrar
with a request to register a transfer, the Registrar shall register the transfer
as requested if the requirements of the Uniform Commercial Code are met. To
permit registration of transfers and exchanges, the Company shall execute
Securities at the Registrar's or co-registrar's request. The Company may require
payment of a sum sufficient to pay all taxes, assessments or other governmental
charges in connection with any transfer or exchange pursuant to this Section.
The Company shall not be required to make and the Registrar need not register
transfers or exchanges of Securities for a period of 15 days before an interest
payment date.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Agent, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
the Agent, the Paying Agent, the Registrar or any co-registrar shall be affected
by notice to the contrary.
SECTION 2.7 Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue a
replacement Security if the requirements of the Uniform Commercial Code are met
and the Holder satisfies any other reasonable requirements of the Agent. If
required by the Agent or the Company, such Holder shall furnish an indemnity
agreement sufficient in the reasonable judgment of the Company and the Agent to
protect the Company, the Agent, the Paying Agent, the Registrar and any
co-registrar from any loss which any of them may suffer if a Security is
replaced. The Company and the Agent may charge the Holder for their expenses in
replacing a Security.
SECTION 2.8 Outstanding Securities. Securities outstanding at any time
are all Securities executed by the Company except for those delivered to it for
cancellation and those described in this Section as not outstanding. A Security
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
17
outstanding unless the Agent and the Company receive proof satisfactory to them
that the replaced Security is held by a bona fide purchaser.
SECTION 2.9 Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company reasonably considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare definitive
Securities and deliver them in exchange for temporary Securities.
SECTION 2.10 Cancellation. The Company at any time may deliver
Securities to the Agent for cancellation. The Registrar and the Paying Agent
shall forward to the Agent any Securities surrendered to them for registration
of transfer, exchange or payment. The Agent and no one else shall cancel and
destroy all Securities surrendered for registration of transfer, exchange,
replacement in the event of a mutilated security, payment or cancellation and
deliver a certificate of such destruction to the Company unless the Company
directs the Agent to deliver canceled Securities to the Company. The Company may
not issue new Securities to replace Securities it has redeemed, paid or
delivered to the Agent for cancellation.
SECTION 2.11 Defaulted Interest. If the Company defaults in a payment
of interest on the Securities, the Company shall pay defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Agent shall fix or
cause to be fixed any such special record date (which shall be no less than 10
days prior to the payment date) and payment date and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid, which notice shall be mailed
not less than 10 days prior to such special record date.
SECTION 2.12 Special Transfer Provisions. No transfer of any Security
may be made unless such transfer satisfies one of the following: (i) such
transfer is in compliance with Rule 144A under the Securities Act, to a person
who the transferor reasonably believes is a Qualified Institutional Buyer (as
defined in Rule 144A) that is purchasing for its own account or for the account
of a Qualified Institutional Buyer and to whom notice is given that such
transfer is being made in reliance upon Rule 144A under the Securities Act as
certified by such transferee in a letter in the form of Exhibit C hereto; (ii)
after the appropriate holding period, such transfer is pursuant to an exemption
from registration under the Securities Act provided by Rule 144 under the
Securities Act; (iii) such transfer is to a transferee who is an accredited
investor in a transaction exempt from the registration requirements of the
Securities Act, in each case in accordance with any applicable securities laws
of any State of the United States or (iv) such transfer is otherwise exempt from
the registration requirements of the Securities Act. The Company will require,
in order to assure compliance with such laws, that the Securityholder's
prospective transferee referred to in the preceding clauses (iii) or (iv)
deliver an investment letter certifying to the Company and the Agent as to the
facts surrounding such transfer in the Form of Exhibit D hereto. Except in the
case of a transfer of
18
Securities to a transferee referred to in the preceding clause (i), a transfer
to an Affiliate of the Agent or of a Holder, or, in general, a transfer that is
to be made after two years from the Issuance Date, the Agent shall require an
opinion of counsel satisfactory to it to the effect that such transfer may be
made pursuant to an exemption from the Securities Act without such registration
(which opinion of counsel shall not be an expense of the Agent or the Company).
ARTICLE 3.
Covenants
SECTION 3.1 Payment of Securities. The Company shall promptly pay the
principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if by 2:00 p.m. New York time on such date
the Agent has received from the Company or the Paying Agent in immediately
available funds money sufficient to pay all principal, interest, premiums and
any other amounts then due. The Company shall pay interest on overdue principal
at the rate specified therefor in the Securities, and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
SECTION 3.2 SEC Reports. The Company shall file with the SEC and
provide the Agent and Securityholders with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections, such information, documents and other reports to be so filed and
provided at the time specified for the filing of such information, documents and
reports under such Sections.
SECTION 3.3 Limitation on Indebtedness. The Company shall not incur,
directly or indirectly, any Indebtedness if, on the date of such incurrence and
after giving effect thereto, the Consolidated Leverage Ratio exceeds 2.0 to 1.0.
SECTION 3.4 Limitation on Indebtedness and Preferred Stock of
Restricted Subsidiaries. The Company shall not permit any Restricted Subsidiary
to incur, directly or indirectly, any Indebtedness or Preferred Stock except:
(a) Permitted Warehouse Indebtedness and Class B Indebtedness;
(b) Indebtedness or Preferred Stock issued to and held by the Company
or a Consolidated Restricted Subsidiary; provided, however, that any subsequent
issuance or transfer of any Capital Stock which results in any such Consolidated
Restricted Subsidiary ceasing to be a Consolidated Restricted Subsidiary or any
subsequent transfer of such Indebtedness or Preferred Stock (other than to the
Company or a Consolidated Restricted Subsidiary) shall be deemed, in each case,
to constitute the issuance of such Indebtedness or Preferred Stock by the issuer
thereof;
19
(c) Indebtedness or Preferred Stock of a Subsidiary incurred and
outstanding on or prior to the date on which such Subsidiary was acquired by the
Company (other than Indebtedness or Preferred Stock incurred in connection with,
or to provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to which
such Subsidiary became a Subsidiary or was acquired by the Company); provided,
however, that on the date of such acquisition and after giving effect thereto,
the Company would have been able to incur at least $1.00 of Indebtedness
pursuant to Section 3.03(a).
(d) Refinancing Indebtedness incurred in respect of Indebtedness
referred to in clause (c) of this Section 3.04 or this clause (d); provided,
however, that to the extent such Refinancing Indebtedness directly or indirectly
Refinances Indebtedness of a Subsidiary described in clause (c) of this Section
3.04, such Refinancing Indebtedness shall be incurred only by such Subsidiary.
SECTION 3.5 Limitation on Restricted Payments. (a) The Company shall
not, and shall not permit any Restricted Subsidiary, directly or indirectly, to
make a Restricted Payment if at the time the Company or such Restricted
Subsidiary makes such Restricted Payment or immediately thereafter: (i) a
Default shall have occurred and be continuing (or would result therefrom); or
(ii) the Company is not able to incur an additional $1.00 of Indebtedness
pursuant to Section 3.03(a) as if such Restricted Payment had been made at the
beginning of the four quarter period ending in the quarterly period in which
such Restricted Payment is made.
(b) The provisions of Section 3.05(a) shall not prohibit: (i) any
purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company by the Company (other than
Capital Stock issued or sold to a Subsidiary of the Company or an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees) (except to the extent that a
Holder holding registration rights was precluded from participating in the
subject sale of Capital Stock despite having elected to do so to the full extent
so elected); (ii) the exercise or conversion of an option, warrant or other
security convertible or exchangeable for an equity security of a Strategic
Alliance Client in connection with a substantially simultaneous sale or other
disposition by the Company or a Restricted Subsidiary of such equity security.
SECTION 3.6 Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary (a) to pay dividends or make any other
distributions on its Capital Stock to the Company or a Restricted Subsidiary or
pay any Indebtedness owed to the Company, (b) to make any loans or advances to
the Company or (c) transfer any of its property or assets to the Company,
except: (i) any encumbrance or restriction pursuant to an agreement in effect at
or entered into on the Issue Date; (ii) any encumbrance or restriction with
respect to a Restricted Subsidiary pursuant to an agreement applicable to
20
such Restricted Subsidiary on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than an agreement entered into in
connection with, or in anticipation of, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding on such date; (iii)
any encumbrance or restriction with respect to a Restricted Subsidiary pursuant
to any other agreement contained in any amendment to an agreement referred to in
clause (i) or (ii) of this Section 3.06 or this clause (iii); provided, however,
that the encumbrances and restrictions with respect to such Restricted
Subsidiary contained in any such agreement or amendment are no less favorable to
the Securityholders than encumbrances and restrictions with respect to such
Restricted Subsidiary contained in the agreements referred to in clauses (i) or
(ii) of this Section 3.06, as the case may be; (iv) any such encumbrance or
restriction consisting of customary non-assignment provisions in leases
governing leasehold interests to the extent such provisions restrict the
transfer of the lease or the property leased thereunder; (v) in the case of
clause (c) above, restrictions contained in Permitted Liens securing
Indebtedness of a Restricted Subsidiary to the extent such restrictions restrict
the transfer of the property subject to such security agreements or mortgages;
and (vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition.
SECTION 3.7 Limitation on Sales of Assets and Subsidiary Stock. In any
calendar year, the Company shall not consummate any Asset Disposition in excess
of 10% of consolidated total assets at such time, other than in the ordinary
course of business and so long as the aggregate amount of such Asset Depositions
(on a cumulative basis from the Issue Date) does not exceed 25% of consolidated
total assets as of the end of the quarter preceding such Asset Dispositions.
SECTION 3.8 Limitation on Liens. The Company shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, incur or permit to
exist any Lien of any nature whatsoever on any of its properties (including
Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or
thereafter acquired, other than Permitted Liens, without effectively providing
that the Securities shall be secured equally and ratably with (or prior to) the
obligations so secured for so long as such obligations are so secured.
SECTION 3.9 Financial Covenants.
(a) Minimum Consolidated Net Worth. As of the end of each quarter, the
Company will have a Consolidated Net Worth of at least $12,000,000, plus (i)
100% of the Net Cash Proceeds to the Company from the sale of Capital Stock,
plus (ii) 75% of net income, in each case on a cumulative basis on and after
February 1, 1998.
(b) Minimum Ratio of Earnings Before Interest, Taxes, Depreciation and
Amortization to Interest. As of the end of each quarter, the Company will have a
trailing 12-month ratio of EBITDA to Interest Expense of at least 1.5.
21
(c) Maximum Average Repossession Ratios. As of the end of each
quarter, the Company will have a weighted average Cumulative Repossession Ratio
for all securitized Receivables pools of no greater than 27%.
SECTION 3.10 Further Assurances. The Company will from time to time
execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance,
and other instruments, and will take such other action as may be necessary or
advisable to maintain or preserve the lien of this Indenture or carry out more
effectively the purposes hereof.
SECTION 3.11 Limitation on Investment Company Status. The Company
shall not take any action, or otherwise permit to exist any circumstance, that
would require the Company to register as an "investment company" under the
Investment Company Act of 1940, as amended.
SECTION 3.12 Compliance Certificate. The Company shall deliver to the
Agent within 45 days after the end of each quarter and within 90 days after the
end of each fiscal year of the Company an Officers' Certificate demonstrating
compliance or noncompliance with respect to the financial covenants contained
herein and stating that in the course of the performance by the signers of their
duties as Officers of the Company they would normally have knowledge of any
Default and whether or not the signers know of any Default that occurred during
such period. If they do, the certificate shall describe the Default, its status
and what action the Company is taking or proposes to take with respect thereto.
SECTION 3.13 Further Instruments and Acts. Upon request of the Agent,
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 purpose of this Indenture.
ARTICLE 4.
Successor Company
SECTION 4.1 When Company May Merge or Transfer Assets. Subject to
Article 13, the Company shall not consolidate with or merge with or into, or
convey, transfer or lease, in one transaction or a series of related
transactions, all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Agent, in form
satisfactory to
22
the Agent, all the obligations of the Company under the Securities , this
Indenture, and, if applicable, the Purchase Agreement;
(ii) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or
any Subsidiary as a result of such transaction as having been incurred by
the Successor Company or such Subsidiary at the time of such transaction),
no Default shall have occurred and be continuing (including on a pro forma
basis);
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to incur an additional $1.00 of
Indebtedness pursuant to Section 3.03(a);
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction; and
(v) the Company shall have delivered to the Agent an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture, but the predecessor Company in the case of a
lease of all or substantially all its assets shall not be released from the
obligation to pay the principal of and interest on the Securities.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company.
ARTICLE 5.
Defaults and Remedies
SECTION 5.1 Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, and such default continues for a
period of 5 Business Days;
(2) the Company (i) defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
declaration or otherwise, or (ii) fails to purchase Securities when
required
23
pursuant to this Indenture or the Securities;
(3) the Company fails to comply with Section 3.04, 3.05, 3.06, 3.07,
3.08, 3.09(b) or (c), 3.12, or 4.01;
(4) the Company fails to comply with any of its covenants or
agreements in the Securities, this Indenture (other than those referred to
in (1), (2) or (3) above) and such failure continues for 30 days after the
occurrence thereof;
(5) Indebtedness of the Company or any Significant Subsidiary is not
paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the aggregate
amount of all such unpaid or accelerated Indebtedness exceeds $1,000,000 or
its foreign currency equivalent at the time;
(6) the Company within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) is dissolved (other than pursuant to a consolidation, a
malgamation or merger);
(C) becomes insolvent or is unable to pay its debts or fails or
admits in writing its inability generally to pay its debts as they
become due;
(D) has a resolution passed for its winding-up, reorganization or
liquidation (other than pursuant to a consolidation, amalgamation or
merger);
(E) has a secured party take possession of all or substantially
all its assets or has a distress, execution, attachment, sequestration
or other legal process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged, stayed
or restrained, in each case within 30 days thereafter;
(F) consents to the entry of an order for relief against it in an
involuntary case;
(G) seeks to consents to the appointment of a Custodian of it or
for substantially all of its assets; or
(H) makes a general assignment, arrangement or composition with,
or for the benefit of, its creditors;
24
or takes any comparable action under any foreign laws relating to
insolvency;
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case;
(B) appoints a Custodian of the Company or for any substantial
part of its property; or
(C) orders the winding up or liquidation of the Company; or any
similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(8) any judgments or decrees for the payment of money in excess of
$1,000,000 in the aggregate (for all such judgments and decrees) or its
foreign currency equivalent at the time is entered against the Company or
any Significant Subsidiary and is not discharged or satisfied and there is
a period of 45 days following the entry of such judgment or decree during
which such judgment or decree is not discharged, satisfied, waived or the
execution thereof stayed; or
(9) if the Agent or any Affiliate of the Agent is a Securityholder,
the material breach of any representation, warranty or covenant of the
Company contained in or the occurrence of a default by the Company under,
the Purchase Agreement, and if such breach or default is susceptible of
cure and the Company is pursuing, and continues to pursue, such cure to the
Agent's reasonable satisfaction, such breach or default remains uncured for
30 days after its occurrence.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Xxxxx 00, Xxxxxx Xxxxxx Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, Agent, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
The Company shall deliver to the Agent, promptly, and in any event
within 5 days after the occurrence thereof, written notice in the form of an
Officers' Certificate of any Default, its status and what action the Company is
taking or proposes to take with respect thereto.
SECTION 5.2 Acceleration. If an Event of Default (other than an Event
of Default specified in Section 5.01(6) or (7) with respect to the Company)
occurs
25
and is continuing, the Agent by notice to the Company, or the Holders of at
least 25% in principal amount of the Securities by notice to the Company and the
Agent, may declare the principal of and accrued but unpaid interest on all the
Securities to be due and payable. Upon such a declaration, such principal and
interest shall be due and payable immediately. If an Event of Default specified
in Section 5.01(6) or (7) with respect to the Company occurs and is continuing,
the principal of and interest on all the Securities shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Agent or any Securityholders. The Agent or the Holders of a majority in
principal amount of the Securities by notice to the Agent may in their sole
discretion rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 5.3 Other Remedies. If an Event of Default occurs and is
continuing, the Agent may pursue any available remedy to collect the payment of
principal of or interest on and any other amounts due under the Securities or to
enforce the performance of any provision of the Securities or this Indenture,
including remedies available under the Uniform Commercial Code.
The Agent may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Agent 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 Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 5.4 Waiver of Past Defaults. The Holders of a majority in
principal amount of the Securities by notice to the Agent may waive an existing
Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security or (ii) a Default in respect of a
provision that under Section 8.02 cannot be amended without the consent of each
Securityholder affected. 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.
SECTION 5.5 Control by Majority. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Agent or of exercising
any power conferred on the Agent. However, the Agent may refuse to follow any
direction that conflicts with law or this Indenture or, subject to Section 6.01,
that the Agent determines is unduly prejudicial to the rights of other
Securityholders or would involve the Agent in personal liability; provided,
however, that the Agent may take any other action deemed proper by the Agent
that is not inconsistent with such direction. Prior to taking any action
hereunder, the Agent shall be entitled to indemnification satisfactory to it in
its sole discretion against all losses and expenses caused by taking or not
taking such action.
SECTION 5.6 Limitation on Suits. A Securityholder may not
26
pursue any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Agent written notice stating that an Event
of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Agent to pursue the remedy;
(3) such Holder or Holders offer to the Agent reasonable security or
indemnity against any loss, liability or expense;
(4) the Agent does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities do
not give the Agent a direction inconsistent with the request during such
60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 5.7 Rights of Holders To Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
principal of and interest on and any other amounts due under the Securities held
by such Holder, on or after the respective due dates expressed in the
Securities, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 5.8 Collection Suit by Agent. If an Event of Default occurs
and is continuing, the Agent may recover judgment in its own name and on behalf
of the Holders against the Company for the whole amount then due and owing
(together with interest on any unpaid interest to the extent lawful) and the
amounts provided for in Section 6.07.
SECTION 5.9 Agent May File Proofs of Claim. The Agent may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Agent and the Securityholders allowed in any
judicial proceedings relative to the Company, its creditors or its property and,
unless prohibited by law or applicable regulations, may vote on behalf of the
Holders in any election of a trustee in bankruptcy or other Person performing
similar functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Agent and, in the event that
the Agent shall consent to the making of such payments directly to the Holders,
to pay to the Agent any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Agent, its agents and its counsel, and any
other amounts due the Agent under Section 6.06.
SECTION 5.10 Priorities. If the Agent collects any money or property
pursuant to this Article 5, it shall pay out the money or property in the
following
27
order:
FIRST: to the Agent for amounts due under Section 6.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Securities; and
THIRD: after all amounts due under the Securities have indefeasibly
been paid in full to the Holders, to the Company.
The Agent may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Agent a notice that
states the record date, the payment date and amount to be paid.
SECTION 5.11 Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Agent for
any action taken or omitted by it as Agent, a court in its discretion may
require the filing by any party litigant 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, 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 does not apply to a suit by the Agent
or by a Holder against the Company,
SECTION 5.12 Waiver of Stay or Extension Laws. The Company (to the
extent it may lawfully do so) shall 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 wherever enacted, now or at any time hereafter in force, 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 shall not hinder, delay or impede the execution
of any power herein granted to the Agent or to any Holder, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE 6.
Agent
SECTION 6.1 Duties of Agent. (a) If an Event of Default has occurred
and is continuing, the Agent shall exercise such of the rights and powers vested
in it by this Indenture and use the same degree of care and skill in their
exercise as the Agent would exercise or use under the circumstances in the
conduct of the Agent's own affairs.
(b) Except during the continuance of an Event of Default:
28
(1) the Agent undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Agent; and
(2) in the absence of bad faith on its part, the Agent 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 Agent and conforming to the requirements of this Indenture. However,
the Agent shall examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) The Agent may not be relieved from liability for its own grossly
negligent action, its own grossly negligent failure to act or its own wilful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Agent shall not be liable for any error of judgment made in
good faith unless it is proved that the Agent was grossly negligent in
ascertaining the pertinent facts; and
(3) the Agent 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 5.05.
(d) Every provision of this Indenture that in any way relates to the
Agent is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Agent shall not be liable for interest on any money received
by it.
(f) Money held in trust by the Agent need not be segregated from other
funds except to the extent required by law.
(g) No provision of this Indenture shall require the Agent to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights or
powers, if it shall have reasonable grounds to believe that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Agent shall be subject
to the provisions of this Section.
SECTION 6.2 Rights of Agent. (a) The Agent may rely on any
29
document reasonably believed by it to be genuine and to have been signed or
presented by the proper Person. The Agent need not investigate any fact or
matter stated in the document.
(b) Before the Agent acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Agent shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Agent may act through agents or employees.
(d) The Agent shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Agent's conduct does not constitute wilful
misconduct or gross negligence.
(e) The Agent may consult with counsel with respect to legal matters
relating to this Indenture and the Securities shall be fully and completely
protected from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
SECTION 6.3 Individual Rights of Agent. The Agent 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 Agent. Any Paying Agent, Registrar, co-registrar or
co-paying agent may do the same with like rights. However, the Agent must comply
with Section 6.09.
SECTION 6.4 Agent's Disclaimer. The Agent shall not be responsible for
and 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 of the
proceeds from the Securities, and it shall not be responsible for any statement
of the Company in the Indenture or in any document issued in connection with the
sale of the Securities or in the Securities other than the Agent's certificate
of authentication.
SECTION 6.5 Notice of Defaults. If a Default occurs and is continuing
and if the Agent receives written notice thereof, the Agent shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to purchase provisions of such Security, if any),
the Agent may withhold the notice if and so long as it in good faith determines
that withholding the notice is in the interests of Securityholders.
SECTION 6.6 Compensation and Indemnity. If neither the Agent nor any
of its Affiliates is a Securityholder, the Company shall pay to the Agent from
time to time reasonable compensation for its services. The Company shall
reimburse the Agent upon request for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services in connection with its performance of its duties
under this Indenture. Such expenses shall
30
include the reasonable compensation and expenses, disbursements and advances of
the Agent's agents, counsel, accountants and experts. The Company shall
indemnify the Agent against any and all loss, liability or reasonable expense
(including reasonable attorneys' fees) incurred by it in connection with the
administration of this agreement and the performance of its duties hereunder.
The Agent shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Agent to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim and the
Agent may have separate counsel but the fees and expenses of such counsel shall
be at the expense of the Agent unless (i) the employment of such counsel shall
have been authorized in writing by the Company, (ii) the Company shall not have
employed counsel to have charge of the defense of such action within 10 days
after notice of commencement of the action, or (iii) the Agent shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to the those available to the Company, in any of
which events such fees and expenses shall be paid by the Company. The Company
shall not be liable for any settlement of any claim or action except with its
written consent, which consent shall not be unreasonably withheld. The Company
need not reimburse any expense or indemnify against any loss, liability or
expense to the extent incurred by the Agent through the Agent's own wilful
misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the Agent
shall have a lien prior to the Securities on all money or property held or
collected by the Agent other than money or property held in trust to pay amounts
due under particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Agent incurs expenses after
the occurrence of a Default specified in Section 5.01(6) or (7) with respect to
the Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 6.7 Replacement of Agent. The Agent may resign at any time by
so notifying the Company. If the Agent fails to discharge its obligations
hereunder despite at least 60 days written notice from (or on behalf of) the
Holders of a majority in principal amount of the Securities, such Holders may
remove the Agent by so notifying the Agent and the Company, and such Holders may
appoint a successor Agent. The Company shall remove the Agent if:
(1) the Agent fails to comply with Section 6.09;
(2) the Agent is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Agent or
its property; or
(4) the Agent otherwise becomes incapable of acting.
If the Agent resigns, is removed by the Company or by the Holders of a
31
majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Agent, or if a vacancy exists in the
office of Agent for any reason (the Agent in such event being referred to herein
as the retiring Agent), the Company shall promptly appoint a successor Agent.
A successor Agent shall deliver a written acceptance of its
appointment to the retiring Agent and to the Company. Thereupon the resignation
or removal of the retiring Agent shall become effective, and the successor Agent
shall have all the rights, powers and duties of the Agent under this Indenture.
The successor Agent shall mail a notice of its succession to Securityholders.
The retiring Agent shall promptly transfer all property held by it as Agent to
the successor Agent, subject to the lien provided for in Section 6.07.
If a successor Agent does not take office within 60 days after the
retiring Agent resigns or is removed, the retiring Agent or the Holders of 10%
in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Agent.
If the Agent fails to comply with Section 6.09, any Securityholder may
petition any court of competent jurisdiction for the removal of the Agent and
the appointment of a successor Agent.
Notwithstanding the replacement of the Agent pursuant to this Section,
the Company's obligations under Section 6.06 shall continue for the benefit of
the retiring Agent.
SECTION 6.8 Successor Agent by Merger. If the Agent consolidates with,
merges or converts into, or transfers all or substantially all its corporate
trust business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation without any further act shall be
the successor Agent.
SECTION 6.9 Eligibility; Disqualification. The Agent shall have a
combined capital and surplus of at least $10,000,000 as set forth in its most
recent published annual report of condition.
ARTICLE 7.
Discharge of Indenture
SECTION 7.1 Discharge of Liability on Securities. (a) When all
outstanding Securities have become due and payable and the Company irrevocably
and indefeasibly deposits with the Agent immediately available funds sufficient
to pay at maturity all outstanding Securities, including interest thereon to
maturity and any applicable premiums and other amounts due thereunder and
payable hereunder by the Company, then this Indenture shall, subject to Section
7.01(b), cease to be of further effect. After such irrevocable and indefeasible
payment, the Agent shall acknowledge satisfaction and discharge of this
Indenture, other than those surviving obligations set
32
forth in Section 7.01(b), on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the
Company.
(b) Notwithstanding clause (a) above, the Company's obligations in
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 6.06 and 6.07 and this Article 7 shall
survive until the Securities have been paid in full. Thereafter, the Company's
obligations in Sections 6.06, 7.04 and 7.05 shall survive.
SECTION 7.2 Repayment to Company. The Agent and the Paying Agent shall
promptly turn over to the Company upon request any excess money or securities
held by them at any time.
Subject to any applicable abandoned property law and the right of the
Agent to publish or mail notice to Securityholders prior to making such payment
to the Company, the Agent and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal or interest that
remains unclaimed for two years, and, thereafter, Securityholders entitled to
the money must look to the Company for payment as general creditors.
ARTICLE 8.
Optional Conversion of Securities
SECTION 8.1 Optional Conversion Privilege and Conversion Price.
Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any Series B Security or any portion of the
principal amount thereof which is $1,000 or an integral multiple of $1,000 may
be converted at the principal amount thereof (without premium), or of such
portion thereof, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100 of a share) of voting, or at the Holder's
option, nonvoting Common Stock of the Company, at the conversion price,
determined as hereinafter provided, in effect at the time of conversion. Such
conversion right commences on and after July 31, 1998 and shall expire upon the
indefeasible repayment in full of the Series B Securities. For the purposes
hereof, any amounts required to be paid by a Holder to the holder of Senior
Indebtedness pursuant to Article 9 hereof shall nevertheless be deemed to remain
outstanding under the Series B Securities unless and until subsequently repaid
or reimbursed to such Holder. In case a Series B Security or portion thereof is
called for redemption, such conversion right in respect of the Series B Security
or portion so called shall expire at the close of business on the Redemption
Date, unless the Company defaults in making the payment due upon redemption (or
the Holder is not indefeasibly entitled to retain such payment).
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "conversion price") shall be initially $3.30 per
share of
33
Common Stock. The Conversion Price shall be adjusted in certain instances as
provided in paragraphs (1), (2), (3), (4), (7) and (8) of Section 8.04.
SECTION 8.2 Exercise of Optional Conversion Privilege.
In order to exercise the conversion privilege, the Holder of any
Series B Security to be converted shall surrender such Series B Security, duly
endorsed or assigned to the Company or in blank, at any office or agency of the
Company maintained for that purpose accompanied by written notice to the Company
at such office or agency that the Holder elects to convert such Series B
Security or, if less than the entire principal amount thereof is to be
converted, the portion thereof to be converted.
Series B Securities shall be deemed to have been converted immediately
prior to the close of business on the day of surrender of such Series B
Securities for conversion in accordance with the foregoing provisions, and at
such time the rights of the Holders of such Series B Securities as Holders shall
cease, and the Person or Persons entitled to receive the Common Stock issuable
upon conversion shall be treated for all purposes as the record holder or
holders of such Common Stock at such time. As promptly as practicable on or
after the conversion date, the Company shall issue and shall deliver at such
office or agency a certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in lieu of any
fraction of a share, as provided in Section 8.03.
In the case of any Series B Security which is converted in part only,
upon such conversion the Company shall execute and deliver to the Holder
thereof, at the expense of the Company, a new Series B Security or Series B
Securities of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Series B Security.
SECTION 8.3 Fractions of Shares.
No fractional shares of Common Stock shall be issued upon conversion
of Series B Securities. If more than one Series B Security shall be surrendered
for conversion at one time by the same Holder, the number of full shares which
shall be issuable upon conversion thereof shall be computed on the basis of the
aggregate principal amount of the Series B Securities (or specified portions
thereof) so surrendered. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of any Series B Security or Series B
Securities (or specified portions thereof), the Company shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
of the market price per share of Common Stock (as determined by the Board of
Directors or in any manner prescribed by the Board of Directors) at the close of
business on the day of conversion.
SECTION 8.4 Adjustment of Conversion Price.
(1) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common
34
Stock, the conversion price in effect at the opening of business on
the day following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be
reduced by multiplying such conversion price by a fraction of which
the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or
other distribution, such reduction to become effective immediately
after the opening of business on the day following the date fixed for
such determination. For the purposes of this paragraph (1), the number
of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions
of shares of Common Stock. The Company will not pay any dividend or
make any distribution on shares of Common Stock held in the treasury
of the Company.
(2) In case the Company shall issue or sell to any Person shares
of Common Stock or rights or warrants entitling such Person to
subscribe for or purchase shares of Common Stock at a price per share
less than the Current Market Price per share (determined as provided
in paragraph (6) of this Section) of the Common Stock on the date
fixed for the determination of stockholders entitled to receive such
rights or warrants (or, in the case of rights or warrants not
exercisable until the occurrence of a contingent event other than the
passage of time or other event that is certain to occur, on the date
that such contingent event occurs), the conversion price in effect at
the opening of business on the day following the date fixed for such
determination or the date such contingent event occurs, as the case
may be, shall be reduced by multiplying such conversion price by a
fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed
for such determination or the date such contingent event occurs, as
the case may be, plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at
such Current Market Price and the denominator shall be the number of
shares of Common Stock outstanding at the close of business on the
date fixed for such determination or the date such contingent event
occurs, as the case may be, plus the number of shares of Common Stock
so offered for subscription or purchase, such reduction to become
effective immediately after the opening of business on the day
following the date fixed for such determination or the date such
contingent event occurs, as the case may be. For the purposes of this
paragraph (2), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock.
The Company will not issue any rights or warrants in respect of shares
of
35
Common Stock held in the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
conversion price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and, conversely, in case outstanding
shares of Common Stock shall each be combined into a smaller number of
shares of Common Stock, the conversion price in effect at the opening
of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction
or increase, as the case may be, to become effective immediately after
the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(4) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its
indebtedness or assets (including securities, but excluding any rights
or warrants referred to in paragraph (2) of this Section, any dividend
or distribution paid in cash out of the retained earnings of the
Company and any dividend or distribution referred to inn paragraph (1)
of this Section), 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 close of business on the date
fixed for the determination of stockholders entitled to receive such
distribution by a fraction of which the numerator shall be the Current
Market Price per share (determined as provided in paragraph (6) of
this Section) of the Common Stock on the date fixed for such
determination less the then fair market value (as determined in good
faith by the Board of Directors, whose determination shall be
supported by a fairness opinion by a nationally recognized investment
banking firm and described in a Board Resolution filed with the Agent)
of the portion of the assets or evidences of indebtedness so
distributed applicable to one share of Common Stock and the
denominator shall be such Current Market Price per share of the Common
Stock, such adjustment to become effective immediately prior to the
opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such distribution.
(5) The reclassification of Common Stock into securities
including other than Common Stock (other than any reclassification
upon a consolidation or merger to which Section 8.11 applies) shall be
deemed to involve (a) a distribution of such securities other than
Common Stock to all holders of Common stock (and the effective date of
such reclassification shall be deemed to be "the date fixed for the
determination of stockholders entitled to receive such distribution"
and "the date fixed for such determination" within the meaning of
paragraph (4) of this Section), and (b) a subdivision or combination,
as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such
36
reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such
reclassification shall be deemed to the "the day upon which such
subdivision becomes effective" or "the day upon which such combination
becomes effective", as the case may be, and "the day upon which such
subdivision or combination becomes effective" within the meaning of
paragraph (3) of this Section).
(6) For the purpose of any computation under paragraphs (2) and
(4) of this Section, the current market price per share of Common
Stock on any date (the "Current Market Price") shall be deemed to be
the average of the daily closing prices per share of the Company's
Common Stock for the 30 consecutive trading days immediately before
the day in question; provided, however, that in the case of (i) a
primary underwritten public offering at a price in excess of the then
current conversion price, the Current Market Price shall be deemed the
price to the underwriter set forth in the prospectus, and (ii) stock
options issued to employees and directors pursuant to a plan adopted
by the Company's Board of Directors, the Current Market Price shall be
the exercise price of such options. The closing price for each day
shall be the last reported sale price regular way or, in case no such
reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way, on the principal national
securities exchange on which the Common Stock is listed or admitted to
trading or stock market if the Common Stock is not listed or admitted
to trading on any national securities exchange or stock market, the
average of the closing bid and asked prices in the over-the-counter
market as reported by NASDAQ or, if not quoted by NASDAQ on such day,
as furnished by any registered broker/dealer selected for that
purpose.
(7) The Company may make such reductions in the conversion price,
in addition to those required by paragraphs (1),(2),(3) and (4) of
this Section, as it considers to be advisable in order that any event
treated for Federal income tax purposes as a dividend of stock or
stock rights shall not be taxable to the recipients.
(8) No adjustment in the conversion price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in the conversion price; provided, however, that any
adjustments which by reason of this paragraph (8) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest
cent or to the nearest one-thousandth of a share, as the case may be.
SECTION 8.5 Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price in
37
accordance with Section 8.04 and shall prepare a certificate signed by
the Treasurer of the Company setting forth the adjusted conversion
price and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be filed
(with a copy to the Agent) at each office or agency maintained for the
purpose of conversion of Series B Securities; and
(b) a notice stating that the conversion price has been adjusted
and setting forth the adjusted conversion price shall forthwith be
required, and as soon as practicable after it is required, such notice
shall be mailed by the Company to all Holders at their last addresses
as they shall appear in the Security Register.
SECTION 8.6 Notice of Certain Corporate Action.
In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out
of its retained earnings; or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation or merger 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;
then the Company shall cause to be filed with the Agent and at each office or
agency maintained for the purpose of conversion of Series B Securities, and
shall cause to be mailed to all Holders at their last addresses as they shall
appear in the Security Register, at least 20 days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution, rights
or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.
38
SECTION 8.7 Company to Reserve Common Stock.
The Company shall at all times reserve and keep available, free from
pre-emptive rights, out of its authorized but unissued non-voting and voting
Common Stock, for the purpose of effecting the conversion of Series B
Securities, the full number of shares of Common Stock then issuable upon the
conversion of all outstanding Series B Securities.
SECTION 8.8 Taxes on Conversions.
The Company will pay any and all taxes that may be payable in respect
of the issue or delivery of shares of Common Stock on conversion of Series B
Securities pursuant hereto. The Company shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery of shares of Common Stock in a name other than that of the Holder
of the Series B Security or Series B Securities to be converted, and no such
issue or delivery shall be made unless and until the Person requesting such
issue has paid to the Company the amount of any such tax, or has established to
the satisfaction of the Company that such tax has been paid.
SECTION 8.9 Covenant as to Common Stock; Accounting Treatment of
Consideration.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Series B Securities will upon issue by fully paid and
nonassessable and, except as provided in Section 8.08, the Company will pay all
taxes, liens and charges with respect to the issue thereof.
The Company covenants that, upon conversion of Series B Securities as
herein provided, there will be credited to Common Stock par capital from the
consideration for which the shares of Common Stock issuable upon such conversion
are issued an amount per share of Common Stock so issued as determined by the
Board of Directors, which amount shall not be less than the amount required by
law and by the Company's certificate of incorporation, as amended, as in effect
on the date of such conversion. For the purposes of this covenant the net
proceeds received by the Company from the issuance and sale of the Series B
Securities converted, less any cash paid in respect of fractional share
interests upon such conversion, shall be deemed to be the amount of
consideration for which the shares of Common Stock issuable upon such conversion
are issued.
SECTION 8.10 Cancellation of Converted Series B Securities.
All Series B Securities delivered for conversion shall be delivered to
the Company to be canceled.
SECTION 8.11 Provisions in Case of Consolidation, Merger or Sale of
Assets.
39
In case of any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the Company)
or any sale or transfer of all or substantially all of the assets of the
Company, the Person formed by such consolidation or resulting from such merger
or which acquires such assets, as the case may be, shall execute and deliver to
the Agent a supplemental indenture providing that the Holder of each Series B
Security then outstanding shall have the right thereafter, during t he period
such Series B Security shall be convertible as specified in Section 8.01, to
convert such Series B Security only into the kind and amount of securities, cash
and other property receivable upon such consolidation, merger, sale or transfer
by a holder of the number of shares of Common Stock of the Company in which such
Series B Security might have been converted immediately prior to such
consolidation, merger, sale or transfer, assuming such holder of Common Stock of
the Company (i) is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such sale
or transfer was made, as the case may be ("constituent Person"), or an Affiliate
of a constituent Person and (ii) failed to exercise his rights of election, if
any, as to the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer (provided that if the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of Common
Stock of the Company held immediately prior to such consolidation, merger, sale
or transfer by others than a constituent Person or an Affiliate thereof and in
respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this Section the kind and amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer by each non-electing share shall be deemed to be the
kind and amount so receivable per share by a plurality of the nonelecting
shares). Such supplemental indenture shall provide for adjustments which, for
events subsequent to the effective date of such supplemental indenture, shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article. The above provisions of this Section shall similarly apply to
successive consolidations, mergers, sales or transfers.
SECTION 8.12 Registration and Listing of Shares.
The Company covenants that if any shares of Common Stock, required to
be reserved for purposes of conversion of Series B Securities hereunder, require
registration with or approval of any governmental authority under any Federal,
State or District of Columbia law before such shares may be issued upon
conversion, the Company will in good faith and as expeditiously as possible
endeavor to cause such shares to be duly registered or approved, as the case may
be. The Company further covenants that so long as the Common Stock of the
Company is listed on the NASDAQ Stock Market or any national securities
exchange, the Company will, if permitted by the rules of NASDAQ or such
exchange, list and keep listed on such exchange,, upon official notice of
issuance, all shares of Common Stock issuable upon conversion of Series B
Securities.
40
SECTION 8.13. Agent and Conversion Agents Not Liable.
Neither the Agent nor any conversion agent shall at any time be under
any duty or responsibility to any Holder or Series B Securities to determine
whether any facts exist which may require any adjustment of the conversion rate,
or with respect to the nature or extent of any such adjustment when made, or
with respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. Neither the Agent nor any
conversion agent shall be accountable with respect to the validity or value (or
the kind or amount) of any shares of Common Stock or of any securities or cash
or other property which may at any time be issued or delivered upon the
conversion of any Series B Security, or makes any representation with respect
thereto. Neither the Agent nor any conversion agent shall be responsible for any
failure of the Company to make any cash payment or to issue, transfer or deliver
any shares of Common Stock or stock certificates or other securities or property
upon the surrender of any Series B Security for the purpose of conversion, or
subject to Section 6.01, to comply with any of the covenants of the Company
contained in this Article Eight.
SECTION 8.14. Regulatory Restrictions.
(a) No Holder of Series B Securities which is a bank holding company
or a subsidiary of a bank holding company (a "Bank Affiliate") as defined in the
Bank Holding Company Act of 1956, as amended, or other applicable banking laws
of the United States of America and the rules and regulations promulgated
thereunder (the "Bank Holding Company Act") shall acquire voting Common Stock,
if, after giving effect to such acquisition, the Bank Affiliate, together with
its Affiliates, would own more than five percent (5%) of the outstanding voting
securities of the Company. Notwithstanding the foregoing, shares of Common Stock
may otherwise be acquired or held by the Initial Purchaser or any other Bank
Affiliate which is a Small Business Investment Company consistent with and
subject to the limitations contained in the Small Business Act and, to the
extent not inconsistent with the Bank Holding Company Act, shares of Common
Stock may be acquired in the event that:
(i) the Company shall vote to merge or consolidate with or into any
other Person and after giving effect to such merger or consolidation the
Bank Affiliate would not own more than five percent (5%) of the outstanding
voting securities of the surviving corporation; or
(ii) the Common Stock issuable upon conversion of the Series B
Securities is covered by an effective registration statement.
(b) Small Business Act. No Person which is a Small Business Investment
Company, as defined in the Small Business Act, shall exercise "put" rights as a
holder of Series B Securities, hereunder if the exercise thereof shall violate
any of the rules or regulations of the Small Business Act.
(c) Statement of Compliance. For purposes of this Indenture, a written
statement of the Initial Purchaser or any of its Affiliates acquiring Common
Stock, or
41
exercising "put" or conversion rights with respect to Series B Securities,
delivered to the Company upon acquisition of any shares of Common Stock or
delivery of any conversion notice, to the effect that the Initial Purchaser or
such Affiliate, as the case may be, is legally entitled to exercise its rights
to purchase securities of the Company and that such exercise will not violate or
contravene any law or regulation or any judgment, decree or order of any
governmental authority then applicable to the Initial Purchaser or such
Affiliate, as the case may be, shall be conclusive and binding upon the Company
and shall absolutely obligate and bind the Company to deliver, in accordance
with the other terms and provisions hereof, certificates or other appropriate
instruments representing the securities so purchased.
ARTICLE 9.
Subordination of Securities
SECTION 9.1 Securities Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Security by
this acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article, the indebtedness
represented by the Securities and the payment of the principal of and interest
on each and all of the Securities are hereby expressly made subordinate and
subject in right of payment to the prior payment in full of all Senior
Indebtedness permitted to be incurred pursuant to the terms of this Indenture.
SECTION 9.2 Payment Over of Proceeds Upon Dissolution, Etc.
Upon any distribution of assets of the Company in the event (a) any
insolvency or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case or proceeding in connection therewith
relative to the Company or to its creditors, as such, or to its assets, or (b)
any liquidation, dissolution or other winding up of the Company, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshaling of
assets and liabilities of the Company, then and in any such event the holders of
Senior Indebtedness shall be entitled to receive payment in full of all amounts
due or to become due on or in respect of all Senior Indebtedness, or provision
shall be made for such payment in money or money's worth, before the Holders of
the Securities are entitled to receive any payment on account of principal of or
interest on the Securities, and to that end the holders of Senior Indebtedness
shall be entitled to receive, for application to the payment thereof, any
payment or distribution of any kind or character, whether in cash, property or
securities, including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of the Company
being subordinated to the payment of the Securities, which may be payable or
deliverable in respect of the Securities in any such case, proceeding,
dissolution, liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions of this
Section the Agent or the Holder of any Security shall have received any payment
or distribution of
42
assets of the Company of any kind or character, whether in cash, property or
securities, including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of the Company
being subordinated to the payment of the Securities, before all Senior
Indebtedness is paid in full or payment thereof provided for, and if such fact
shall then have been made known to the Agent, or, as the case may be, such
Holder, then and in such event such payment or distribution shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in full, after giving effect
to any concurrent payment or distribution to or for the holders of Senior
Indebtedness.
For purposes of this Article only, the words "cash, property
or securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan or reorganization or readjustment the payment of which is
for by a plan or reorganization or readjustment the payments of which is
subordinated at least to the extent provided in this Article with respect to the
Securities to the payment of all Senior Indebtedness which may at the time be
outstanding; provided, however, that (i) Senior Indebtedness is assumed by the
new corporation, if any, resulting from any such reorganization or readjustment,
and (ii) the rights of the holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Article Eight shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Company for the purposes of this
Section if the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance or transfer, comply with the
conditions set forth in Article Eight.
SECTION 9.3 Prior Payment to Senior Indebtedness Upon Acceleration of
Securities.
In the event that any Securities are declared due and payable before
their Stated Maturity due to the occurrence of an Event of Default, then and in
such event the holders of the Senior Indebtedness outstanding at the time such
Securities so become due and payable shall be entitled to receive payment in
full of all amounts due or to become due on or in respect of all such Senior
Indebtedness, or provision shall be made for such payment in money or money's
worth, before the Holders of the Securities are entitled to receive any payment
(including any payment which may be payable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Securities) by the Company on account of the principal of or interest on the
Securities or on account of the purchase or other acquisition of Securities.
43
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Agent or the Holder of any Securities prohibited by the
foregoing provisions of this Section, and if such fact shall then have been made
known to the Agent or, as the case may be, such Holder, then and in such event
such payment shall be paid over and delivered forthwith to the Company for the
benefit of the holders of Senior Indebtedness.
SECTION 9.4 No Payment When Senior Indebtedness in Default.
(a) In the event and during the continuation of any default in the
payments of principal of or interest on any Senior Indebtedness beyond any
applicable grace period with respect thereto, or in the event that any event of
default with respect to any Senior Indebtedness shall have occurred and be
continuing and the holders of such Senior Indebtedness (or an agent on behalf of
the holders thereof) have declared such Senior Indebtedness due and payable
prior to the date on which it would otherwise have become due and payable,
unless and until such event of default shall have been cured or waived or shall
have ceased to exist and such acceleration shall have been rescinded or
annulled, or (b) in the event any judicial proceeding shall be pending with
respect to any such default in payment or event of default, then no payment
(including any payment which may be payable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Securities) shall be made by the Company on account of principal of or interest
on the Securities or on account of the purchase or other acquisition of
Securities; provided, however, (i) that on and after the 90th day after such
default on Senior Indebtedness, payments hereunder to Securityholders may
resume; (ii) nothing herein shall prevent or delay the Agent or Holders, as the
case may be, from commencing the exercise of their legal rights and remedies
arising from any Event of Default; and (iii) there may not be more than two
payment blockages hereunder during any 12 month period.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Agent or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall then have been made
known to the Agent or, as the case may be, such Holder, then and in such event
such payment shall be paid over and delivered forthwith to the Company for the
benefit of the holders of Senior Indebtedness.
SECTION 9.5 Payment Permitted if No Default.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any case, proceeding, dissolution, liquidation or other winding
up, assignment for the benefit of creditors or other marshaling of assets and
liabilities of the Company referred to in Section 5.01(6) or (7) or under the
conditions described in Section 9.03 or 9.04, from making payments at any time
of principal of
44
or interest on the Securities, or (b) the application by the Agent or the
indefeasible retention thereof by the Holders of any money deposited with it
hereunder to the payment of or on account of the principal of or interest on or
any other amounts under the Securities if, at the time of such application, the
Agent did not have knowledge that such payment would have been prohibited by the
provisions of this Article.
SECTION 9.6 Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the Holders
of the Securities shall be subrogated to the extent of the payments or
distribution made to the holders of such Senior Indebtedness pursuant to the
provisions of this Article to the rights of the holders of such Senior
Indebtedness to receive payments or distribution of cash, property or securities
applicable to the Senior Indebtedness (and any and all collateral therefor)
until the principal of and interest on the Securities shall be paid in full. For
purposes of such subrogation, no payments or distributions to the holders of the
Senior Indebtedness of any cash, property or securities to which the Holders of
the Securities or the Agent, shall, as between the Company, its creditors other
than holders of Senior Indebtedness and the Holders of the Securities, be deemed
to be payment or distribution by the Company to or on account of Senior
Indebtedness.
SECTION 9.7 Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities, on the
one hand, and the holders of Senior Indebtedness, on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities is
intended to or shall impair, as between the Company, its creditors other than
the holders of Senior Indebtedness and the Holders of the Securities, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders of the Securities the principal of and interest on the Securities as and
when the same shall become due and payable in accordance with their terms and
which subject to the rights under this Article of the holders of Senior
Indebtedness, is intended to rank equally with all other general obligations of
the Company, or is intended to or shall affect the relative rights against the
Company of the Holders of the Securities and creditors of the Company other than
the holders of Senior Indebtedness, nor shall anything herein or therein prevent
the Agent or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior Indebtedness to
receive cash, property or securities otherwise payable or deliverable to the
Agent or such Holder.
SECTION 9.8 Agent to Effectuate Subordination.
Each Holder of a Security by such Holder's acceptance thereof
authorizes and directs the Agent on such Holder's behalf to take such action as
may be necessary or appropriate to effectuate the subordination provided in this
Article and appoint the Agent his attorney-in-fact for any and all such
purposes.
SECTION 9.9 No Waiver of Subordination Provisions.
45
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Agent or the Holders of the Securities
without incurring responsibility to the Holders of the Securities and without
impairing or releasing the subordination provided in this Article or the
obligations hereunder of the Holders of the Securities to the holders of Senior
indebtedness, do any one or more of the following: (i) change the manner place
or terms of payment or extend the time of payments of, or renew or alter Senior
Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii)
release any person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company and any other Person.
SECTION 9.10 Notice to Agent.
The Company shall give prompt written notice to the Agent of any fact
known to the Company which would prohibit the making of any payment to or by the
Agent in respect of the Securities. Failure to give such notice shall not affect
the subordination of the Securities to Senior Indebtedness. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the Agent
shall not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Agent in respect of the
Securities, unless and until the Agent shall have received written notice
thereof from the Company or a holder of Senior Indebtedness or from any agent
therefor; and, prior to the receipt of any such written notice the Agent,
subject to the provisions of Section 6.01, shall be entitled in all respects to
assume that no such facts exist; provided, however, that if the Agent shall not
have received, at least five Business Days prior to the date upon which by the
terms hereof any such money may become payable for any purpose (including,
without limitation, the payment of the principal of or interest on any
Security), the notice with respect to such money provided for in this Section,
then, anything herein contained to the contrary notwithstanding, the Agent shall
have full power and authority to receive such money and to apply the same to the
purpose for which such money was received and shall not be affected by any
notice to the contrary which may be received by it within five Business Days
prior to such date.
Subject to the provisions of Section 6.01, the Agent shall be entitled
to rely on the delivery to it of a written notice by a Person representing
himself to be a holder of Senior Indebtedness (or an agent on behalf of such
holder) to establish that such notice has been given by a holder of Senior
Indebtedness (or an agent on behalf of any
46
such holder). In the event that the Agent determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article, the Agent may request such Person to furnish evidence to the
reasonable satisfaction of the Agent as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the Agent
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
SECTION 9.11 Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Agent, subject to the provisions of Section 6.01, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the Agent in
bankruptcy, liquidating Agent, custodian, receiver, assignee for the benefit of
creditors, agent or other Person making such payment or distribution, delivered
to the Agent or to the Holders of Securities, for the purpose of ascertaining
the Persons entitled to participate in such payment or distribution, the holders
of the Senior Indebtedness and other indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article.
SECTION 9.12 Agent Not Fiduciary for Holders of Senior Indebtedness.
The Agent shall not be deemed to owe any fiduciary duty to the holders
of Senior Indebtedness and shall not be liable to any such holders if it shall
in good faith mistakenly pay over or distribute to Holders or Securities or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Indebtedness shall be entitled by virtue of this Article or
otherwise.
SECTION 9.13 Rights of Agent as Holder of Senior Indebtedness;
Preservation of Agent's Rights.
The Agent in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Agent of any of
its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Agent under or pursuant to Section 6.06.
47
SECTION 9.14 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Agent shall have
been appointed by the Company and be then acting hereunder, the term "Agent" as
used in this Article shall in such case (unless the context otherwise requires)
be construed as extending to and including such Paying Agent, within its meaning
as fully for all intents and purposes as if such Paying Agent were named in this
Article in addition to or in place of the Agent; provided, however, that Section
9.13 shall not apply to the Company or any Affiliate of the Company if it or
such Affiliate acts as Paying Agent.
SECTION 9.15 Certain Conversions Deemed Payment.
For the purposes of this Article only, (1) the issuance and delivery
of junior securities upon conversion of Securities in accordance with Article
Eight shall not be
deemed to constitute a payment or distribution on account of the principal of or
interest on Securities or on account of the purchase or other acquisition of
Securities, and (2) the payment, issuance or delivery of cash, property or
securities (other than cash paid in lieu of fractional shares and other than
junior securities) upon conversion of a Security shall be deemed to constitute
payment on account of the principal of such Security. For the purposes of this
Section, the term "junior securities" means (a) shares of any stock of any class
of the Company and (b) securities of the Company which are subordinated in right
of payment to all Senior Indebtedness which may be outstanding at the time of
issuance or delivery of such securities to the same extent as, or to a greater
extent than, the Securities are subordinated as provided in this Article.
Nothing contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Company, its creditors
other than holders of Senior Indebtedness and the Holders of the Securities, the
right, which is absolute and unconditional, of the Holder of any Security to
convert such Security in accordance with Article Thirteen.
ARTICLE 10.
Amendments
SECTION 10.1 Without Consent of Holders. The Company, when authorized
by a resolution of its Board of Directors, and the Agent may amend this
Indenture or the Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 4;
(3) to add guarantees with respect to the Securities or to secure the
Securities;
(4) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company; or
48
(5) to make any change that does not adversely affect the rights of
any Securityholder.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 10.2 With Consent of Holders. The Company, when authorized by
a resolution of its Board of Directors, and the Agent may amend this Indenture
or the Securities without notice to any Securityholder but with the written
consent of the Holders of at least a majority in principal amount of the
Securities. However, without the consent of each Securityholder affected, an
amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) make any Security payable in money other than that stated in the
Security; or
(5) make any change in Section 5.04 or 5.07 or the second sentence of
this Section.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 10.3 Revocation and Effect of Consents and Waivers. A consent
to an amendment or a waiver by a Holder of a Security shall bind the Holder and
every subsequent Holder of that Security or portion of the Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent or waiver is not made on the Security. However, any such Holder or
subsequent Holder may revoke the consent or waiver as to such Holder's Security
or portion of the Security if the Agent receives the notice of revocation before
the date the amendment or waiver becomes effective. After an amendment or waiver
becomes effective, it shall bind every Securityholder.
49
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 10.4 Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Agent may require the Holder of the
Security to deliver it to the Agent. The Agent may place an appropriate notation
on the Security regarding the changed terms and return it to the Holder.
Alternatively, if the Company or the Agent so determines, the Company in
exchange for the Security shall issue new Security that reflects the changed
terms. Failure to make the appropriate notation or to issue a new Security shall
not affect the validity of such amendment.
SECTION 10.5 Agent To Sign Amendments. The Agent shall sign any
amendment authorized pursuant to this Article 10 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Agent. If
it does, the Agent may but need not sign it. In signing such amendment the Agent
shall be entitled to receive indemnity reasonably satisfactory to it and to
receive, and (subject to Section 6.01) 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 10.6 Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 11.
Miscellaneous
SECTION 11.1 Notices. Any notice or communication shall be in writing
and delivered in person or mailed by first-class mail, overnight delivery by a
nationally recognized overnight delivery service, or sent by facsimile
transmission addressed as follows:
if to the Company: 000 Xxxxxxxx Xxxxxx 0xx Xxxxx
Xxxxxx, Xxxxx 00000
50
Attn: Chairman
if to the Agent: BankBoston, N.A.
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxx (MS01-10-08)
Fax: 000-000-0000
copy to: Xxxxxx & Xxxxxxxxxx
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxxxx, Esq.
if to Initial Holder: BancBoston Investments, Inc.
000 Xxxxxxx Xxxxxx
` Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxx Xxxxxx, Vice President
(MS75-10-01)
Fax:
The Company or the Agent by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder 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 given in the manner provided
above, it is duly given, upon receipt or (a) for mail, three Business Days
thereafter, and (b) for overnight delivery on the following Business Day.
SECTION 11.2 Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Agent to take or refrain from
taking any action under this Indenture, the Company shall furnish to the Agent:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Agent stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
51
satisfactory to the Agent stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.
SECTION 11.3 Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.4 When Securities Disregarded. In determining whether the
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Agent shall
be protected in relying on any such direction, waiver or consent, only
Securities which the Agent knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 11.5 Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday
or a day on which banking institutions are not required to be open in the State
of New York or in Boston, Massachusetts. If a payment date is a Legal Holiday,
payment shall be made on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period. If a regular record
date is a Legal Holiday, the record date shall not be affected.
SECTION 11.6 Governing Law. This Indenture and the Securities shall be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 11.7 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 this Indenture or for any
claim based
52
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 11.8 Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Agent in this Indenture shall bind its successors.
SECTION 11.9 Multiple Originals . The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION 11.10 Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
ARTICLE 12.
Redemption of Securities
SECTION 12.1 Right of Redemption. The Securities may be redeemed, as a
whole or from time to time in part, at any time on or after July 1, 1999, at the
Redemption Prices specified in the form of Security, together with accrued
interest to the Redemption Date.
SECTION 12.2 Applicability of Article. Redemption of Securities at the
election of the Company or otherwise, as permitted or required by any provision
of this Indenture, shall be made in accordance with such provision and this
Article.
SECTION 12.3 Election to Redeem; Notice to Agent. The election of the
Company to redeem any Securities pursuant to Section 12.01 shall be evidenced by
a Board Resolution. In case of any redemption at the election of the Company of
less than all the Securities, the Company shall, at least 20 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Agent), notify the Agent of such Redemption Date and of the
principal amount of Securities to be redeemed and shall deliver to the Agent
such documentation and records as shall enable the Agent to select the
Securities to be redeemed.
SECTION 12.4 Selection by Agent of Securities to Be Redeemed. If less
than all the Securities are to be redeemed, the particular Securities to be
redeemed shall be selected not more than 20 days prior to the Redemption Date by
the Agent, from the outstanding Securities not previously called for redemption,
by such method as the Agent shall deem fair and appropriate (so long as such
method is acceptable to the securities exchange or exchanges, if any, on which
the Securities are listed) and which may provide for the selection for
redemption of portions (equal to $250,000 or any
53
integral multiple of $50,000 in excess thereof) of the principal amount of
Securities of a denomination larger than $500,000.
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 may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed shall be treated
by the Agent as Outstanding for the purpose of such selection.
The Agent shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed.
SECTION 12.5 Notice of Redemption. Notice of redemption shall be given
by the Company first-class mail, postage prepaid, mailed not less than 20 or
more than 60 days prior to the Redemption Date, to each Securityholder to be
redeemed, at his address appearing in the Security Register. Such notice shall
be presumed to have been given when so mailed.
All notices of redemption shall state:
(1) the Redemption Date.
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption, the principal
amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date,
(5) the conversion price, the date on which the right to convert the
principal of the Securities to be redeemed will terminate and the place or
places where such Securities may be surrendered for conversion, and
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the
54
Company shall be given by the Company (with a copy to the Agent).
SECTION 12.6 Deposit of Redemption Price. On or before any Redemption
Date, the Company shall deposit with the Agent in immediately available funds an
amount of money sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on, all the
Securities which are to be redeemed on that date other than any Securities
called for redemption on that date which have been converted prior to the date
of such deposit.
If any Security called for redemption is converted, any money
deposited with the Agent for the redemption of such Security shall be paid to
the Company upon Company Request.
SECTION 12.7 Securities Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest to the
Redemption Date.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, at the Holder's option, such redemption shall
be deemed rescinded or such failure shall constitute an Event of Default
hereunder.
SECTION 12.8 Securities Redeemed in Part. Any Security which is to be
redeemed only in part shall be surrendered at an office or agency of the Company
designated for that with, if the Company or the Agent so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Agent duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute and deliver to the Holder
of such Security without service charge, a new Security or Securities, of any
authorized denomination as requested by such Security holder in an aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.
ARTICLE 13.
Right to Require Repurchase
SECTION 13.1 Right to Require Repurchase. In the event that there
shall occur a Change in Control of the Company, then each Holder shall have the
right, at such Holder's option, to require the Company to purchase, and upon the
exercise of such right the Company shall purchase, all or any part of such
Holder's Securities on the date (the "Repurchase Date") that is 30 days after
the date of such Change in Control at a price (the "Repurchase Price") equal to
100% of the principal amount thereof, together with accrued and unpaid interest
to the Repurchase Date.
55
SECTION 13.2 Notice; Method of Exercising Repurchase Right. (a) On or
before the 10th day after the earlier of (i) Change in Control or (ii) the
reaching of a definitive agreement with respect to the occurrence of a Change in
Control, the Company, or at the request of the Company, the Agent (in the name
and at the expense of the Company), shall give notice of the occurrence of the
Change in Control and of the repurchase right set forth herein arising as a
result thereof by first-class mail, postage prepaid, to each Holder of the
Securities at such Holder's address appearing in the Security Register. The
Company shall also deliver a copy of such notice of a repurchase right to the
Agent and the Company shall deliver in the name of the Holder a new Security or
Securities in the aggregate principal amount of the unrepurchased portion of
such surrendered Security.
SECTION 13.3 Deposit of Repurchase Price. Prior to the Repurchase
Date, the Company shall deposit with the Agent in immediately available funds an
amount of money sufficient to pay the Repurchase Price of the Securities which
are to be repaid on the Repurchase Date.
SECTION 13.4 Securities Not Repaid on Repurchase Date. If any Security
surrendered for repurchase shall not be so paid on the Repurchase Date, the
principal shall, until paid, bear interest to the extent permitted by applicable
law from the Repurchase Date at the default rate borne by the Security, and an
Event of Default shall be deemed to have occurred hereunder.
SECTION 13.5 Securities Repurchased in Part. Any Security which is to
be repurchased only in part shall be surrendered at any office or agency of the
Company designated for that (with, if the Company or the Agent so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Agent duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute 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 unrepurchased portion of the principal
of the Security so surrendered.
56
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
AUTOBOND ACCEPTANCE CORPORATION
By:
----------------------------------
Name:
Title:
BANKBOSTON, N.A.
By:
----------------------------------
Name:
Title:
57
Execution Copy
================================================================================
AUTOBOND ACCEPTANCE CORPORATION
15% Senior Subordinated Notes Due 2001
15% Convertible Subordinated Notes Due 2001
-----------------------
INDENTURE
Dated as of January 30, 1998
-----------------------
BANKBOSTON, N.A.,
Agent
================================================================================
TABLE OF CONTENTS
Page
ARTICLE 1.
Definitions and Incorporation by Reference........1
SECTION 1.01 Definitions ............................................1
SECTION 1.02 Other Definitions .....................................15
SECTION 1.03 Rules of Construction .................................15
ARTICLE 2.
The Securities...................................16
SECTION 2.01 Form and Dating .......................................16
SECTION 2.02 Execution and Authentication ..........................16
SECTION 2.03 Registrar and Paying Agent ............................16
SECTION 2.04 Paying Agent ..........................................17
SECTION 2.05 Securityholder Lists ..................................17
SECTION 2.06 Transfer and Exchange .................................17
SECTION 2.07 Replacement Securities ................................17
SECTION 2.08 Outstanding Securities ................................18
SECTION 2.09 Temporary Securities ..................................18
SECTION 2.10 Cancellation ..........................................18
SECTION 2.11 Defaulted Interest ....................................18
SECTION 2.12 Special Transfer Provisions ...........................18
ARTICLE 3.
Covenants.......................................19
SECTION 3.01 Payment of Securities .................................19
SECTION 3.02 SEC Reports ...........................................19
SECTION 3.03 Limitation on Indebtedness ............................19
SECTION 3.04 Limitation on Indebtedness and Preferred Stock of
Restricted Subsidiaries................................19
SECTION 3.05 Limitation on Restricted Payments .....................20
SECTION 3.06 Limitation on Restrictions on Distributions from
Restricted Subsidiaries................................21
SECTION 3.07 Limitation on Sales of Assets and Subsidiary Stock ....21
SECTION 3.08 Limitation on Liens ...................................21
SECTION 3.09 Financial Covenants. ..................................21
SECTION 3.10 Further Assurances. ...................................22
SECTION 3.11 Limitation on Investment Company Status ...............22
SECTION 3.12 Compliance Certificate ................................22
SECTION 3.13 Further Instruments and Acts ..........................22
i
ARTICLE 4.
Successor Company................................22
SECTION 4.01 When Company May Merge or Transfer Assets 23
ARTICLE 5.
Defaults and Remedies............................23
SECTION 5.01 Events of Default .....................................24
SECTION 5.02 Acceleration ..........................................26
SECTION 5.03 Other Remedies ........................................26
SECTION 5.04 Waiver of Past Defaults ...............................26
SECTION 5.05 Control by Majority ...................................26
SECTION 5.06 Limitation on Suits ...................................27
SECTION 5.07 Rights of Holders To Receive Payment ..................27
SECTION 5.08 Collection Suit by Agent ..............................27
SECTION 5.09 Agent May File Proofs of Claim ........................27
SECTION 5.10 Priorities ............................................28
SECTION 5.11 Undertaking for Costs .................................28
SECTION 5.12 Waiver of Stay or Extension Laws ......................28
ARTICLE 6.
Agent............................................29
SECTION 6.01 Duties of Agent .......................................29
SECTION 6.02 Rights of Agent .......................................30
SECTION 6.03 Individual Rights of Agent ............................30
SECTION 6.04 Agent's Disclaimer ....................................30
SECTION 6.05 Notice of Defaults ....................................30
SECTION 6.06 Compensation and Indemnity ............................31
SECTION 6.07 Replacement of Agent ..................................31
SECTION 6.08 Successor Agent by Merger .............................32
SECTION 6.09 Eligibility; Disqualification .........................32
ARTICLE 7.
Discharge of Indenture...........................33
SECTION 7.01 Discharge of Liability on Securities ..................33
SECTION 7.02 Repayment to Company ..................................33
ARTICLE 8.
Optional Conversion of Securities................33
SECTION 8.01 Optional Conversion Privilege and Conversion Price ....33
SECTION 8.02 Exercise of Optional Conversion Privilege .............34
SECTION 8.03 Fractions of Shares ...................................34
SECTION 8.04 Adjustment of Conversion Price ........................35
SECTION 8.05 Notice of Adjustments of Conversion Price .............38
SECTION 8.06 Notice of Certain Corporate Action ....................38
ii
SECTION 8.07 Company to Reserve Common Stock .......................39
SECTION 8.08 Taxes on Conversions ..................................40
SECTION 8.09 Covenant as to Common Stock; Accounting Treatment
of Consideration ......................................40
SECTION 8.10 Cancellation of Converted Series B Securities .........40
SECTION 8.11 Provisions in Case of Consolidation, Merger or
Sale of Assets ........................................40
SECTION 8.12 Registration and Listing of Shares ....................41
SECTION 8.13 Agent and Conversion Agents Not Liable ................41
ARTICLE 9.
Subordination of Securities......................43
SECTION 9.01 Securities Subordinate to Senior Indebtedness .........43
SECTION 9.02 Payment Over of Proceeds Upon Dissolution, Etc. .......43
SECTION 9.03 Prior Payment to Senior Indebtedness Upon
Acceleration of Securities ............................44
SECTION 9.05 Payment Permitted if No Default. ......................45
SECTION 9.06 Subrogation to Rights of Holders of
Senior Indebtedness ...................................45
SECTION 9.10 Notice to Agent .......................................47
ARTICLE 10.
Amendments.......................................49
SECTION 10.01 Without Consent of Holders ...........................49
SECTION 10.02 With Consent of Holders ..............................50
SECTION 10.03 Revocation and Effect of Consents and Waivers ........50
SECTION 10.04 Notation on or Exchange of Securities ................51
SECTION 10.05 Agent To Sign Amendments .............................51
SECTION 10.06 Payment for Consent ..................................51
ARTICLE 11.
Miscellaneous....................................51
SECTION 11.01 Notices ..............................................51
SECTION 11.02 Certificate and Opinion as to Conditions Precedent ...52
SECTION 11.03 Statements Required in Certificate or Opinion ........52
SECTION 11.04 When Securities Disregarded ..........................53
SECTION 11.05 Legal Holidays .......................................53
SECTION 11.06 Governing Law ........................................53
SECTION 11.07 No Recourse Against Others ...........................53
SECTION 11.08 Successors ...........................................53
SECTION 11.09 Multiple Originals ...................................54
SECTION 11.10 Table of Contents; Headings ..........................54
ARTICLE 12.
Redemption of Securities.........................54
SECTION 12.01 Right of Redemption ..................................54
iii
SECTION 12.02 Applicability of Article ............................54
SECTION 12.03 Election to Redeem; Notice to Agent .................54
SECTION 12.04 Selection by Agent of Securities to Be Redeemed .....54
SECTION 12.05 Notice of Redemption ................................55
SECTION 12.06 Deposit of Redemption Price. ........................55
SECTION 12.07 Securities Payable on Redemption Date ...............56
SECTION 12.08 Securities Redeemed in Part. ........................56
ARTICLE 13.
Right to Require Repurchase.....................56
SECTION 13.01 Right to Require Repurchase .........................56
SECTION 13.02 Notice; Method of Exercising Repurchase Right .......56
SECTION 13.03 Deposit of Repurchase Price .........................57
SECTION 13.04 Securities Not Repaid on Repurchase Date ............57
SECTION 13.05 Securities Repurchased in Part ......................57
Exhibit A - Form of Series A Note
Exhibit B - Form of Series B Note
Exhibit C - Form of Transferee Letter
Exhibit D - Form of Investment Letter
iv
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. BY ITS ACCEPTANCE
HEREOF, EACH PURCHASER REPRESENTS AND AGREES THAT THIS NOTE MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED, EXCEPT IN COMPLIANCE WITH THE
REGISTRATION PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE PROVISIONS
UNDER STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH
PROVISIONS. THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH
IN THE INDENTURE REFERRED TO HEREIN.
15% Senior Subordinated Note due 2001
15% Convertible Subordinated Note due 2001
No. R-1 $ 7,500,000
-------------- ------------
AutoBond Acceptance Corporation, a corporation duly organized and
existing under the laws of Texas (herein called the "Company", which term
includes any successor corporation under the Indenture hereinafter referred to);
for value received, hereby promises to pay to BancBoston Investments, Inc., or
registered assigns, the principal sum of $7,500,000 on January 31, 2001, and to
pay interest thereon from January 30, 1998 or from the most recent Interest
Payment Date to which interest has been paid, quarterly on February 1, May 1,
August 1, and November 1 in each year, commencing May 1, 1998 (and upon the
Stated Maturity), in arrears at the rate of 15% per annum (17% after Stated
Maturity), until the principal hereof is paid. Payment of the principal of (and
premium, if any) and interest on this Security will be made by wire transfer in
immediately available funds to the Holder. Interest shall be computed on the
basis of actual days elapsed and a 360-day year consisting of twelve 30-day
months.
This Security is one of a duly authorized issue of Securities of the
Company designated as its 15% Senior Subordinated Notes due 2001 and its 15%
Convertible Subordinated Notes due 2001 (herein called the "Securities"),
limited in aggregate principal amount to $7,500,000 (subject to increase at the
option of the Holder, as provided in the Indenture, up to $10,000,000 aggregate
principal amount), issued under an Indenture, dated as of January 30, 1998
(herein called the "Indenture"), between the Company and BankBoston, N.A., as
agent (herein called the "Agent", which term includes any successor agent under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Agent, the
holders of Senior Indebtedness and the Holders of the Securities and of the
terms upon which the Securities are, and are to be, authenticated and delivered.
Optional Conversion. Subject to and upon compliance with the
provisions of the Indenture, the Holder of this Security is entitled, at such
Holder's option, at any time on or before the close of business on January 31,
2001, or in case this Security or a portion hereof is called for redemption,
then in respect of this Security or such portion hereof until and including, but
(unless the Company defaults in making the payment due upon redemption) not
after, the close of business on the Redemption Date, to convert up to
$1,215,924.60 in principal amount of this Security (or any portion of the
principal amount hereof which is $1,000 or an integral multiple thereof), at the
principal amount hereof, or of such portion, into fully paid and nonassessable
shares (calculated as to each conversion to the nearest 1/100 of a share) of
Common Stock of the Company at a conversion price equal to $3.30 in aggregate
principal amount of Securities for each share of Common Stock (or at the current
adjusted conversion price if an adjustment has been made as provided in the
Indenture) by surrender of this Security, duly endorsed or assigned to the
Company or in blank, to the Company, accompanied by written notice to the
Company that the holder hereof elects to convert this Security and the portion
hereof to be converted. Accrued and unpaid interest to the date of conversion
will be payable by the Company to the holder. No payment or adjustment is to be
made on conversion for dividends on the Common Stock issued on conversion. No
fractions of shares or scrip representing fractions of shares will be issued on
conversion, but instead of any fractional interest the Company shall pay a cash
adjustment as provided in the Indenture. The conversion price is subject to
adjustment as provided in the Indenture. In addition, the Indenture provides
that in case of certain consolidations or mergers to which the Company is a
party or the transfer of substantially all of the assets of the Company, the
Indenture shall be amended, without the consent of any holders of Securities, so
that this Security, if then outstanding, will be convertible thereafter, during
the period this Security shall be convertible as specified above, only into the
kind and amount of securities, cash and other property receivable upon the
consolidation, merger or transfer by a holder of the number of shares of Common
Stock into which this Security might have been converted immediately prior to
such consolidation, merger or transfer (assuming such holder of Common Stock
failed to exercise any rights of election and received per share the kind and
amount of securities, cash or other property received per share by a plurality
of non-electing shares).
The Securities are subject to redemption upon not less than 20 days'
notice by mail, at any time on or after July 1, 1999, as a whole or in part, at
the election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): if redeemed during the 3-month period
beginning,
Date Redemption Price
---- ----------------
July 1, 1999 105%
October 1, 1999 104%
January 1, 2000 103%
May 1, 2000 102%
August 1, 2000 101%
and thereafter at a Redemption Price equal to 100% of the principal amount,
together in the case
2
of any such redemption with accrued interest to the Redemption Date.
In the event of redemption or conversion of this Security in part
only, a new Security or Securities for the unredeemed or unconverted portion
hereof will be issued in the name of the Holder hereof upon the cancellation
hereof, with accrued and unpaid interest being carried forward to the
replacement Security as such.
The indebtedness evidenced by the Securities is, to the extent and in
the manner provided in the Indenture, expressly subordinate and subject in right
of payment to the prior payment in full of any Senior Indebtedness of the
Company or provision for such payment, whether outstanding at the date of the
Indenture or thereafter incurred (to the extent permitted in the Indenture), and
each Holder of this Security, by such Holder's acceptance hereof, agrees to and
shall be bound by such provisions of the Indenture and authorizes and directs
the Agent in such Holder's behalf to take such action as may be necessary or
appropriate to effectuate such subordination and appoints the Agent such
Holder's attorney-in-fact or any and all such purposes.
In the event there shall occur any Change in Control (as defined in
the Indenture) with respect to the Company, each Holder of Securities shall have
the right, at such Holder's option, to require the Company to purchase on the
Repurchase Date all or any part of such Holder's Securities at a Repurchase
Price equal to the 100% of the principal amount on the Repurchase Date, together
with accrued interest to the Repurchase Date and in the manner specified in the
Indenture.
If an Event of Default shall occur and be continuing, the principal of
all the Securities and all other amounts due hereunder may be declared due and
payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Agent with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the time
outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the right of the Holder, which is
absolute and unconditional, to receive payment of the principal of (and premium,
if any) and interest on this Security at the times, place and rate, and in the
coin or currency (i.e., U.S. Dollars), herein prescribed or to convert this
Security as provided in the Indenture.
3
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $100,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Agent and any agent of the Company or the Agent may
treat the Person in whose name this Security is registered as the owner hereof
for all purposes, whether or not this Security be overdue, and neither the
Company, the Agent nor any such agent shall be affected by notice to the
contrary.
This Security shall be governed by the laws of the State of New York
(without reference to choice of law rules) and this Security is subject to that
certain Purchase Agreement dated as of January 30, 1998, between the Company and
BancBoston Investments, Inc.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the indenture.
4
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: January 30, 1998
AUTOBOND ACCEPTANCE CORPORATION
By
------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman
5
[Form of Election to Convert]
To AutoBond Acceptance Corporation:
The undersigned owner of this Security hereby irrevocably exercises
the option to convert this Security, or the portion below designated, into
shares of Common Stock of AutoBond Acceptance Corporation in accordance with the
terms of the Indenture referred to in this Security, and directs that the shares
issuable and deliverable upon conversion, together with any check in payment for
fractional shares, be issued in the name of and delivered to the undersigned
registered Holder hereof, unless a different name has been indicated in the
assignment below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. Any amount required to be paid by the undersigned on account of
interest accompanies this Security.
Dated:
Portion of Security to be converted
($1,000 or an integral multiple thereof):
$
------------------------------------
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Signature ( for conversion only) If
shares of Common Stock are to be
issued and registered otherwise than
to the registered Holder named above,
please print or typewrite name and
address, including zip code, and
social security or other taxpayer
identifying number.
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6