Exhibit A
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PIEDMONT MANAGEMENT COMPANY INC.
as the Company
and
SHAWMUT BANK CONNECTICUT, N.A.
as the Trustee
___________________________________
Indenture
Dated as of ________ __, 1995
___________________________________
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TABLE OF CONTENTS*
Page
RECITALS OF THE COMPANY
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions. . . . . . . . . . . . . . 1
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SECTION 1.2 Other Definitions. . . . . . . . . . . 16
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SECTION 1.3 Incorporation by Reference of
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Trust Indenture Act . . . . . . . . . . 17
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SECTION 1.4 Rules of Construction . . . . . . . . . 18
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ARTICLE 2
THE SECURITIES
SECTION 2.1 Form and Dating . . . . . . . . . . . . 18
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SECTION 2.2 Execution and Authentication . . . . . 18
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SECTION 2.3 Amount Limited . . . . . . . . . . . . 19
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SECTION 2.4 Denomination and Date of
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Securities; Payments of
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Interest . . . . . . . . . . . . . . . 19
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SECTION 2.5 Registrar and Paying Agent;
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Agents Generally . . . . . . . . . . . 19
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SECTION 2.6 Paying Agent to Hold Money in
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Trust . . . . . . . . . . . . . . . . . 20
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SECTION 2.7 Transfer Restrictions;
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Transfer and Exchange . . . . . . . . . 21
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SECTION 2.8 Replacement Securities . . . . . . . . 22
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SECTION 2.9 Outstanding Securities . . . . . . . . 23
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SECTION 2.10 Temporary Securities . . . . . . . . . 24
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SECTION 2.11 Cancellation . . . . . . . . . . . . . 24
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SECTION 2.12 CUSIP Numbers . . . . . . . . . . . . . 25
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SECTION 2.13 Limited Extension of
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Settlement Date. . . . . . . . . . . . 25
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ARTICLE 3
REDEMPTION
SECTION 3.1 Notices. . . . . . . . . . . . . . . . 26
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SECTION 3.2 Notice of Redemption . . . . . . . . . 26
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*Note: The Table of Contents shall not for any
purposes be deemed to be a part of the
Indenture.
i
SECTION 3.3 Effect of Notice of
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Redemption . . . . . . . . . . . . . . 27
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SECTION 3.4 Deposit of Redemption or
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Purchase Price . . . . . . . . . . . . 27
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SECTION 3.5 No Securities Redeemed or
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Purchased in Part . . . . . . . . . . . 28
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SECTION 3.6 Optional Redemption . . . . . . . . . . 28
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SECTION 3.7 Mandatory Redemption . . . . . . . . . 28
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ARTICLE 4
COVENANTS
SECTION 4.1 Payment of Securities . . . . . . . . . 28
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SECTION 4.2 Maintenance of Records;
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Compliance with Laws; Access
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and Cooperation . . . . . . . . . . . . 29
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SECTION 4.3 Reports by the Company . . . . . . . . 30
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SECTION 4.4 Maintenance of Office or
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Agency . . . . . . . . . . . . . . . . 30
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SECTION 4.5 Negative Pledge . . . . . . . . . . . . 31
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SECTION 4.6 Purchase of Securities upon a
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Change of Control . . . . . . . . . . . 31
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SECTION 4.7 Limitation on Indebtedness . . . . . . 33
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SECTION 4.8 Certificate to Trustee . . . . . . . . 33
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ARTICLE 5
CONSOLIDATION, MERGER, CONVEYANCE,
SECTION 5.1 When Company May Merge, Etc. . . . . . 34
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SECTION 5.2 Successor Substituted . . . . . . . . . 36
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ARTICLE 6
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default . . . . . . . . . . . 36
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SECTION 6.2 Acceleration . . . . . . . . . . . . . 38
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SECTION 6.3 Other Remedies . . . . . . . . . . . . 38
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SECTION 6.4 Waiver of Past Defaults . . . . . . . . 38
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SECTION 6.5 Control by Majority . . . . . . . . . . 39
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SECTION 6.6 Limitation on Suits . . . . . . . . . . 39
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SECTION 6.7 Rights of Holders of
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Securities to Receive
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Payment . . . . . . . . . . . . . . . . 40
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SECTION 6.8 Collection Suit by Trustee . . . . . . 40
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SECTION 6.9 Trustee May File Proofs of
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Claim . . . . . . . . . . . . . . . . . 40
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SECTION 6.10 Priorities . . . . . . . . . . . . . . 41
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SECTION 6.11 Undertaking for Costs . . . . . . . . . 41
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ii
ARTICLE 7
TRUSTEE
SECTION 7.1 General . . . . . . . . . . . . . . . . 42
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SECTION 7.2 Certain Rights of Trustee . . . . . . . 42
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SECTION 7.3 Individual Rights of Trustee . . . . . 44
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SECTION 7.4 Trustee's Disclaimer . . . . . . . . . 45
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SECTION 7.5 Notice of Default . . . . . . . . . . . 45
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SECTION 7.6 Reports by Trustee to
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Holders . . . . . . . . . . . . . . . . 45
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SECTION 7.7 Compensation and Indemnity . . . . . . 45
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SECTION 7.8 Replacement of Trustee . . . . . . . . 46
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SECTION 7.9 Successor Trustee by Merger,
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Etc. . . . . . . . . . . . . . . . . . 48
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SECTION 7.10 Eligibility . . . . . . . . . . . . . . 48
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SECTION 7.11 Money Held in Trust . . . . . . . . . . 48
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ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.1 Satisfaction and Discharge of
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Indenture . . . . . . . . . . . . . . . 48
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SECTION 8.2 Application by Trustee of
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Funds Deposited for Payment
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of Securities . . . . . . . . . . . . . 49
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SECTION 8.3 Repayment of Moneys Held by
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Paying Agent . . . . . . . . . . . . . 49
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SECTION 8.4 Return of Moneys Held by
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Trustee and Paying Agent
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Unclaimed for Three Years . . . . . . . 49
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SECTION 8.5 Defeasance . . . . . . . . . . . . . . 50
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SECTION 8.6 Covenant Defeasance . . . . . . . . . . 51
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ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders of
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Securities . . . . . . . . . . . . . . 52
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SECTION 9.2 With Consent of Holders of
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Securities . . . . . . . . . . . . . . 53
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SECTION 9.3 Compliance with Trust
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Indenture Act . . . . . . . . . . . . . 55
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SECTION 9.4 Revocation and Effect of
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Consents . . . . . . . . . . . . . . . 55
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SECTION 9.5 Notation on or Exchange of
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Securities . . . . . . . . . . . . . . 55
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SECTION 9.6 Trustee to Sign Amendments,
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etc . . . . . . . . . . . . . . . . . . 56
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iii
ARTICLE 10
DETERMINATION OF THE PAYMENT AMOUNT
SECTION 10.1 Determination of the
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Contingent Amount . . . . . . . . . . . 56
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SECTION 10.2 Holder Actuary; Compensation
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and Indemnity . . . . . . . . . . . . . 56
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SECTION 10.3 Company Actuary . . . . . . . . . . . . 57
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SECTION 10.4 Preparation of Reserve
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Reports . . . . . . . . . . . . . . . . 58
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SECTION 10.5 Resolution of Disputes;
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Arbitration . . . . . . . . . . . . . . 59
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SECTION 10.6 Annual Review of Reserves And
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Claims . . . . . . . . . . . . . . . . 60
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SECTION 10.7 Settlement in Stock . . . . . . . . . . 61
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ARTICLE 11
MISCELLANEOUS
SECTION 11.1 Trust Indenture Act of 1939 . . . . . . 61
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SECTION 11.2 Notices . . . . . . . . . . . . . . . . 62
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SECTION 11.3 Certificate and Opinion as to
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Conditions Precedent . . . . . . . . . 63
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SECTION 11.4 Statements Required in
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Certificate or Opinion . . . . . . . . 63
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SECTION 11.5 Rules by Trustee, Paying
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Agent or Registrar . . . . . . . . . . 64
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SECTION 11.6 Payment Date Other Than a
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Business Day . . . . . . . . . . . . . 64
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SECTION 11.7 Governing Law . . . . . . . . . . . . . 64
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SECTION 11.8 No Adverse Interpretation of
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Other Agreements . . . . . . . . . . . 64
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SECTION 11.9 Successors . . . . . . . . . . . . . . 64
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SECTION 11.10 Duplicate Originals . . . . . . . . . . 64
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SECTION 11.11 Separability . . . . . . . . . . . . . 64
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SECTION 11.12 Table of Contents, Headings,
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Etc. . . . . . . . . . . . . . . . . . 64
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SECTION 11.13 Incorporators, Stockholders,
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Officers and Directors of
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Company Exempt from
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Individual Liability . . . . . . . . . 65
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SECTION 11.14 Judgment Currency . . . . . . . . . . . 65
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SIGNATURES
Exhibit A - Form of Security
Exhibit B - Calculation of Contingent Amount
Exhibit C - Registration Rights
iv
INDENTURE, dated as of ________ __, 1995, between
Piedmont Management Company Inc., a Delaware corporation, as
the Company, and Shawmut Bank Connecticut, N.A., a national
association, as Trustee.
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the issue
of its Contingent Interest Notes Due June 30, 2006
(collectively, the "Securities"), which Securities consist
of (i) an aggregate principal amount of $1,000,000 plus
interest accreting thereon from the date of issuance as
provided herein at a rate of 8.0% per annum, compounded
annually, and (ii) aggregate contingent interest of up to
$55,000,000 as determined pursuant to Article 10, and, to
provide, among other things, for the authentication,
delivery and administration thereof, the Company has duly
authorized the execution and delivery of this Indenture; and
WHEREAS, all things necessary to make this Inden-
ture a valid indenture and agreement according to its terms
have been done;
NOW, THEREFORE:
In consideration of the premises, the Company and
the Trustee mutually covenant and agree for the equal and
proportionate benefit of the respective holders from time to
time of the Securities as follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
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"Acquired Indebtedness" means Indebtedness of a
Person: (i) existing at the time such Person becomes a
Subsidiary (or any renewal, extension, substitution,
refinancing or replacement thereof at such time) or (ii)
assumed in connection with the acquisition of assets from
another Person, other than Indebtedness incurred in
connection with, or in contemplation of, such Person
becoming a Subsidiary or such acquisition, as the case may
be.
"Adverse Reserve Development" has the meaning set
forth in Exhibit B.
1
"Affiliate" means, with respect to any specified
Person, any other Person directly or indirectly controlling
or controlled by or under direct or indirect common control
with such specified Person (except in cases where
substantially all of the control that would ordinarily be
exercisable by virtue of ownership of stock, other than the
election of directors, has been eliminated by applicable
regulatory authorities). For the purposes of this
definition, "control" when used with respect to any
specified Person means the power to direct the management
and policies of such Person, directly or indirectly, whether
through the ownership of voting stock, by contract or
otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Average Life" means, as of the date of
determination, with respect to any Indebtedness, the
quotient obtained by dividing: (i) the sum of the products
of (A) the number of years (or portion thereof) from the
date of determination to the dates of each successive
scheduled principal payment of such Indebtedness multiplied
by (B) the amount of such principal payment by (ii) the sum
of all such principal payments.
"Board of Directors" means either the Board of
Directors of the Company or any committee of such Board duly
authorized to act hereunder.
"Board Resolution" means one or more resolutions
of the board of directors of the Company or any authorized
committee thereof, certified by the secretary or an
assistant secretary to have been duly adopted and to be in
full force and effect on the date of certification, and
delivered to the Trustee.
"Business Day" means any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a
day on which banking institutions are authorized or required
by law or regulation to close in The City of New York.
"Capital Lease Obligation" of any Person means any
obligations of such Person and its Subsidiaries on a
consolidated basis under any capital lease of real or
personal property which, in accordance with GAAP, has been
recorded as a capitalized lease obligation; and the amount
of Indebtedness represented by such obligation will 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
2
lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all
shares, interests, participation, or other equivalent
(however designated) of such Person's capital stock and any
rights (other than debt securities convertible into or
exchangeable for capital stock), warrants or options to
purchase the foregoing whether now outstanding or issued
after the date hereof.
"Change of Control" means (A) either (i) any
transaction or series of transactions occurring after the
Merger in which any "person" or "group" (within the meaning
of Rule 13d-5 under the Exchange Act and Sections 13(d) and
14(d) of the Exchange Act) (x) consisting of one or more of
the holders (or their Affiliates) of the Common Stock of
Chartwell immediately prior to the Merger becomes the direct
or indirect "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), by way of merger, consolidation,
other business combination or otherwise, of greater than 66-
2/3% of the total voting power (on a fully-diluted basis as
if all convertible securities had been converted) entitled
to vote in the election of directors of the Company or the
Surviving Entity (if other than the Company) or (y) other
than the initial holders (or their Affiliates) of the Common
Stock of the Company immediately after the Merger, becomes
the direct or indirect "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), by way of merger,
consolidation, other business combination or otherwise, of
greater than 50% of the total voting power (as defined
above) entitled to vote in the election of directors of the
Company or the Surviving Entity (if other than the Company);
provided that this subclause (y) shall not include any
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transaction in which the Company or the Surviving Entity
becomes or is a direct or indirect Wholly-Owned Restricted
Subsidiary of another entity (the "Parent") if immediately
following such transaction no "person" or "group" would be
the "beneficial owner" of greater than 50% of such total
voting power of the Parent or (ii) the Common Stock of the
Company shall cease to be listed on any national securities
exchange or on The NASDAQ Stock Market; and (B) within one
year after the occurrence of any of the events described in
clause (A) above, (i) the individuals who immediately prior
to the occurrence of such event or events constituted the
board of directors of the Company cease for any reason to
constitute a majority of the directors of the Company then
in office or (ii) the Chief Executive Officer and President
of the Company (or an individual or individuals holding
positions of equivalent responsibility) at the time of such
event or events cease for any reason to hold such positions
3
at the Company, or if the Company is controlled by another
Person, such officers do not hold positions of equivalent
responsibility at such other Person. In addition, a Change
of Control shall be deemed to have occurred if (a) the
Company or any Subsidiary sells, conveys, transfers, leases
or otherwise disposes of all or substantially all of the
assets of the Company and its Subsidiaries, considered as a
whole, or (b) the Company or any Subsidiary of the Company
sells, conveys, transfers, leases or otherwise disposes of
all or substantially all of the common stock of, or sells,
conveys, transfers, leases or otherwise disposes of all or
substantially all of the assets of, RECO or Chartwell
Reinsurance to another Person or Persons in one transaction
or a series of transactions, including through a bulk
reinsurance transaction or transactions, in each case with
respect to clauses (a) and (b) above, other than any
transaction which is specifically contemplated by the Merger
Agreement or any sale, conveyance, transfer, lease or other
disposition to the Company or any Wholly-Owned Restricted
Subsidiary.
"Chartwell" means Chartwell Re Corporation, a
Delaware corporation.
"Chartwell Reinsurance" means Chartwell
Reinsurance Company, a Minnesota corporation.
"Commission" means the Securities and Exchange
Commission, as from time to time constituted, created under
the Exchange Act or, if at any time after the execution of
this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such
time.
"Common Stock" means, with respect to any Person,
any and all shares, interests, participations or other
equivalents (however designated, whether voting or non-
voting) of such Person's common stock, whether now
outstanding or issued after the date of this Indenture,
including, without limitation, all series and classes of
such common stock.
"Company" means Piedmont Management Company Inc.,
a Delaware corporation, and its successors and assigns.
Chartwell shall be deemed to be the successor to Piedmont
Management Company Inc. after the Merger, and from and after
the Merger, "Company" shall mean Chartwell and its
successors and assigns.
4
"Company Actuary" means the actuary appointed by
the Company pursuant to Section 10.3.
"Consolidated Net Worth" of any Person means the
consolidated stockholders' equity of such Person and its
Restricted Subsidiaries as determined in accordance with
GAAP consistently applied.
"Contingent Amount" has the meaning set forth in
Exhibit B.
"Corporate Trust Office" means the office of the
Trustee at which the corporate trust business of the Trustee
shall, at any particular time, be principally administered,
which office is, at the date as of which this Indenture is
dated, located at New York, New York.
"Currency Agreement" means any foreign exchange
contract, currency swap agreement or other similar agreement
or arrangement designed to protect such Person or any of its
Restricted Subsidiaries against fluctuations in currency
values or exchange rates.
"Determination Date" has the meaning set forth in
Exhibit B.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"Fair Market Value" means, with respect to any
asset or property, the sale value that would be obtained in
an arm's-length transaction between an informed and willing
seller under no compulsion to sell and an informed and
willing buyer.
"Fixed Amount" means the aggregate Principal
Amount plus accreted interest thereon from the Issue Date
through the Settlement Date (not including any period of
extension pursuant to Section 2.13) at a rate of 8.0% per
annum, compounded annually.
"GAAP" means generally accepted accounting
principles in the United States of America at the date of
any computation required or permitted hereunder; provided
that for purposes of calculation of the Contingent Amount
GAAP means generally accepted accounting principles in the
United States of America as in effect on the Determination
Date.
"Guaranteed Debt" of any Person means, without
duplication, all Indebtedness of any other Person to the
5
extent guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly
by such Person through an agreement: (i) to pay or purchase
such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness; (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase
or sell services, primarily for the purpose of enabling such
other Person to make payment of such Indebtedness or to
assure the holder of such Indebtedness against loss;
(iii) to supply funds to, or in any other manner invest in,
such other Person (including any agreement to pay for
property or services to be acquired by such other Person
irrespective of whether such property is received or such
services are rendered); (iv) to maintain working capital or
equity capital of such other Person, or otherwise to
maintain the net worth, solvency or other financial
condition of the debtor; or (v) otherwise to assure the
holder of such Indebtedness of such other Person against
loss; provided that the term "guarantee" shall not include
endorsements for collection or deposit, in either case in
the ordinary course of business, or any obligation or
liability of such other Person in respect of leasehold
interests assigned by such other Person to any other Person.
"Holder", "holder of Securities", "Securityholder"
or other similar terms means the registered holder of any
Security.
"Holder Actuary" means the actuary appointed to
represent the interests of the Holders of the Securities
pursuant to the Holder Actuary Agreement dated the date
hereof between the Holder Actuary and the Company.
"Indebtedness" means, with respect to any Person,
without duplication: (i) all obligations of such Person for
borrowed money and all obligations of such Person for the
deferred purchase price of property or services, excluding
any trade payables and other accrued current liabilities
incurred in the ordinary course of business, in each case,
if, and to the extent, any of the foregoing would appear as
a liability upon a balance sheet of such Person prepared in
accordance with GAAP; (ii) all obligations of such Person
evidenced by bonds, notes, debentures or other similar
instruments, if, and to the extent, any of the foregoing
would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP; (iii) all
obligations created or arising under any conditional sale or
other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of
default are limited to repossession or sale of such
6
property), but excluding trade accounts payable arising in
the ordinary course of business and software license
agreements or other software acquisition agreements entered
into in the ordinary course of business; (iv) all Capital
Lease Obligations of such Person; (v) all obligations
referred to in (but not excluded from) clause (i), (ii),
(iii) or (iv) above of other Persons and all dividends of
other Persons, to the extent that the payment thereof is
secured by (or to the extent that the holder of such
obligations has an existing right, contingent or otherwise,
to be secured by) any Lien, upon or in property (including,
without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or
become liable for the payment of such obligations; (vi) all
Guaranteed Debt of such Person; (vii) all Redeemable Capital
Stock issued by such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends; (viii) the net amount of all
obligations under Currency Agreements or Interest Swap
Obligations of such Person; (ix) all obligations 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 entered
into in the ordinary course of the insurance or reinsurance
business of such Person to the extent that such letters of
credit are not drawn upon, or if and to the extent drawn
upon, such drawing is reimbursed not later than the 30th
Business Day following a demand for reimbursement following
payment on the letter of credit) and (x) any amendment,
supplement, modification, deferral, renewal, extension or
refunding of any liability of the types referred to in
clauses (i) through (ix) above. Indebtedness shall not
include obligations under insurance, reinsurance or
retrocession contracts entered into in the ordinary course
of business. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does
not have a fixed repurchase price shall be calculated in
accordance with the terms of such Redeemable Capital Stock
as if such Redeemable Capital Stock were purchased on any
date on which Indebtedness shall be required to be
determined pursuant to the Indenture, and if such price is
based upon, or measured by, the Fair Market Value of such
Redeemable Capital Stock, such Fair Market Value shall be
determined in good faith by the board of directors of the
issuer of such Redeemable Capital Stock.
"Indenture" means this instrument as originally
executed and delivered or, if amended or supplemented as
herein provided, as so amended or supplemented.
7
"Interest Swap Obligations" means the obligations
of any Person pursuant to any interest rate swap agreement,
interest rate collar agreement or other similar agreement or
arrangement designed to protect such Person or any of its
subsidiaries against fluctuations in interest rates.
"Issue Date" means the date on which Securities
are originally issued under the Indenture.
"Lien" means any mortgage, charge, pledge, lien,
security interest or encumbrance of any kind.
"Maturity Date" means June 30, 2006 (subject to
any extension pursuant to Section 2.13).
"Merger" means the merger of the Company with and
into Chartwell pursuant to an Agreement and Plan of Merger
dated as of August 7, 1995 between the Company and Chartwell
(the "Merger Agreement").
"Non-Recourse Indebtedness" means Indebtedness as
to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support (including any
undertaking, agreement or instrument that would constitute
Indebtedness), unless the incurrence of such Indebtedness
would have otherwise been permitted hereunder, (b) is
directly or indirectly liable, unless the incurrence of such
Indebtedness would have otherwise been permitted hereunder,
or (c) constitutes the lender.
"Officer" means, with respect to the Company, the
chairman of the board of directors, the president or chief
executive officer, any vice president, the chief financial
officer, the treasurer or any assistant treasurer, or the
secretary or any assistant secretary.
"Officers' Certificate" means a certificate signed
in the name of the Company by the Chairman of the Board of
Directors or the President or any Vice President and by the
Chief Financial Officer, Treasurer or the Secretary or any
Assistant Secretary of the Company and delivered to the
Trustee. Each such certificate shall comply with
Section 314 of the Trust Indenture Act of 1939 to the extent
applicable and include the statements provided for in
Section 11.4, if and to the extent required thereby.
"Opinion of Counsel" means an opinion in writing
signed by legal counsel who may be an employee of or counsel
to the Company or who may be other counsel satisfactory to
the Trustee. Each such opinion shall comply with Section
314 of the Trust Indenture Act and include the statements
8
provided for in Section 11.4, if and to the extent required
thereby.
"Payment Amount" means the sum of (i) the Fixed
Amount, (ii) the Contingent Amount and (iii) to the extent
applicable, any Extension Interest.
"Permitted Liens" means:
(a) Liens securing Indebtedness of the Company
with respect to any revolving credit facility not
exceeding $10.0 million in principal amount in the
aggregate at any one time outstanding (exclusive of any
Lien permitted by any other clause of this definition);
provided that such $10.0 million shall be reduced to
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the extent that any Indebtedness shall have been
incurred and shall be outstanding under clause (ix) of
the definition of "Permitted Subsidiary Indebtedness";
(b) Liens in favor of the Company or any
Restricted Subsidiary;
(c) Liens on shares of capital stock or property
of a Person existing at the time such Person is
acquired by or merged into or consolidated with the
Company or any Restricted Subsidiary of the Company,
provided that such Liens were not incurred in
connection with, or in contemplation of, such merger or
consolidation and such Liens do not extend to any
assets of the Company or any of its Restricted
Subsidiaries other than the shares or assets of the
Person so acquired by, merged into or consolidated with
the Company or such Restricted Subsidiary;
(d) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted
Subsidiary of the Company; provided that such Liens
were not incurred in connection with, or in
contemplation of, such acquisition and do not extend to
any assets of the Company or any of its Restricted
Subsidiaries other than the property so acquired;
(e) Liens to secure the performance of statutory
obligations, surety or appeal bonds or performance
bonds, or landlords', carriers', warehousemen's,
mechanics', suppliers', materialmen's or other like
Liens, in any case incurred in the ordinary course of
business and with respect to amounts not yet delinquent
or being contested in good faith by appropriate process
of law, if a reserve or other appropriate provision, if
9
any, as is required by GAAP shall have been made
therefor;
(f) Liens existing on the date of the Merger;
(g) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that
are being contested in good faith by appropriate
proceedings promptly instituted and diligently
concluded; provided that any reserve or other
appropriate provision as shall be required in
conformity with GAAP shall have been made therefor;
(h) Liens with respect to obligations under
Currency Agreements or Interest Swap Obligations
permitted under the Indenture;
(i) Liens to secure any extension, renewal,
substitution, refinancing or replacement (or successive
extensions, renewal, substitution, refinancing or
replacements), in whole or in part, of any Indebtedness
secured by Liens referred to in any of clauses (a),
(c), (d), (f), (j), (k) and (l); provided that any such
--------
Lien shall be limited to the same property that secured
the original Lien and the aggregate principal amount of
Indebtedness that is secured by such Lien shall not be
increased to an amount greater than the outstanding
aggregate principal amount of the Indebtedness being so
extended, renewed, substituted, refinanced or replaced
(plus any premium and expenses incurred in connection
therewith);
(j) Liens securing Indebtedness incurred to
finance the construction or purchase of, or repairs,
improvements or additions to, property of the Company;
provided that (i) any such Lien may not extend to any
--------
other property owned by the Company or any of its
Restricted Subsidiaries, (ii) such Lien is created
prior to, at the time of or within 90 days after such
construction, purchase, repair, improvement or addition
is completed and (iii) the principal amount of the
Indebtedness secured by such Lien does not exceed 100%
of the fair market cost of such construction, purchase,
repair, improvement or addition;
(k) Liens securing Indebtedness of a Restricted
Subsidiary permitted to be incurred under this
Indenture or any guarantee by the Company thereof; and
(l) Liens securing Indebtedness of the Company
provided, that at the date that any such Lien is
10
created or incurred (on a pro forma basis), the ratio
of (x) Senior Indebtedness to (y) Consolidated Net
Worth of the Company does not exceed 0.9 to 1.
"Permitted Subsidiary Indebtedness" means:
(i) Indebtedness of any Restricted Subsidiary
outstanding on the date of the Merger;
(ii) Acquired Indebtedness of any Restricted
Subsidiary;
(iii) Indebtedness of any Restricted Subsidiary
issued to or held by the Company or a Wholly-Owned
Restricted Subsidiary of the Company;
(iv) (A) Interest Swap Obligations of any
Restricted Subsidiary, the notional amount of which
obligations do not exceed the aggregate principal
amount of the Indebtedness they are designed to protect
and (B) obligations pursuant to Currency Agreements
entered into by any Restricted Subsidiary in respect of
its (x) assets or (y) obligations, as the case may be,
that are denominated in a currency other than U.S.
dollars;
(v) Guaranteed Debt of a Restricted Subsidiary in
respect of Indebtedness of any other Restricted
Subsidiary permitted to be incurred by such other
Subsidiary under this Indenture;
(vi) Indebtedness arising from agreements
providing for indemnification, adjustment of purchase
price or similar obligations, or from Guaranteed Debt
or letters of credit, surety bonds or performance bonds
securing any obligations of the Company or any
Restricted Subsidiary pursuant to such agreements, in
any case incurred in connection with the disposition of
any business, assets or Restricted Subsidiary of the
Company, other than guarantees of Indebtedness incurred
by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the
purpose of financing such acquisition; provided that
--------
the maximum aggregate liability in respect of all such
Indebtedness in the nature of such guarantee shall at
no time exceed the gross proceeds actually received
from the sale of such business, assets or Restricted
Subsidiary;
(vii) Indebtedness under performance, surety or
appeal bonds; provided that such performance, surety or
--------
11
appeal bonds are furnished in the ordinary course of
any Restricted Subsidiary's insurance or reinsurance
business;
(viii) Any renewals, extensions, substitutions,
refinancings or replacements by any Restricted
Subsidiary of any Indebtedness of a Restricted
Subsidiary permitted under this Indenture, including
any successive renewals, extensions, substitutions,
refinancings or replacements thereof so long as any
such new Indebtedness (A) shall be in a principal
amount that does not exceed the principal amount so
refinanced, plus the amount of any premium required to
be paid in connection with such refinancing pursuant to
the terms of the Indebtedness refinanced or the amount
of any premium reasonably determined by the Company as
necessary to accomplish such refinancing, plus the
amount of expenses incurred in connection with such
refinancing and (B) (x) in the case of Indebtedness
being refinanced which has an Average Life shorter than
the Securities, such renewal, extension, substitution,
refinancing or replacement does not reduce the Average
Life or the final Stated Maturity of the principal of
such Indebtedness and (y) in all other cases, any such
new Indebtedness has an Average Life and final Stated
Maturity that exceeds the Average Life and final Stated
Maturity of the Securities; provided that for purposes
of this clause (viii), the principal amount of any
Indebtedness shall be deemed to mean the principal
amount thereof or, if such Indebtedness provides for an
amount less than the principal amount thereof to be due
and payable upon a declaration of acceleration thereof,
such lesser amount as of the date of determination; and
(ix) Indebtedness under any revolving credit
facility of up to but not in excess of an aggregate
principal amount outstanding at any one time of $10.0
million; provided that there is a period of 30
--------
consecutive days in each calendar year during which no
such Indebtedness is outstanding; and provided further
----------------
that such $10.0 million shall be reduced to the extent
of any Indebtedness secured by Liens created or
incurred under clause (a) of the definition of
"Permitted Liens".
"Person" means any individual, corporation,
limited or general partnership, limited liability company,
joint venture, association, joint stock company, trust,
fund, unincorporated organization or government or any
agency or political subdivision thereof.
12
"Principal Amount" means, with respect to the
Securities, in the aggregate, $1,000,000.
"Principal Restricted Insurance Subsidiary" means
(i) Chartwell Reinsurance; (ii) RECO; (iii) any other
insurance company Restricted Subsidiary of the Company that
becomes a "significant subsidiary" as defined in Regulation
S-X, as promulgated by the Commission; and (iv) any other
Subsidiary of the Company that may succeed, by merger,
consolidation or otherwise, to all or substantially all of
the business of one or more of such persons specified in
(i), (ii) and (iii) above.
"pro rata" means, with respect to any Security,
the ratio of the principal amount of such Security to the
aggregate principal amount of the Securities.
"Protected Business" has the meaning set forth in
Exhibit B.
"RECO" means The Reinsurance Corporation of New
York, a New York corporation.
"Redeemable Capital Stock" means any Capital Stock
that, either by its terms, by the terms of any security into
which it is convertible or exchangeable or otherwise, is or
upon the happening of an event or passage of time would be
required to be redeemed on or prior to the final Stated
Maturity of the Securities or is redeemable at the option of
the holder thereof at any time prior to such final Stated
Maturity, or is convertible into or exchangeable for debt
securities at any time prior to such final Stated Maturity.
"Redemption Date" means the date fixed for
optional redemption of the Securities in accordance with
Article 3 of the Indenture; provided that such date shall be
--------
extended if and to the extent required by Section 2.13.
"Registered Common Stock" means Common Stock of
the Company registered under the Securities Act of 1933, as
amended (or other Common Stock of the Company that is freely
tradeable (other than by affiliates (within the meaning of
Rule 144 under the Securities Act) of the Company) without
such registration; provided that in connection with the
--------
settlement of the Payment Amount due under the Securities in
Common Stock without such registration, an unqualified
opinion of a nationally recognized law firm experienced in
securities law matters is delivered by the Company to the
Trustee to such effect).
13
"Responsible Officer" when used with respect to
the Trustee means the chairman of the board of directors,
any vice chairman of the board of directors, the chairman of
the trust committee, the chairman of the executive
committee, any vice chairman of the executive committee, the
president, any vice president (whether or not designated by
numbers or words added before or after the title "vice
president"), the cashier, the secretary, the treasurer, any
trust officer, any assistant trust officer, any assistant
vice president, any assistant cashier, any assistant
secretary, any assistant treasurer, or any other officer or
assistant officer of the Trustee customarily performing
functions similar to those performed by the persons who at
the time shall be such officers, respectively, or to whom
any corporate trust matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" of a Person means any
Subsidiary of the referent Person that is not an
Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933,
as amended.
"Security" or "Securities" means any Contingent
Interest Note Due June 30, 2006 authenticated and delivered
under this Indenture.
"Senior Indebtedness" means, without duplication,
Indebtedness of all Restricted Subsidiaries of the Company
plus any Indebtedness of the Company to the extent secured
by Liens created or incurred under clauses (a), (c), (d),
(f), (i), (j) and (l) of the definition of "Permitted
Liens".
"Settlement Date" means each of the Maturity Date;
the Redemption Date; a Change of Control Purchase Date; and,
in the event of acceleration of the Securities pursuant to
this Indenture, as a result of a bankruptcy or insolvency
event with respect to the Company or a Principal Restricted
Insurance Subsidiary, the date of such Event of Default,
(ii) as the result of a failure to pay when due any amount
with respect to any Securities, the Settlement Date as of
which such payment was due or (iii) as the result of any
Event of Default other than those described in the foregoing
clauses (i) and (ii), the date of such acceleration.
"Stated Maturity" means, when used with respect to
any Indebtedness or any installment of principal or of
interest thereon, the date specified in such Indebtedness as
the fixed date on which the principal of such Indebtedness
14
or such installment of principal or of interest is due and
payable.
"Subsidiary" means, with respect to any Person,
any corporation, association or other business entity of
which more than 50% of the outstanding Voting Stock is
owned, directly or indirectly, by such Person and one or
more other Subsidiaries of such Person.
"Tax Benefit" has the meaning set forth in
Exhibit B.
"Trust Indenture Act" means the Trust Indenture
Act of 1939 as in force at the date as of which this
Indenture was originally executed.
"Trustee" means the entity identified as "Trustee"
in the first paragraph hereof and shall also include any
successor trustee.
"Unrestricted Subsidiary" means (i) any Subsidiary
that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution; but
only to the extent that such Subsidiary: (a) is designated
an Unrestricted Subsidiary prior to formation, creation or
acquisition; (b) except in the case of any newly acquired
Subsidiary, has total assets at the time of formation or
creation with a fair market value not exceeding $1,000; (c)
has no Indebtedness other than Non-Recourse Indebtedness;
(d) 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 from Persons who are not
Affiliates of the Company; and (e) is a Person with respect
to which neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Capital Stock or (y) to maintain or
preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results.
Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions.
If, at any time, any Unrestricted Subsidiary would fail to
meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be
15
incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant entitled
"Limitation on Indebtedness," the Company shall be in
default of such covenant). The Board of Directors of the
Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary
and such designation shall only be permitted if (i) such
Indebtedness is permitted under the covenant entitled
"Limitation on Indebtedness," and (ii) no default or Event
of Default would be in existence following such designation.
"Voting Stock" means stock of the class or classes
pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least
a majority of the board of directors, managers or trustees
of a corporation (irrespective of whether or not at the time
stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
"Wholly-Owned Restricted Subsidiary" of any Person
means a Restricted Subsidiary of such Person all of the
outstanding Capital Stock or other equity ownership
interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more
Wholly-Owned Restricted Subsidiaries of such Person.
SECTION 1.2 Other Definitions. Each of the
-----------------
following terms is defined in the section set forth opposite
such term:
Term Section
---- -------
Arbitration Cost 10.5
Authenticating Agent 2.2
cash transaction 7.3
Change of Control Offer 4.6
Change of Control Purchase Date 4.6
Change of Control Purchase Notice 4.6
Change of Control Purchase Price 4.6
Event of Default 6.1
Existing Records 4.2
Extension Interest 2.13
Fair Value 10.7
finally determined 2.13
Holder Actuary Cost 10.2
Independent Actuary 10.5
Judgment Currency 11.14
Paying Agent 2.5
16
record date 2.4
Registrar 2.5
Registration Rights 10.7
Report Date 10.6
Required Currency 11.14
Reserve Report 10.4
Security Register 2.5
self-liquidating paper 7.3
Surviving Entity 5.1
Trigger Date 10.4.
In addition, certain terms relating to the
definition and calculation of the Contingent Amount are
defined in Exhibit B attached to the Indenture.
SECTION 1.3 Incorporation by Reference of Trust
-----------------------------------
Indenture Act. Whenever this Indenture or any supplemental
-------------
indenture refers to a provision of the Trust Indenture Act,
the provision is incorporated by reference in and made a
part of this Indenture or such supplemental indenture. The
following terms used in this Indenture or any supplemental
indenture that are defined by the Trust Indenture Act have
the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a
Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee"
means the Trustee; and
"obligor" on the indenture securities means the
Company or any other obligor on the Securities.
All other terms used in this Indenture or any
supplemental indenture that are defined by the Trust
Indenture Act, defined by reference in the Trust Indenture
Act to another statute or defined by a rule of the
Commission and not otherwise defined herein have the
meanings assigned to them therein unless the context
otherwise requires.
SECTION 1.4 Rules of Construction. Unless the
---------------------
context otherwise requires in this Indenture or any
supplemental indenture:
(i) an accounting term not otherwise defined has
the meaning assigned to it in accordance with GAAP;
17
(ii) words in the singular include the plural, and
words in the plural include the singular;
(iii) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision;
(iv) all references to Sections or Articles refer
to Sections or Articles of this Indenture unless
otherwise indicated; and
(v) use of masculine, feminine or neuter pronouns
should not be deemed a limitation, and the use of any
such pronouns should be construed to include, where
appropriate, the other pronouns.
ARTICLE 2
THE SECURITIES
SECTION 2.1 Form and Dating. The Securities
---------------
and Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is hereby
incorporated in and expressly made a part of this Indenture,
with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this
Indenture and may have imprinted or otherwise reproduced
thereon such legend or legends or endorsements, not
inconsistent with the provisions of this Indenture, as may
be required to comply with any law, or with any rules of any
securities exchange or usage, all as may be determined by
the officers executing such Securities as evidenced by their
execution of the Securities.
SECTION 2.2 Execution and Authentication. Two
----------------------------
Officers shall execute the Securities for the Company by
facsimile or manual signature in the name and on behalf of
the Company. The seal of the Company, if any, shall be
reproduced on the Securities. If an Officer whose signature
is on a Security no longer holds that office at the time the
Security is authenticated, the Security shall nevertheless
be valid.
The Trustee, at the expense of the Company, may
appoint an authenticating agent (the "Authenticating Agent")
--------------------
to authenticate Securities. The Authenticating Agent may
authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the
Trustee includes authentication by such Authenticating
Agent.
18
A Security shall not be valid until the Trustee or
Authenticating Agent manually signs the certificate of
authentication on the Security. The signature shall be
conclusive evidence that the Security has been authenticated
under this Indenture.
SECTION 2.3 Amount Limited. Subject to Section
--------------
2.8, the aggregate principal amount of Securities which may
be authenticated and delivered under this Indenture is
limited to $1,000,000 plus interest accreting thereon from
the Issue Date as provided herein at a rate of 8.0% per
annum, compounded annually. The Securities are general
unsecured obligations of the Company and shall rank equally
and pari passu with all other unsecured and unsubordinated
debt of the Company.
SECTION 2.4 Denomination and Date of Securi-
--------------------------------
ties; Payments of Interest. The Securities shall be
--------------------------
issuable as registered Securities in denominations as the
Company and the Trustee shall from time to time determine;
provided that in no event shall the minimum denomination
--------
exceed $1,000.
Each Security shall be dated the date of its
authentication. The principal amount of the Securities
shall bear interest from the date, and such interest shall
be payable on the date, as set forth herein or in the
Security.
SECTION 2.5 Registrar and Paying Agent; Agents
----------------------------------
Generally. The Company shall maintain an office or agency
---------
where Securities may be presented for registration, regis-
tration of transfer or for exchange (the "Registrar") and an
---------
office or agency where Securities may be presented for
payment (the "Paying Agent"), which shall be in the Borough
------------
of Manhattan, The City of New York. The Company shall cause
the Registrar to keep a register of the Securities and of
their registration, transfer and exchange (the "Security
--------
Register"). No transfer of a Security shall be registered
--------
unless such transfer was permitted under Section 2.7. The
Company or the Trustee may require any Person requesting
such registration to present appropriate evidence
establishing the compliance of such transfer with Section
2.7 before permitting such registration of transfer. The
Company may have one or more additional Paying Agents or
transfer agents with respect to the Securities.
The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture. The
agreement shall implement the provisions of this Indenture
and the Trust Indenture Act that relate to such Agent. The
19
Company shall give prompt written notice to the Trustee of
the name and address of any Agent and any change in the name
or address of an Agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such.
The Company may remove any Agent upon written notice to such
Agent and the Trustee; provided that no such removal shall
--------
become effective until (i) the acceptance of an appointment
by a successor Agent to such Agent as evidenced by an appro-
priate agency agreement entered into by the Company and such
successor Agent and delivered to the Trustee or (ii) notifi-
cation to the Trustee that the Trustee shall serve as such
Agent until the appointment of a successor Agent in accor-
dance with clause (i) of this proviso. The Company or any
affiliate of the Company may act as Paying Agent or Regis-
trar; provided that neither the Company nor an affiliate of
--------
the Company shall act as Paying Agent in connection with the
defeasance of the Securities or the discharge of this Inden-
ture under Article 8.
The Company initially appoints the Trustee as
Registrar, Paying Agent and Authenticating Agent. If, at
any time, the Trustee is not the Registrar, the Registrar
shall make available to the Trustee ten days prior to each
Settlement Date and at such other times as the Trustee may
reasonably request the names and addresses of the Holders as
they appear in the Security Register.
SECTION 2.6 Paying Agent to Hold Money in
-----------------------------
Trust. Not later than 10:00 a.m. New York City time on each
-----
due date of any amount due with respect to the Securities,
the Company shall deposit with the Paying Agent money in
immediately available funds (or as provided in Section 10.7,
shares of Registered Common Stock and cash in lieu of
fractional shares) sufficient to pay or satisfy such amount.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that such Paying Agent shall
hold in trust for the benefit of the Holders of such
Securities or the Trustee all money or securities held by
the Paying Agent for the payment of any amount due with
respect to the Securities and shall promptly notify the
Trustee of any default by the Company in making any such
payment. The Company at any time may require a Paying Agent
to pay all money or securities held by it to the Trustee and
account for any funds or securities disbursed, and the
Trustee may at any time during the continuance of any
payment default, upon written request to a Paying Agent,
require such Paying Agent to pay all money or securities
held by it to the Trustee and to account for any funds or
securities disbursed. Upon doing so, the Paying Agent shall
have no further liability for the money or securities so
paid over to the Trustee. If the Company or any affiliate
20
of the Company acts as Paying Agent, it will, on or before
each due date of any amount due with respect to the
Securities, segregate and hold in a separate trust fund for
the benefit of the Holders thereof a sum of money (or
Registered Common Stock and cash in lieu of any fractional
shares) sufficient to pay such amount so becoming due until
such sum of money (or Registered Common Stock and cash in
lieu of fractional shares) shall be paid to such Holders or
otherwise disposed of as provided in this Indenture, and
will promptly notify the Trustee in writing of its action or
failure to act as required by this Section.
SECTION 2.7 Transfer Restrictions; Transfer and
-----------------------------------
Exchange. Subject to compliance with the Securities Act and
--------
any other applicable law, any Security may be transferred
without restriction of any kind during the period beginning
on the Issue Date and ending ninety (90) days from the Issue
Date. After such ninety (90) day period, none of the
Securities shall be transferred or assigned, except that
Securities may be transferred, subject to compliance with
the Securities Act, and any other applicable law, by a
Holder at any time:
(a) to any Affiliate of such Holder;
(b) to a trust, the beneficiaries of which, or a
corporation, limited liability company or
partnership, at least 80% of the
stockholders, members or general or limited
partners of which, are such Holder or his or
her issue, adopted issue, stepchild, parent,
spouse or other lineal descendants;
(c) by will or the laws of descent and
distribution;
(d) to the heirs, executors, administrators,
testamentary trustees, legatees or
beneficiaries of such Holder;
(e) by gift without consideration of any kind;
(f) to any entity owning, at the time of
transfer, any of the Securities;
(g) to any entity offering to acquire, by tender
offer or otherwise, at least 25% of the
Securities then outstanding; or
(h) to the Company;
21
provided that in the case of any transfer pursuant to
subsection (f) or (g) above, any such transfer shall only be
permitted during the period of (i) 60 days commencing April
1, 1999; (ii) 90 days prior to any Settlement Date; and
(iii) at any time after an acceleration of the Securities
pursuant to Section 6.2.
At the option of the Holder thereof, Securities
may be exchanged for a Security or Securities having
authorized denominations and an equal aggregate Principal
Amount as such Securities to be exchanged. Any such
exchange shall occur by the surrender of such Securities to
be exchanged at the agency of the Company that shall be
maintained for such purpose in accordance with Section 2.5
and upon payment, if the Company shall so require, of the
charges hereinafter provided. Whenever any Securities are
so surrendered for exchange, the Company shall execute, and
the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities presented for registration of
transfer, exchange, redemption or payment shall be duly
endorsed by, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company
and the Trustee duly executed by, the holder or his attorney
duly authorized in writing.
The Company may require payment of a sum
sufficient to cover any tax or other governmental charge
that may be imposed in connection with any exchange or
registration of transfer of Securities. No service charge
shall be made for any such transaction.
All Securities issued upon any transfer or
exchange of Securities shall be valid obligations of the
Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered
upon such transfer or exchange.
SECTION 2.8 Replacement Securities. If a
----------------------
defaced or mutilated Security is surrendered to the Trustee
or if a Holder claims that its Security has been lost,
destroyed or wrongfully taken, the Company shall issue and
the Trustee shall authenticate a replacement Security
bearing a number not contemporaneously outstanding. If
required by the Trustee or the Company, an indemnity bond
must be furnished that is sufficient in the judgment of both
the Trustee and the Company to protect the Company, the
Trustee and any Agent from any loss that any of them may
suffer if a Security is replaced. The Company may charge
such Holder for its reasonable expenses and the reasonable
22
expenses of the Trustee (including without limitation
attorneys' fees and expenses) in replacing a Security. In
case any such mutilated, defaced, lost, destroyed or
wrongfully taken Security has become or is about to become
due and payable, the Company in its discretion may pay such
Security instead of issuing a new Security in replacement
thereof.
Every replacement Security is an additional
obligation of the Company and shall be entitled to the
benefits of this Indenture.
To the extent permitted by law, the foregoing
provisions of this Section are exclusive with respect to the
replacement or payment of mutilated, destroyed, lost or
wrongfully taken Securities.
SECTION 2.9 Outstanding Securities. Securities
----------------------
outstanding at any time are all Securities that have been
authenticated by the Trustee except for those canceled by
it, those delivered to it for cancellation and those
described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.8,
it ceases to be outstanding unless and until the Trustee and
the Company receive proof satisfactory to them that the
replaced Security is held by a holder in due course.
If the Paying Agent (other than the Company or an
affiliate of the Company) holds on the maturity date or any
redemption date or date for repurchase of the Securities
money sufficient (or Registered Common Stock and cash in
lieu of any fractional shares) to pay Securities payable or
to be redeemed or repurchased on that date, then on and
after that date such Securities cease to be outstanding and
interest on them shall cease to accrue.
A Security does not cease to be outstanding
because the Company or one of its affiliates holds such
Security, provided that, in determining whether the Holders
--------
of the requisite Principal Amount of the outstanding
Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Securities
owned by the Company or any affiliate of the Company shall
be disregarded and deemed not to be outstanding, except
that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities as to
which a Responsible Officer of the Trustee has received
written notice to be so owned shall be so disregarded. Any
Securities so owned which are pledged by the Company, or by
23
any affiliate of the Company, as security for loans or other
obligations, otherwise than to another such affiliate of the
Company, shall be deemed to be outstanding, if the pledgee
is entitled pursuant to the terms of its pledge agreement
and is free to exercise in its or his discretion the right
to vote such Securities, uncontrolled by the Company or by
any such affiliate.
SECTION 2.10 Temporary Securities. Until
--------------------
definitive Securities are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary
Securities. Temporary Securities shall be substantially in
the form of definitive Securities but may have insertions,
substitutions, omissions and other variations determined to
be appropriate by the Officers executing the temporary
Securities, as evidenced by their execution of such
temporary Securities. If temporary Securities are issued,
the Company will cause definitive Securities to be prepared
without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of
such temporary Securities at the office or agency of the
Company designated for such purpose pursuant to Section 4.2,
without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities the
Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like Principal Amount of
definitive Securities. Until so exchanged, the temporary
Securities shall be entitled to the same benefits under this
Indenture as definitive Securities.
SECTION 2.11 Cancellation. The Company at any
------------
time may deliver to the Trustee for cancellation any
Securities previously authenticated and delivered
hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee for cancellation
any Securities previously authenticated hereunder which the
Company has not issued and sold. The Registrar, any
transfer agent and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer,
exchange or payment. The Trustee shall cancel and destroy
all Securities surrendered for transfer, exchange, payment
or cancellation and shall deliver a certificate of
destruction to the Company. The Company may not issue new
Securities to replace Securities it has paid in full or
delivered to the Trustee for cancellation.
SECTION 2.12 CUSIP Numbers. The Company in
-------------
issuing the Securities may use "CUSIP" and "CINS" numbers
(if then generally in use), and the Trustee shall use CUSIP
numbers or CINS numbers, as the case may be, in notices of
24
redemption or exchange as a convenience to Holders and no
representation shall be made as to the correctness of such
numbers either as printed on the Securities or as contained
in any notice of redemption or exchange.
SECTION 2.13 Limited Extension of Settlement
-------------------------------
Date. Except in the event of acceleration of the Securities
----
pursuant to Section 6.2, in the event that, despite the best
efforts of the Company, (i) any of the Company, the Holder
Actuary, the Independent Actuary or any accounting firm is
unable to perform in a timely manner its responsibilities
hereunder with respect to the calculation of the Contingent
Amount, and as a result such amount has not been finally
determined as of any Settlement Date, or (ii) the Commission
or any other regulatory authority has not provided any
consent or approval needed in connection with the settlement
of the Securities on or prior to the Settlement Date
(including any such consent or approval necessary in order
to permit the Company to settle the Securities in Registered
Common Stock pursuant to Section 10.7), then, in any such
case, the Settlement Date shall be automatically extended
until the earlier of (x) the second Business Day after the
date on which the Contingent Amount has been finally
determined or such consent or approval has been obtained, as
applicable, and (y) 180 days from the Settlement Date. For
these purposes, the Contingent Amount shall be "finally
determined" on the date that the Contingent Amount has been
determined pursuant to either Subsection 10.4(d) or
Subsection 10.5(b) of this Indenture. The Holders of the
Securities shall be entitled to receive interest ("Extension
Interest") on the sum of the Fixed Amount and the Contingent
Amount in respect of any such extension at an interest rate
per annum, compounded annually, equal to (i) 8% for the
first 60 days of any such extension; (ii) 10% for 61 to 120
days of any such extension; and (iii) 12% for 121 to 180
days of any such extension. Extension Interest may be
settled in Registered Common Stock to the extent permitted
by Section 10.7. In the event that payment of amounts due
with respect to the Securities shall not have been made
within 180 days from the Settlement Date or following
acceleration of the Securities upon any Event of Default,
Extension Interest on the sum of the Fixed Amount and the
Contingent Amount shall accrue at the rate of 12% per annum,
compounded annually.
25
ARTICLE 3
REDEMPTION
SECTION 3.1 Notices. If the Company elects to
-------
redeem Securities pursuant to the optional redemption
provisions of Section 3.6 hereof, it shall furnish to the
Trustee and the Holder Actuary, at least 180 days but not
more than 190 days before a Redemption Date, an Officers'
Certificate setting forth (i) the Section of this Indenture
pursuant to which the redemption shall occur and (ii) the
Redemption Date. In addition, promptly following
determination of the Contingent Amount pursuant to Article
10, the Company shall notify the Holder Actuary and Trustee
of the redemption price.
SECTION 3.2 Notice of Redemption. At least
--------------------
140 days but not more than 150 days before a Redemption
Date, the Company shall mail or cause to be mailed, by first
class mail, a notice of redemption to each Holder whose
Securities are to be redeemed at its registered address.
The notice shall identify the Securities to be
redeemed and shall state:
(a) the Redemption Date;
(b) the redemption price (including accrued
interest to the Redemption Date); provided
that if at the time of such notice the
Contingent Amount has not yet been
determined, the Company shall separately mail
or cause to be mailed a notice to each Holder
of the redemption price promptly following
determination of the Contingent Amount;
(c) if Securities are to be settled in Registered
Common Stock pursuant to Section 10.7, that
delivery of such Stock will occur in lieu of
payment in cash; provided that such notice
--------
may state that such delivery is subject to
obtaining all necessary regulatory consents
and approvals;
(d) the name and address of the Paying Agent;
(e) that Securities called for redemption must be
surrendered to the Paying Agent to collect
the redemption price;
26
(f) that, unless the Company defaults in making
such redemption payment, interest on
Securities called for redemption ceases to
accrue on and after the Redemption Date;
(g) the paragraph of the Securities and/or
Section of this Indenture pursuant to which
the Securities called for redemption are
being redeemed; and
(h) that no representation is made as to the
correctness or accuracy of the CUSIP number,
if any, listed in such notice or printed on
the Securities.
At the Company's request, the Trustee shall give
the notice of redemption in the Company's name and at its
expense; provided that the Company shall have delivered to
the Trustee, at least 165 days prior to the Redemption Date,
an Officers' Certificate requesting that the Trustee give
such notice and setting forth the information to be stated
in such notice as provided in the preceding paragraph.
SECTION 3.3 Effect of Notice of Redemption.
------------------------------
Once the Officers' Certificate is furnished to the Trustee
and Holder Actuary pursuant to Section 3.1 of the Indenture,
Securities called for redemption become irrevocably due and
payable on the Redemption Date at the redemption price. A
notice of redemption may not be conditional.
SECTION 3.4 Deposit of Redemption or Purchase
---------------------------------
Price. With respect to any Redemption Date or Change of
-----
Control Purchase Date (as defined in Section 4.6), the
Company shall deposit with the Paying Agent money (or
Registered Common Stock and cash in lieu of any fractional
shares) in accordance with Section 2.6 of the Indenture.
The Trustee or the Paying Agent shall promptly return to the
Company any money (or Registered Common Stock) deposited
with the Trustee or the Paying Agent by the Company in
excess of the amounts necessary to pay the redemption or
purchase price of, and accrued interest on, all Securities
to be redeemed or purchased.
If Securities called for redemption or tendered in
a Change of Control Offer are paid or if the Company has
deposited with the Paying Agent money (or Registered Common
Stock) sufficient to pay the redemption or purchase price
of, and unpaid and accrued interest, if any, on all
Securities to be redeemed or purchased on the Redemption
Date or Change of Control Purchase Date, interest shall
cease to accrue on the Securities or the portions of
27
Securities called for redemption or tendered and not
withdrawn in a Change of Control Offer (regardless of
whether certificates for such securities are actually
surrendered), and the only remaining right of the Holder
with respect to such Security or portion thereof shall be to
receive such payment upon proper presentation and surrender
of the Securities. If any Security called for redemption or
subject to a Change of Control Offer shall not be so paid
upon surrender for redemption or purchase because of the
failure of the Company to comply with the preceding
paragraph, interest shall be paid from the Redemption Date
or Change of Control Purchase Date until paid at the rate
provided in Section 2.13 hereof.
SECTION 3.5 No Securities Redeemed or Purchased
-----------------------------------
in Part. The Company shall not redeem or purchase less than
-------
all of any Security.
SECTION 3.6 Optional Redemption. The
-------------------
Securities shall not be redeemable at the Company's option
prior to the third anniversary of the Issue Date.
Thereafter, the Securities shall be subject to redemption at
the option of the Company, in whole but not in part, upon
notice given pursuant to Section 3.1 of the Indenture, at
100% of the Payment Amount.
SECTION 3.7 Mandatory Redemption. Except as
--------------------
set forth below under Section 4.6, the Company shall not be
required to make mandatory redemption or sinking fund
payments with respect to the Securities.
ARTICLE 4
COVENANTS
SECTION 4.1 Payment of Securities. The Company
---------------------
will duly and punctually pay any and all amounts due under
the Securities in accordance with the terms of the
Securities and this Indenture. Amounts due under this
Indenture shall be considered paid on the date due if the
Paying Agent holds on that date money sufficient, or subject
to Section 10.7, Registered Common Stock and cash in lieu of
any fractional shares sufficient, to pay or satisfy all
amounts then due.
The Company shall pay interest on overdue amounts,
including, to the extent lawful, interest on overdue
interest, at the applicable rate per annum set forth in
Section 2.13.
28
SECTION 4.2 Maintenance of Records; Compliance
----------------------------------
with Laws; Access and Cooperation. (a) The Company shall
---------------------------------
and shall cause each Subsidiary to keep proper and true
books of record and account, in which full and correct
entries shall be made of all financial transactions and the
assets and business of the Company and each Subsidiary.
(b) The Company shall and shall cause each of its
Subsidiaries to comply with all statutes, laws, ordinances
or government rules and regulations to which it is subject,
except where a failure to do so, singly or in the aggregate
is not likely to have a materially adverse effect upon the
business, prospects, assets or condition (financial or
otherwise) or results of operations of the Company and its
Subsidiaries taken as a whole.
(c) The Company shall cause RECO to maintain the
books and records with respect to Protected Business in
sufficient detail and consistent with the level of detail
contained in the books and records of RECO in existence on
the Issue Date (the "Existing Records"). In preparing such
books and records, the Company shall cause RECO to maintain
records by class of business consistent with the Existing
Records. The Company agrees to allow the Holder Actuary and
Independent Actuary, if any, (and associated agents and
accounting firms) reasonable access, during normal business
hours, to the books and records (including tax returns,
statements, reports, forms, claim files, and related
documentation) and personnel of the Company, including
Chartwell Reinsurance and RECO, during the period that the
Securities are outstanding. With respect to the Holder
Actuary, prior to its review in connection with preparing
the Holder Actuary's Reserve Report, such access shall be
provided only during a limited period during each year as
shall be reasonable and adequate to review the annual
reports referred to in Section 10.6 and to review the
Company's compliance during the previous year with the
matters referred to under Section 10.6. The Company agrees
that such access will be designed to assure that the Holder
Actuary will obtain full and adequate information regarding
the adjustment, settlement and/or defense of any claims,
disputes or other matters arising out of the Protected
Business.
(d) The Company agrees to act, and to cause RECO
to act, in a commercially reasonable manner (i) in the
investigation, adjustment, settlement or defense of any
claims, disputes or other matters arising out of Protected
Business and (ii) in deciding whether or not, and on what
terms, any insurance or reinsurance contracts to the extent
constituting Protected Business should be commuted.
29
Protected Business may be commuted by the Company and its
Subsidiaries in the ordinary course of business; provided
that the Company shall not permit RECO to commute any treaty
or group of treaties with a single issuer involving a
payment of $1,500,000 or more unless such commutation has
been approved in writing by the Holder Actuary, such
approval not to be unreasonably withheld. The Holder
Actuary shall respond to any commutation request within a
reasonable period of time taking into account the facts and
circumstances involved. If the Holder Actuary fails to so
respond, the Holder Actuary shall be deemed to have
consented to such commutation.
SECTION 4.3 Reports by the Company. The
----------------------
Company covenants to file with the Trustee, within 15 days
after the Company is required to file the same with the
Commission, copies of the annual reports and of the
information, documents, and other reports which the Company
may be required to file with the Commission pursuant to
Section 13 or Section 15(d) of the Exchange Act.
SECTION 4.4 Maintenance of Office or Agency.
-------------------------------
The Company will maintain in the Borough of Manhattan, The
City of New York, an office or agency where Securities may
be surrendered for registration of transfer or exchange or
for presentation for payment and where notices and demands
to or upon the Company in respect of the Securities and this
Indenture may be served. The Company hereby initially
designates the Corporate Trust Office of the Trustee,
located in the Borough of Manhattan, The City of New York,
as such office or agency of the Company. The Company will
give prompt written notice to the Trustee of the location,
and any change in the location, of such office or agency.
If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 11.2.
The Company may also from time to time designate
one or more other offices or agencies where the Securities
may be presented or surrendered for any or all such purposes
and may from time to time rescind such designations;
provided that no such designation or rescission shall in any
--------
manner relieve the Company of its obligation to maintain an
office or agency in the Borough of Manhattan, The City of
New York for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or
rescission and of any change in the location of any such
other office or agency.
30
SECTION 4.5 Negative Pledge. The Company shall
---------------
not, and shall not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or suffer
to exist any Lien securing Indebtedness of the Company
(other than Permitted Liens) on any property or asset now
owned or hereafter acquired, or on any income or profits
therefrom, or assign or convey any right to receive income
therefrom, unless all amounts due under the Indenture and
the Securities are secured on an equal and ratable basis
with (or prior to) the obligations so secured until such
time as such obligations are no longer secured by a Lien.
SECTION 4.6 Purchase of Securities upon a
-----------------------------
Change of Control. (a) If there shall have occurred a
-----------------
Change of Control, the Company shall make an offer (a
"Change of Control Offer") to each Holder of Securities to
repurchase all, but not less than all, of such Holder's
Securities at a purchase price equal to 100% of the Payment
Amount, on a pro rata basis (the "Change of Control Purchase
Price").
(b) Within 15 days following the date on which
the Change of Control occurs, the Company shall mail a
notice to each Holder of Securities stating:
(1) that a Change of Control Offer is being made
pursuant to Section 4.6 of the Indenture and that all
Securities properly tendered will be accepted for
payment;
(2) the purchase price (if then determined) and
the purchase date, which shall be (i) no earlier than
180 days nor later than 190 days from the date of such
Change of Control or (ii) such later date as may be
necessary for the Company or to comply with
requirements under the Exchange Act (such date, or such
later date, a "Change of Control Purchase Date";
provided that any such date shall be extended if and to
--------
the extent required by Section 2.13);
(3) that any Securities not properly tendered
will continue to remain outstanding in accordance with
the terms of the Indenture;
(4) that, unless the Company defaults in the
payment of the Change of Control Purchase Price, all
Securities accepted for payment pursuant to a Change of
Control Offer shall cease to accrue interest after a
Change of Control Purchase Date;
31
(5) the procedures a Holder of Securities must
follow to exercise rights under this Section 4.6 and a
brief description of those rights;
(6) if Securities are to be settled in Registered
Common Stock pursuant to Section 10.7, that delivery of
such Stock will occur in lieu of payment in cash;
provided that such notice may state that such delivery
--------
is subject to obtaining all necessary regulatory
consents and approvals; and
(7) that Holders of Securities will be entitled
to withdraw their election if the Paying Agent
receives, not later than the close of business on the
third Business Day preceding the Change of Control
Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the
Holder and a statement that such Holder is withdrawing
his election to have such Securities purchased.
(c) A Holder may exercise its rights specified in
Section 4.6(a) upon (1) delivery to any Paying Agent of a
written notice (a "Change of Control Purchase Notice") at
any time prior to the close of business on the third
Business Day before the Change of Control Purchase Date,
stating that such Holder accepts the Company's offer to
repurchase all of such Holder's Securities and (2) delivery
of such Securities to such Paying Agent at such office prior
to, on or after the Change of Control Purchase Date
(together with all necessary endorsements), such delivery
being a condition to receipt by the Holder of the Change of
Control Purchase Price therefor. Each Paying Agent shall
promptly notify the Company of the receipt by the former of
any and all Change of Control Purchase Notices and any and
all written notices of withdrawal thereof.
(d) Upon receipt by any Paying Agent of a Change
of Control Purchase Notice, the Holder of the Security in
respect of which such Change in Control Purchase Notice was
given shall thereafter be entitled to receive solely the
Change of Control Purchase Price with respect to such
Security (unless such Change of Control Purchase Notice is
withdrawn pursuant to Section 4.6(g)). Such Change of
Control Purchase Price shall be paid to such Holder promptly
following the later of the Business Day following the Change
of Control Purchase Date (provided the conditions in Section
4.6(c) have been satisfied) and the time of delivery of such
Security to the relevant Paying Agent at the office of such
Paying Agent by the Holder thereof in the manner required by
Section 4.6(c).
32
(e) On or prior to the Change of Control Purchase
Date, the Company shall, to the extent lawful, (i) accept
for payment all Securities properly tendered pursuant to a
Change of Control Offer and (ii) deposit with the Trustee or
with the Paying Agent money (or Registered Common Stock and
cash in lieu of any fractional shares) in accordance with
Section 3.4 of this Indenture.
(f) The Company shall comply with applicable
tender offer rules, including Rule 14e-1 under the Exchange
Act, in connection with a Change of Control Offer and may
modify a Change of Control Offer to so comply. The
provisions of this Section 4.6 shall be deemed modified to
the extent in conflict with any applicable laws or
regulations.
(g) A Change of Control Purchase Notice may be
withdrawn before or after delivery by the Holder to the
relevant Paying Agent at the office of such Paying Agent of
the Security to which such Change of Control Purchase Notice
relates, by means of a written notice of withdrawal (by
telegram, telex, facsimile transmission or letter) received
by such Paying Agent at such office not later than three
Business Days prior to the Change of Control Purchase Date,
specifying, as applicable:
(1) the name of such Holder and
(2) a statement that such Holder is withdrawing
his election to have such Securities
purchased.
Each Paying Agent will promptly return to the
prospective Holders thereof any Securities with respect to
which a Change of Control Purchase Notice has been withdrawn
in compliance with this Indenture.
SECTION 4.7 Limitation on Indebtedness. The
--------------------------
Company shall not permit any of its Restricted Subsidiaries
to incur, assume, guarantee or otherwise become directly or
indirectly liable for the payment of (collectively, "incur")
any Indebtedness other than Permitted Subsidiary
Indebtedness; provided that the Company may permit any
--------
Restricted Subsidiary to incur Indebtedness if at the date
of such incurrence (on a pro forma basis) the ratio of (x)
Senior Indebtedness to (y) Consolidated Net Worth of the
Company does not exceed 0.9 to 1.
SECTION 4.8 Certificate to Trustee. The
----------------------
Company will furnish to the Trustee annually, on or before a
date not more than four months after the end of its fiscal
33
year (which, on the date hereof, is a calendar year), a
certificate (which need not contain the statements required
by Section 11.4) from its principal executive, financial or
accounting officer as to his or her knowledge of the
compliance of the Company with all conditions and covenants
under this Indenture (such compliance to be determined
without regard to any period of grace or requirement of
notice provided under this Indenture) which certificate
shall comply with the requirements of the Trust Indenture
Act.
ARTICLE 5
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 5.1 When Company May Merge, Etc. (a)
----------------------------
The Company shall not and shall not permit any Restricted
Subsidiary to, in any transaction or series of transactions,
consolidate with or merge with or into any other Person
(other than the Merger and other than any such transaction
with a Wholly-Owned Restricted Subsidiary of the Company
with a positive Consolidated Net Worth) or, directly or
indirectly, sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its assets
(determined on a consolidated basis for the Company and its
subsidiaries taken as a whole) in one or more related
transactions, including through a bulk reinsurance
arrangement, to any Person (other than a Wholly-Owned
Restricted Subsidiary of the Company with a positive
Consolidated Net Worth) or group of affiliated Persons
unless, at the time and after giving effect thereto:
(i) (A) the Company shall be the continuing
corporation (or, in the case of any consolidation or
merger of a Restricted Subsidiary, the Company shall
continue to have all of the obligations under this
Indenture, including the obligation to make due and
punctual payment of the Payment Amount and the
performance of every covenant, agreement and obligation
on the part of the Company under this Indenture); or
(B) the Person (if other than the Company) formed by
such consolidation, or into which the Company is merged
or the Person that acquires by sale or other
disposition the assets of the Company, substantially as
an entirety (the "Surviving Entity"), is a corporation
duly organized and validly existing under the laws of
the United States or any state thereof and shall, in
the case of clause (B), expressly assume, by
supplemental indenture, executed and delivered to the
34
Trustee, in form reasonably satisfactory to the
Trustee, all the obligations of the Company under the
Indenture;
(ii) immediately before and after such
transaction, giving effect to such transaction on a pro
forma basis, no default or Event of Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such
transaction on a pro forma basis, the Consolidated Net
Worth (after giving pro forma effect to such
transaction but not including the accrual of deferred
tax liabilities resulting from the transaction) of the
Company (or the Surviving Entity if the Company is not
the continuing obligor under the Indenture) is at least
equal to the Consolidated Net Worth of the Company
immediately before such transaction; provided that in
--------
the case of the merger or consolidation of any
Restricted Subsidiary with Consolidated Net Worth of
less than 5% of the Consolidated Net Worth of the
Company with any other Person, clause (iii) of this
Section 5.1(a) shall not apply; and
(iv) if any of the property or assets of the
Company or any Restricted Subsidiary prior to such
transaction would thereupon become subject to any Lien
securing Indebtedness of the Company, the outstanding
Securities shall be secured equally and ratably with
(or prior to) the obligation or liability secured by
such Lien, unless the Company or such Restricted
Subsidiary could create such Lien without equally and
ratably securing the Securities.
(b) Notwithstanding anything in this Section
5.1(a) to the contrary, the Company may consummate the
Merger subsequent to the issuance of the Securities, and in
the event of such Merger, Chartwell shall expressly assume,
by supplemental indenture, executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, all
of the obligations of the Company under the Indenture.
(c) In connection with the Merger or any
consolidation, merger, transfer or lease contemplated
hereby, the Company shall deliver to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that the Merger or such consolidation, merger,
transfer or lease and the supplemental indenture in respect
thereto comply with the provisions described herein and that
all conditions precedent provided for in the Indenture
relating to such transaction have been complied with.
35
SECTION 5.2 Successor Substituted. Upon the
---------------------
Merger or any consolidation or merger or any sale,
assignment, transfer, lease or conveyance or other
disposition of all or substantially all of the assets of the
Company in accordance with the provisions described in
Section 5.1, the successor Person formed by such
consolidation or into which the Company is merged or to
which such sale, assignment, conveyance, transfer, lease or
other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of
the Company under the Indenture with the same effect as if
such successor Person had been named as the Company therein.
When a successor assumes all the obligations of its
predecessor under the Indenture and the Securities, the
predecessor will be released from those obligations;
provided that, in the case of a transfer by lease, the
predecessor corporation shall not be released from the
payment of any amount under the Securities.
ARTICLE 6
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default. An "Event of
----------------- --------
Default" shall occur with respect to the Securities if:
-------
(a) the Company defaults in the payment of any
amount due with respect to any Security when the same
becomes due and payable at maturity, upon acceleration,
redemption or mandatory repurchase (giving effect to
any period of extension under Section 2.13);
(b) the Company defaults in the performance of or
breaches any other covenant or agreement of the Company
in this Indenture with respect to any Security and such
default or breach continues for a period of 60
consecutive days after written notice to the Company by
the Trustee or to the Company and the Trustee by the
Holders of 25% or more in aggregate Principal Amount of
the Securities;
(c) an involuntary case or other proceeding shall
be commenced against the Company or any Principal
Restricted Insurance Subsidiary with respect to it or
its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect seeking the
appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any
substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and
36
unstayed for a period of 60 days; or an order for
relief shall be entered against the Company or any
Principal Restricted Insurance Subsidiary under the
federal bankruptcy laws as now or hereafter in effect;
(d) the Company or any Principal Restricted
Insurance Subsidiary (A) commences a voluntary case
under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to
the entry of an order for relief in an involuntary case
under any such law, (B) consents to the appointment of
or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar
official of the Company or any Principal Restricted
Insurance Subsidiary or for all or substantially all of
the property and assets of the Company or any Principal
Restricted Insurance Subsidiary or (C) effects any
general assignment for the benefit of creditors;
(e) a default occurs under any mortgage,
indenture or instrument under which there may be issued
or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries whether such
Indebtedness now exists or is created after the date of
this Indenture which default results in the
acceleration of such Indebtedness prior to its express
maturity and the principal amount of any such
Indebtedness, together with the principal amount of any
other such Indebtedness the maturity of which has been
so accelerated, aggregates $10.0 million or more;
(f) a default occurs in the payment of any amount
in excess of $1.0 million under any mortgage, indenture
or instrument under which there may be issued or by
which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries whether such
Indebtedness now exists, or is created after the date
of this Indenture which default extends beyond the
grace period applicable to such default, if any; or
(g) a final judgment or final judgments for the
payment of money are entered by a court or courts of
competent jurisdiction against the Company or any of
its Restricted Subsidiaries and such judgments are not
paid, discharged or stayed for a period of 30 days
after their entry, provided that the aggregate of all
such unpaid, undischarged or unstayed judgments exceeds
$1.0 million (net of any amount as to which a reputable
insurance company has accepted liability).
37
SECTION 6.2 Acceleration. If an Event of
------------
Default (other than an Event of Default specified in clauses
(c) and (d) of Section 6.1 hereof) occurs and is continuing,
the Trustee by written notice to the Company, or the Holders
of at least 25% in aggregate Principal Amount of the then
outstanding Securities by written notice to the Company and
the Trustee may declare the unpaid principal of and accrued
and unpaid interest on all the Securities to be due and
payable. Upon such declaration the principal and interest
shall be due and payable immediately. If an Event of
Default specified in clause (c) or (d) of Section 6.1 hereof
occurs, all outstanding Securities shall ipso facto become
and be immediately due and payable without any declaration
or other act on the part of the Trustee or any Holder. The
Holders of a majority in aggregate Principal Amount of the
then outstanding Securities, by written notice to the
Trustee, may rescind an acceleration and its consequences if
the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except
nonpayment of principal or interest that has become due
solely because of the acceleration) have been cured or
waived.
SECTION 6.3 Other Remedies. If an Event of
--------------
Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal and
interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee 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
Trustee or any Holder of a Security 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. All remedies are
cumulative to the extent permitted by law.
SECTION 6.4 Waiver of Past Defaults. Holders
-----------------------
of a majority in aggregate Principal Amount of the
Securities then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Securities waive any
existing default or Event of Default and its consequences
under this Indenture, except a continuing default or Event
of Default in the payment of the principal of or interest
on, the Securities (including in connection with an offer to
purchase) (provided that the Holders of a majority in
aggregate Principal Amount of the then outstanding
Securities may rescind an acceleration and its consequences,
including any related payment default that resulted from
such acceleration). Upon any such waiver, such default
38
shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend
to any subsequent or other default or Event of Default or
impair any right consequent thereon.
SECTION 6.5 Control by Majority. Holders of a
-------------------
majority in aggregate Principal Amount of the then
outstanding Securities may direct the time, method and place
of conducting any proceeding for exercising any remedy
available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow
any direction that conflicts with law or this Indenture or
that the Trustee determines may be unduly prejudicial to the
rights of other Holders or that may involve the Trustee in
personal liability. The Trustee may take any other action
which it deems proper which is not inconsistent with any
such direction.
SECTION 6.6 Limitation on Suits. A Holder of a
-------------------
Security may pursue a remedy with respect to this Indenture
or the Securities if:
(a) the Holder gives to the Trustee written
notice of a continuing Event of Default or the Trustee
receives such notice from the Company;
(b) the Holders of at least 25% in aggregate
Principal Amount of the then outstanding Securities make a
written request to the Trustee to pursue the remedy;
(c) such Holder or Holders offer and, if
requested, provide to the Trustee indemnity satisfactory to
the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer
and, if requested, the provision of indemnity; and
(e) during such 60-day period the Holders of a
majority in aggregate Principal Amount of the then
outstanding Securities do not give the Trustee a direction
inconsistent with the request.
A Holder of a Security may not use this Indenture to
prejudice the rights of another Holder of a Security or to
obtain a preference or priority over another Holder of a
Security.
39
SECTION 6.7 Rights of Holders of Securities to
----------------------------------
Receive Payment. Notwithstanding any other provision of
---------------
this Indenture, the right of any Holder of a Security to
receive payment of principal of and interest on the
Security, on or after the respective due dates expressed in
the Security (including in connection with an offer to
purchase), 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 6.8 Collection Suit by Trustee. If an
--------------------------
Event of Default specified in Section 6.1(a) hereof occurs
and is continuing, the Trustee is authorized to recover
judgment in its own name and as trustee of an express trust
against the Company or any other obligor for the whole
amount of principal of and interest remaining unpaid on the
Securities and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be
sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel.
SECTION 6.9 Trustee May File Proofs of Claim.
--------------------------------
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel) and the Holders allowed in any judicial proceedings
relative to the Company (or any other obligor upon the
Securities), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any
such claims and any custodian in any such judicial
proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee
shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.07 hereof. To
the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee
under Section 7.07 hereof out of the estate in any such
proceeding, shall be denied for any reason, payment of the
same shall be secured by a Lien on, and shall be paid out
of, any and all distributions, dividends, money, securities
and other properties that the Holders may be entitled to
receive in such proceeding whether in liquidation or under
40
any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the
Securities or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any
such proceeding.
SECTION 6.10 Priorities. If the Trustee
----------
collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and
attorneys for amounts due under Section 7.7 hereof,
including payment of all compensation, expense and
liabilities incurred, and all advances made, by the
Trustee and the costs and expenses of collection, and
to the Holder Actuary, its agents and attorneys for
amounts due under Section 10.2 hereof, including
payment of all compensation, expense and liabilities
incurred by the Holder Actuary and the costs and
expenses of collection;
Second: to Holders 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: to the Company or to such party as
a court of competent jurisdiction shall direct.
The Trustee may fix a record date and payment date
for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11 Undertaking for Costs. In any suit
---------------------
for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action
taken or omitted by it as a Trustee, 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
Trustee, a suit by a Holder pursuant to Section 6.7 hereof,
or a suit by Holders of more than 10% in aggregate Principal
Amount of the then outstanding Securities.
41
ARTICLE 7
TRUSTEE
SECTION 7.1 General. The duties and
-------
responsibilities of the Trustee shall be as provided by the
Trust Indenture Act and as set forth herein.
Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its
own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, unless it receives
indemnity satisfactory to it against any loss, liability or
expense. Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this
Article 7.
SECTION 7.2 Certain Rights of Trustee. Subject
-------------------------
to Trust Indenture Act Sections 315(a) through (d):
(i) the Trustee may rely and shall be protected
in acting or refraining from acting upon any
resolution, certificate, Officers' Certificate, Opinion
of Counsel (or both), statement, instrument, opinion,
report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine
and to have been signed or presented by the proper
person or persons. The Trustee need not investigate
any fact or matter stated in the document, but the
Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as
it may see fit;
(ii) before the Trustee acts or refrains from
acting, it may require an Officers' Certificate and/or
an Opinion of Counsel, which shall conform to Section
11.4. The Trustee shall not be liable for any action
it takes or omits to take in good faith in reliance on
such certificate or opinion. Subject to Sections 7.1
and 7.2, whenever in the administration of the trusts
of this Indenture the Trustee shall deem it necessary
or desirable that a matter be proved or established
prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in
respect thereof be herein specifically prescribed) may,
in the absence of negligence or bad faith on the part
of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to
42
the Trustee, and such certificate, in the absence of
negligence or bad faith on the part of the Trustee,
shall be full warrant to the Trustee for any action
taken, suffered or omitted by it under the provisions
of this Indenture upon the faith thereof;
(iii) the Trustee may act through its attorneys and
agents not regularly in its employ and shall not be
responsible for the misconduct or negligence of any
agent or attorney appointed with due care;
(iv) any request, direction, order or demand of
the Company mentioned herein shall be sufficiently
evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically
prescribed); and any Board Resolution may be evidenced
to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;
(v) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by
this Indenture at the request, order or direction of
any of the Holders, unless such Holders shall have
offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities that might
be incurred by it in compliance with such request or
direction;
(vi) the Trustee shall not be liable for any
action it takes or omits to take in good faith that it
believes to be authorized or within its rights or
powers or for any action it takes or omits to take in
accordance with the direction of the Holders in
accordance with Section 6.5 relating to the time,
method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this
Indenture;
(vii) the Trustee may consult with counsel and the
written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance
thereon; and
(viii) prior to the occurrence of an Event of
Default hereunder and after the curing or waiving of
all Events of Default, the Trustee shall not be bound
to make any investigation into the facts or matters
stated in any resolution, certificate, Officers'
43
Certificate, Opinion of Counsel, Board Resolution,
statement, instrument, opinion, report, notice,
request, consent, order, approval, appraisal, bond,
debenture, note, coupon, security, or other paper or
document unless requested in writing so to do by the
Holders of not less than a majority in aggregate
Principal Amount of the Securities then outstanding;
provided that, if the payment within a reasonable time
--------
to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security
afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such
expenses or liabilities as a condition to proceeding.
SECTION 7.3 Individual Rights of Trustee. The
----------------------------
Trustee, in its individual or any other capacity, may become
the owner or pledgee of Securities and may otherwise deal
with the Company or its Affiliates with the same rights it
would have if it were not the Trustee. Any Agent may do the
same with like rights. However, the Trustee is subject to
Trust Indenture Act Sections 310(b) and 311. For purposes
of Trust Indenture Act Section 311(b)(4) and (6), the
following terms shall mean:
(a) "cash transaction" means any transaction in
----------------
which full payment for goods or securities sold is made
within seven days after delivery of the goods or securities
in currency or in checks or other orders drawn upon banks or
bankers and payable upon demand; and
(b) "self-liquidating paper" means any draft,
----------------------
xxxx of exchange, acceptance or obligation which is made,
drawn, negotiated or incurred by the Company for the purpose
of financing the purchase, processing, manufacturing,
shipment, storage or sale of goods, wares or merchandise and
which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or
merchandise or the receivables or proceeds arising from the
sale of the goods, wares or merchandise previously
constituting the security, provided the security is received
by the Trustee simultaneously with the creation of the
creditor relationship with the Company arising from the
making, drawing, negotiating or incurring of the draft, xxxx
of exchange, acceptance or obligation.
SECTION 7.4 Trustee's Disclaimer. The recitals
--------------------
contained herein and in the Securities (except the Trustee's
certificate of authentication) shall be taken as statements
of the Company and not of the Trustee and the Trustee
44
assumes no responsibility for the correctness of the same.
Neither the Trustee nor any of its agents (i) makes any
representation as to the validity or adequacy of this
Indenture or the Securities or (ii) shall be accountable for
the Company's use or application of the proceeds from the
Securities.
SECTION 7.5 Notice of Default. If any default
-----------------
or Event of Default with respect to the Securities occurs
and is continuing and if such default or Event of Default is
known to the actual knowledge of a Responsible Officer with
the Corporate Trust Department of the Trustee, the Trustee
shall give to each Holder of Securities notice of such
default or Event of Default within 90 days after it occurs
to all Holders of Securities in the manner and to the extent
provided in Section 313(c) of the Trust Indenture Act,
unless such default or Event of Default shall have been
cured or waived before the mailing or publication of such
notice; provided that, except in the case of a default or
--------
Event of Default in the payment of any amount with respect
to any Security, the Trustee shall be protected in
withholding such notice if the Trustee in good faith
determines that the withholding of such notice is in the
interests of the Holders.
SECTION 7.6 Reports by Trustee to Holders.
-----------------------------
Within 60 days after each June 30, beginning with June 30,
1996, the Trustee shall mail to each Holder as and to the
extent provided in Trust Indenture Act Section 313(c) a
brief report dated as of such June 30, if required by Trust
Indenture Act Section 313(a).
SECTION 7.7 Compensation and Indemnity. The
--------------------------
Company shall pay to the Trustee such reasonable
compensation as shall be agreed upon in writing from time to
time for its services. The compensation of the Trustee
shall not be limited by any law on compensation of a Trustee
of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket
expenses, disbursements and advances incurred or made by the
Trustee. Such expenses shall include the reasonable
compensation and expenses of the Trustee's agents, counsel
and other persons not regularly in its employ.
The Company shall indemnify the Trustee for, and
hold it harmless against, any loss or liability or expense
incurred by it without willful misconduct, negligence or bad
faith on its part arising out of or in connection with the
acceptance or administration of this Indenture and the
Securities and the performance of duties under this
Indenture and the Securities, including the costs and
45
expenses of defending itself against or investigating any
claim or liability and of complying with any process served
upon it or any of its officers in connection with the
exercise or performance of any of its powers or duties under
this Indenture and the Securities.
To secure the Company's payment obligations in
this Section 7.7, the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the
Trustee, in its capacity as Trustee, except money or
property held in trust to pay any amount with respect to the
Securities.
The obligations of the Company under this Section
to compensate and indemnify the Trustee and each predecessor
Trustee and to pay or reimburse the Trustee and each
predecessor Trustee for expenses, disbursements and advances
shall constitute additional indebtedness hereunder and shall
survive the satisfaction and discharge of this Indenture or
the rejection or termination of this Indenture under
bankruptcy law. Such additional indebtedness shall be a
senior claim to that of the Securities upon all property and
funds held or collected by the Trustee as such, except funds
held in trust for the benefit of the Holders of particular
Securities or coupons, and the Securities are hereby
subordinated to such senior claims. If the Trustee renders
services and incurs expenses following an Event of Default
under Section 6.1(c) or Section 6.1(d) hereof, the parties
hereto and the holders by their acceptance of the Securities
hereby agree that such expenses are intended to constitute
expenses of administration under any bankruptcy law.
SECTION 7.8 Replacement of Trustee. A
----------------------
resignation or removal of the Trustee as Trustee with
respect to the Securities and appointment of a successor
Trustee as Trustee with respect to the Securities shall
become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 7.8.
The Trustee may resign as Trustee with respect to
the Securities at any time by so notifying the Company in
writing. The Holders of a majority in aggregate Principal
Amount of the outstanding Securities may remove the Trustee
or a successor Trustee as Trustee with respect to the
Securities by so notifying the Trustee in writing and may
appoint a successor Trustee with respect thereto with the
consent of the Company. The Company may remove the Trustee
as Trustee with respect to the Securities if: (i) the
Trustee is no longer eligible under Section 7.10 of this
Indenture; (ii) the Trustee is adjudged a bankrupt or
insolvent; (iii) a receiver or other public officer takes
46
charge of the Trustee or its property; or (iv) the Trustee
becomes incapable of acting; (v) within 10 days of the
Merger, the Company notifies the Trustee and the Holder
Actuary in writing of its intent to remove such Trustee and
nominates a successor Trustee; provided that the Holder
--------
Actuary must consent to the appointment of such successor
Trustee, which consent shall not be unreasonably withheld.
If the Trustee resigns or is removed as Trustee
with respect to the Securities, or if a vacancy exists in
the office of Trustee with respect to the Securities for any
reason, the Company shall promptly appoint a successor
Trustee with respect thereto. If the successor Trustee with
respect to the Securities does not deliver its written
acceptance required by the next succeeding paragraph of this
Section 7.8 within 30 days after the retiring Trustee
resigns or is removed, the retiring Trustee, the Company or
the Holders of a majority in aggregate Principal Amount of
the outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor
Trustee with respect thereto.
A successor Trustee with respect to the Securities
shall deliver a written acceptance of its appointment to the
retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien
provided for in Section 7.7, (i) the retiring Trustee shall
transfer all property held by it as Trustee in respect of
the Securities to the successor Trustee, (ii) the
resignation or removal of the retiring Trustee in respect of
the Securities shall become effective and (iii) the
successor Trustee shall have all the rights, powers and
duties of the Trustee in respect of the Securities under
this Indenture. A successor Trustee shall mail notice of
its succession to each Holder of Securities.
Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully
and certainly vesting in and confirming to such successor
Trustee all such rights, powers and trusts referred to in
the preceding paragraph.
The Company shall give notice of any resignation
and any removal of the Trustee with respect to the
Securities and each appointment of a successor Trustee in
respect of the Securities to all Holders of Securities.
Each notice shall include the name of the successor Trustee
and the address of its Corporate Trust Office.
Notwithstanding replacement of the Trustee with
respect to the Securities pursuant to this Section 7.8, the
47
Company's obligations under Section 7.7 shall continue for
the benefit of the retiring Trustee.
SECTION 7.9 Successor Trustee by Merger, Etc.
---------------------------------
If the Trustee consolidates with, merges or converts into,
or transfers all or substantially all of its corporate trust
business to, another corporation or national banking
association, the resulting, surviving or transferee
corporation or national banking association without any
further act shall be the successor Trustee with the same
effect as if the successor Trustee had been named as the
Trustee herein.
SECTION 7.10 Eligibility. This Indenture shall
-----------
always have a Trustee who satisfies the requirements of
Trust Indenture Act Section 310(a). The Trustee shall have
a combined capital and surplus of at least $25,000,000 as
set forth in its most recent published annual report of
condition.
SECTION 7.11 Money Held in Trust. The Trustee
-------------------
shall not be liable for interest on any money received by it
except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law and
except for money held in trust under Article 8 of this
Indenture.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.1 Satisfaction and Discharge of
-----------------------------
Indenture. If at any time (a) (i) all Outstanding
---------
Securities shall have become due and payable and the Company
shall have irrevocably deposited with the Trustee or Paying
Agent on or immediately prior to the date due money (or
Registered Common Stock and cash in lieu of any fractional
shares) sufficient to pay all amounts with respect to all of
the Securities outstanding hereunder, as and when the same
shall have become due and payable, or (ii) the Company shall
have delivered to the Trustee for cancellation all
Securities theretofore authenticated (other than any
Securities which shall have been destroyed, lost or stolen
and which shall have been replaced or paid as provided in
Section 2.8) and (b) in either case, the Company shall also
pay or cause to be paid all sums payable hereunder by the
Company, then this Indenture shall cease to be of further
effect (except as to (i) the rights, obligations and
immunities of the Trustee hereunder, (ii) Sections 8.3 and
48
8.4 and (iii) the Registration Rights set forth in Exhibit
C), and the Trustee, on demand of the Company accompanied by
an Officers' Certificate and an Opinion of Counsel and at
the cost and expense of the Company, shall execute proper
instruments acknowledging such satisfaction of and
discharging this Indenture. The Company agrees to reimburse
the Trustee for any costs or expenses thereafter reasonably
and properly incurred and to compensate the Trustee for any
services thereafter reasonably and properly rendered by the
Trustee in connection with this Indenture or the Securities.
SECTION 8.2 Application by Trustee of Funds
-------------------------------
Deposited for Payment of Securities. Subject to Section
-----------------------------------
8.4, all moneys deposited with the Trustee under this
Indenture shall be held in trust and applied by it to the
payment, either directly or through any paying agent
(including the Company acting as its own paying agent), to
the holders of the particular Securities for the payment or
redemption of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon; but such
money need not be segregated from other funds except to the
extent required by law.
SECTION 8.3 Repayment of Moneys Held by Paying
----------------------------------
Agent. In connection with the satisfaction and discharge of
-----
this Indenture all moneys then held by any paying agent
under the provisions of this Indenture shall, upon demand of
the Company, be repaid to it or paid to the Trustee and
thereupon such paying agent shall be released from all
further liability with respect to such moneys.
SECTION 8.4 Return of Moneys Held by Trustee
--------------------------------
and Paying Agent Unclaimed for Three Years. Any moneys (or
------------------------------------------
Registered Common Stock) deposited with or paid to the
Trustee or any paying agent for the payment on any Security
and not applied but remaining unclaimed for three years
after the date upon which such Payment Amount shall have
become due and payable, shall, upon the written request of
the Company and unless otherwise required by mandatory
provisions of applicable escheat or abandoned or unclaimed
property law, be repaid to the Company by the Trustee or
such paying agent, and the holder of such Security shall,
unless otherwise required by mandatory provisions of
applicable escheat or abandoned or unclaimed property laws,
thereafter look only to the Company for any payment which
such holder may be entitled to collect, and all liability of
the Trustee or any paying agent with respect to such moneys
(or Registered Common Stock) shall thereupon cease.
SECTION 8.5 Defeasance. Except as provided
----------
below, the Company will be deemed to have paid and will be
49
discharged from any and all obligations in respect of the
Securities and the provisions of this Indenture will no
longer be in effect with respect to the Securities (and the
Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same); provided that the
--------
following conditions shall have been satisfied:
(A) the Company has irrevocably deposited in
trust with the Trustee as trust funds solely for the
benefit of the Holders of the Securities, for payment
of the Payment Amount, money or U.S. Government
Obligations (as defined below) or a combination thereof
sufficient, in the opinion of a nationally recognized
firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee,
without consideration of any reinvestment and after
payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by
the Trustee, to pay and discharge the Payment Amount on
the outstanding Securities on the Maturity Date
(irrevocably provided for under arrangements
satisfactory to the Trustee);
(B) such deposit will not result in a breach or
violation of, or constitute a default under, this
Indenture or any other material agreement or instrument
to which the Company is a party or by which it is
bound;
(C) no Default with respect to the Securities
shall have occurred and be continuing on the date of
such deposit;
(D) the Company shall have delivered to the
Trustee (1) either (x) a ruling directed to the Trustee
received from the Internal Revenue Service to the
effect that the Holders of the Securities will not
recognize income, gain or loss for federal income tax
purposes as a result of the Company's exercise of its
option under this Section 8.5 and will be subject to
federal income tax on the same amount and in the same
manner and at the same times as would have been the
case if such deposit and defeasance had not occurred or
(y) an Opinion of Counsel to the same effect as the
ruling described in clause (x) above and (2) an Opinion
of Counsel to the effect that the Holders of the
Securities of such series have a valid security
interest in the trust funds subject to no prior liens
under the Uniform Commercial Code, as in effect in each
applicable jurisdiction (the "UCC"); and
50
(E) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, in
each case stating that all conditions precedent
provided for herein relating to the defeasance
contemplated by this Section 8.5 of the Securities have
been complied with.
For these purposes, "U.S. Government Obligations"
means securities that are (i) direct obligations of the
United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of an agency
or instrumentality of the United States of America the
payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America,
and shall also include a depository receipt issued by a bank
or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on
or principal of any such U.S. Government Obligation held by
such custodian for the account of the holder of a depository
receipt; provided that (except as required by law) such
--------
custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by
such depository receipt.
The Company's obligations in Sections 2.2 through
2.13, 4.2, 4.3, 4.4, 7.7, 7.8, 8.3, 8.4 and 10.2 through
10.6 with respect to the Securities shall survive until such
Securities are no longer outstanding. Thereafter, only the
Company's obligations in Sections 7.7, 8.3 and 8.4 shall
survive.
SECTION 8.6 Covenant Defeasance. The Company
-------------------
may omit to comply with any term, provision or condition set
forth in Sections 4.5, 4.6 or 4.7, and such omission shall
be deemed not to be an Event of Default under clause (b) of
Section 6.1, with respect to the outstanding Securities if:
(i) the Company has irrevocably deposited in
trust with the Trustee as trust funds solely for the
benefit of the Holders of the Securities, for payment
of the Payment Amount, money or U.S. Government
Obligations or a combination thereof sufficient, in the
opinion of a nationally recognized firm of independent
public accountants expressed in a written certification
thereof delivered to the Trustee, without consideration
of any reinvestment and after payment of all federal,
state and local taxes or other charges and assessments
in respect thereof payable by the Trustee, to pay and
51
discharge the Payment Amount on the outstanding
Securities on the Maturity Date (irrevocably provided
for under arrangements satisfactory to the Trustee);
(ii) such deposit will not result in a breach or
violation of, or constitute a default under, this
Indenture or any other material agreement or instrument
to which the Company is a party or by which it is
bound;
(iii) no Default with respect to the Securities
shall have occurred and be continuing on the date of
such deposit;
(iv) the Company has delivered to the Trustee an
Opinion of Counsel to the effect that (A) the Holders
of the Securities have a valid security interest in the
trust funds subject to no prior liens under the UCC and
(B) such Holders will not recognize income, gain or
loss for federal income tax purposes as a result of
such deposit and covenant defeasance and will be
subject to federal income tax on the same amount and in
the same manner and at the same times as would have
been the case if such deposit and defeasance had not
occurred; and
(v) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, in
each case stating that all conditions precedent
provided for herein relating to the covenant defeasance
contemplated by this Section 8.6 of the Securities have
been complied with.
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders of
-----------------------------
Securities. Notwithstanding Section 9.2 of this Indenture,
----------
the Company and the Trustee may amend or supplement this
Indenture or the Securities without the consent of any
Holder of a Security:
(a) to cure any ambiguity, defect or
inconsistency;
(b) to provide for uncertificated Securities in
addition to or in place of certificated Securities;
(c) to provide for the assumption of the
Company's obligations under this Indenture to the Holders in
52
the case of a merger, consolidation or other transaction
pursuant to Article 5 hereof;
(d) to make any change that would provide any
additional rights or benefits to the Holders of the
Securities or that does not adversely affect the legal
rights hereunder of any Holder of the Security; or
(e) to comply with requirements of the Commission
in order to effect or maintain the qualification of this
Indenture under the Trust Indenture Act.
Upon the request of the Company accompanied by a
resolution of the Board of Directors of the Company
authorizing the execution of any such supplemental
indenture, and upon receipt by the Trustee of the documents
described in Section 9.6 hereof, the Trustee shall join with
the Company in the execution of any amended or supplemental
indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee
shall not be obligated to enter into such amended or
supplemental indenture that affects its own rights, duties
or immunities under this Indenture or otherwise.
SECTION 9.2 With Consent of Holders of
--------------------------
Securities. Except as provided below in this Section 9.2,
----------
the Company and the Trustee may amend or supplement this
Indenture or the Securities with the consent of the Holders
of at least a majority in aggregate Principal Amount of the
Securities then outstanding (including consents obtained in
connection with a tender offer or exchange offer for the
Securities), and, subject to Sections 6.4 and 6.7 hereof,
any existing default or Event of Default (other than a
default or Event of Default in the payment of any amount due
under the Securities, except a payment default resulting
from an acceleration that has been rescinded) or compliance
with any provision of this Indenture or the Securities may
be waived with the consent of the Holders of a majority in
aggregate Principal Amount of the then outstanding
Securities (including consents obtained in connection with a
tender offer or exchange offer for the Securities).
Upon the request of the Company accompanied by a
resolution of the Board of Directors of the Company
authorizing the execution of any such amended or
supplemental indenture, and upon the filing with the Trustee
of evidence reasonably satisfactory to the Trustee of the
consent of the Holders of Securities as aforesaid, and upon
receipt by the Trustee of the documents described in Section
9.6 hereof, the Trustee shall join with the Company in the
53
execution of such amended or supplemental indenture unless
such amended or supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion,
but shall not be obligated to, enter into such amended or
supplemental indenture.
It shall not be necessary for the consent of the
Holders of Securities under this Section 9.2 to approve the
particular form of any proposed amendment or waiver, but it
shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under
this Section becomes effective, the Company shall mail to
the Holders of Securities affected thereby a notice briefly
describing the amendment, supplement or waiver. Any failure
of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity
of any such supplemental indenture or waiver. Subject to
Sections 6.4 and 6.7 hereof, the Holders of a majority in
aggregate Principal Amount of the Securities then
outstanding may waive compliance in a particular instance by
the Company with any provision of this Indenture or the
Securities. Without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Security
held by a non-consenting Holder):
(a) reduce the aggregate Principal Amount of
Securities whose Holders must consent to an amendment,
supplement or waiver;
(b) reduce the Payment Amount or change the fixed
maturity of any Security or alter the provisions with
respect to the redemption of the Securities (other than the
provisions of Sections 4.6);
(c) reduce the rate of or change the time for
payment of interest on any Securities;
(d) waive a default or Event of Default in the
payment of the Fixed Amount or the Contingent Amount or
interest on the Securities (except a rescission of
acceleration of the Securities by the Holders of at least a
majority in aggregate Principal Amount thereof and a waiver
of the payment default that resulted from such
acceleration);
(e) make any Security payable in money other than
that stated in the Securities;
54
(f) make any change in the provisions of this
Indenture relating to waivers of past defaults or Events of
Default or the rights of Holders of Securities to receive
payments of the Fixed Amount or the Contingent Amount or
interest on the Securities;
(g) waive a redemption payment with respect to
any Security (other than a payment required by Section 4.6);
or
(h) make any change in Section 6.4 or 6.7 hereof
or in Section 9.1 or in this Section 9.2 hereof.
SECTION 9.3 Compliance with Trust Indenture
-------------------------------
Act. Every amendment to this Indenture or the Securities
---
shall be set forth in a supplemental indenture that complies
with the Trust Indenture Act as then in effect.
SECTION 9.4 Revocation and Effect of Consents.
---------------------------------
Until an amendment, supplement or waiver becomes effective,
a consent to it by a Holder is a continuing consent by the
Holder and every subsequent Holder of a Security or portion
of a Security that evidences the same debt as the consenting
Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or
subsequent Holder of a Security may revoke the consent as to
its Security if the Trustee receives written notice of
revocation before the date the waiver, supplement or
amendment becomes effective. An amendment, supplement or
waiver becomes effective in accordance with its terms and
thereafter binds every Holder.
The Company may, but shall not be obligated to,
fix a record date for determining which Holders must consent
to such amendment or waiver. If the Company fixes a record
date, the record date shall be fixed at (i) the later of 30
days prior to the first solicitation of such consent or the
date of the most recent list of Holders furnished to the
Trustee prior to such solicitation pursuant to Section 2.05
or (ii) such other date as the Company shall designate.
SECTION 9.5 Notation on or Exchange of
--------------------------
Securities. The Trustee may place an appropriate notation
----------
about an amendment, supplement or waiver on any Security
thereafter authenticated. The Company in exchange for all
Securities may issue and the Trustee shall authenticate new
Securities that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue
a new Security shall not affect the validity and effect of
such amendment, supplement or waiver.
55
SECTION 9.6 Trustee to Sign Amendments, etc.
-------------------------------
The Trustee shall sign any amendment or supplemental
indenture authorized pursuant to this Article 9 if the
amendment does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. The Company may
not sign an amendment or supplemental indenture until the
Board of Directors of the Company approves it. In executing
any amended or supplemental indenture, the Trustee shall be
entitled to receive and (subject to Section 7.1 hereof)
shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that the
execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10
DETERMINATION OF THE PAYMENT AMOUNT
SECTION 10.1 Determination of the Contingent
-------------------------------
Amount. On any Settlement Date, the Payment Amount shall be
------
paid pro rata to the Holders of the Securities as provided
in this Indenture. The Contingent Amount shall be
determined as provided in this Article 10 and in Exhibit B
hereto, which is hereby incorporated in and expressly made a
part of this Indenture. The Payment Amount shall be paid in
cash or, subject to Section 10.7, Registered Common Stock.
SECTION 10.2 Holder Actuary; Compensation and
--------------------------------
Indemnity. (a) On the Issue Date, the Company shall
---------
appoint Ernst & Young LLP as Holder Actuary to represent the
interests of the Holders of the Securities as provided in
Indenture and pursuant to the Holder Actuary Agreement dated
the date hereof between the Company and the Holder Actuary.
The reasonable fees and expenses of the Holder
Actuary incurred in connection with the performance of its
duties under this Indenture, and the reasonable fees and
expenses of any necessary agents engaged by the Holder
Actuary in connection therewith (the "Holder Actuary Cost"),
shall be promptly paid in full by Company; provided that the
--------
Company shall have no obligation to pay the Holder Actuary
Cost to the extent that such cost exceeds $50,000 in any one
year (or $200,000 in any year which includes a Settlement
Date).
The Company shall indemnify the Holder Actuary and
any predecessor Holder Actuary for, and hold it harmless
against, any loss or liability or expense incurred by it
without willful misconduct, negligence or bad faith on its
part arising out of or in connection with the performance of
56
its duties as Holder Actuary under this Indenture, the
Securities or the Holder Actuary Agreement, including the
costs and expenses of defending itself against or
investigating any claim or liability and of complying with
any process served upon it or any of its officers in
connection with the exercise or performance of any of its
powers or duties under this Indenture, the Securities or the
Holder Actuary Agreement.
The obligations of the Company under this Section
to compensate and indemnify the Holder Actuary and each
predecessor Holder Actuary and to pay or reimburse the
Holder Actuary and each predecessor Holder Actuary as set
forth in this Section shall constitute additional
indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture or the rejection or
termination of this Indenture under bankruptcy law. If the
Holder Actuary renders services and incurs expenses
following an Event of Default under Section 6.1(c) or
Section 6.1(d) hereof, the parties hereto and the holders by
their acceptance of the Securities hereby agree that such
expenses are intended to constitute expenses of
administration under any bankruptcy law.
(b) In the event of the resignation of the Holder
Actuary or any other circumstance whereby the Holder Actuary
shall cease to perform or otherwise not be available to
perform its duties under this Indenture, the Trustee shall
select a successor Holder Actuary, which successor actuary
shall be a nationally recognized property and casualty
actuarial firm which has had no relationship with the
Company during the greater of (i) the 5 years preceding the
Issue Date and (ii) the period during which the Securities
have been outstanding.
SECTION 10.3 Company Actuary. (a) The Company
---------------
shall appoint an actuary to act as Company Actuary under
this Article 10. The Company Actuary may be, but shall not
be not required to be, an employee of the Company. The
Company may replace the Company Actuary at any time for any
reason; provided that any such action does not and would not
--------
likely result in an extension of the Settlement Date under
Section 2.13. The Trustee and the Holder Actuary shall be
promptly notified in writing of the appointment, resignation
or discharge of the Company Actuary. The fees and expenses
of the Company Actuary shall be paid by the Company without
any adjustment to the Contingent Amount.
SECTION 10.4 Preparation of Reserve Reports.
------------------------------
(a) Promptly following (i) the occurrence of a Change
of Control, (ii) an acceleration of the Securities pursuant
57
to Section 6.2 following an Event of Default, (iii) delivery
of a notice of redemption to the Trustee under Section 3.1,
and (iv) December 31, 2005 (each a "Trigger Date"), the
Company shall notify the Trustee, the Holder Actuary and the
Company Actuary of:
(a) the Settlement Date (without regard to any
extension under Section 2.13);
(b) whether or not the Securities are to be
settled in Registered Common Stock pursuant
to Section 10.7; and
(c) the paragraph of the Securities and/or
Section of this Indenture pursuant to which
the Securities will be settled.
In addition, promptly following the Trigger Date,
the Company shall furnish to the Company Actuary and the
Holder Actuary the information or access to the information
referred to in Section 4.2 to allow each such Actuary to
prepare a report (each a "Reserve Report") reflecting
calculation of the Contingent Amount as of the applicable
Settlement Date.
(b) In accordance with and to the extent set
forth in Exhibit B, each Reserve Report, including
calculation of the Contingent Amount, shall be prepared
independently by each Actuary. Such calculation shall be
made in accordance with Exhibit B and, as set forth in
Exhibit B, shall take account of the Tax Benefit resulting
from the Adverse Reserve Development.
The Tax Benefit may be calculated with the
assistance of (i) in the case of the Company Actuary, an
accountant selected by the Company who may be a Company
employee and (ii) in the case of the Holder Actuary, an
accountant selected by such Holder Actuary. The calculation
of any items relevant to the determination of the Tax
Benefit pursuant to Exhibit B shall be made in a manner that
is consistent with the manner in which any comparable
adjustments to reserves are reported or have been reported
by the Company for federal income tax purposes. From the
Trigger Date to the Settlement Date (including any extension
thereof pursuant to Section 2.13), the Company shall provide
each of the Holder Actuary and the Independent Actuary (and
any of their agents) access to the books and records of the
Company and each Subsidiary of the Company as provided in
Section 4.2.
58
(c) Each Reserve Report shall include in
reasonable detail an explanation of the methodology used in
such Report and all supporting calculations of Adverse
Reserve Development (as defined in Exhibit B). Each Actuary
shall use its best efforts to deliver its Reserve Report to
the other Actuary at least 105 calendar days prior to the
Settlement Date.
(d) If the calculation of the Contingent Amount
set forth in the Holder Actuary's Reserve Report (i) does
not differ from that set forth in the Company Actuary's
Reserve Report or (ii) differs from that set forth in the
Company Actuary's Reserve Report and the amount of the
difference does not exceed $3,000,000, then the Contingent
Amount set forth in the Company Actuary's Reserve Report
shall be the Contingent Amount for purposes of settlement of
the Securities.
SECTION 10.5 Resolution of Disputes;
-----------------------
Arbitration. (a) If the calculation of the Contingent
-----------
Amount set forth in the Holder Actuary's Reserve Report
differs from that set forth in the Company Actuary's Reserve
Report and the amount of the difference exceeds $3,000,000,
the Company and the Holder Actuary shall use their
reasonable best efforts to resolve this difference. If,
however, the difference cannot be resolved within 30
calendar days after delivery of the later to be delivered of
either the Company Actuary or Holder Actuary Reserve Report,
the Company and the Holder Actuary shall thereafter jointly
appoint an independent third party actuary, which shall be a
nationally recognized property and casualty actuarial firm,
with no relationship to the Company, the Trustee, the Holder
Actuary or any holder of 5% or more of the Securities (the
"Independent Actuary") to resolve said dispute. If the
parties cannot agree on the appointment of an Independent
Actuary within 10 calendar days, then the Company and the
Holder Actuary shall each select two actuarial firms meeting
the requirements set forth in the preceding sentence. Each
of the Company and Holder Actuary shall then be entitled to
reject one of the two selections of the other party. The
Independent Actuary shall then be chosen at random from the
remaining two selections. The Independent Actuary shall
have the authority to engage an independent third party
accountant with no relationship to the Company, the Trustee,
the Holder Actuary or any beneficial owner of 10% or more of
the Securities to resolve any disagreement with respect to
the calculation of the Tax Benefit.
(b) Not later than 30 days prior to any
Settlement Date, the Independent Actuary shall prepare and
deliver to the Company, the Trustee, the Company Actuary and
59
the Holder Actuary its calculation of the Contingent Amount.
This calculation shall be prepared in accordance with the
guidelines set forth in Exhibit B. Based on the foregoing,
the Independent Actuary will determine which of (i) the
Contingent Amount set forth in the Company Actuary's Reserve
Report and (ii) the Contingent Amount set forth in the
Holder Actuary's Reserve Report, is, in the judgment of the
Independent Actuary, the best estimate of the Contingent
Amount. The amount so selected will be the Contingent
Amount for purposes of settlement of the Securities.
(c) The reasonable fees and expenses of the
Independent Actuary incurred in connection with this
Indenture, and the reasonable fees and expenses of any
necessary agents engaged by the Independent Actuary in
connection therewith, shall be promptly paid in full by
Company; provided that 50% of all such fees and expenses
--------
(the "Arbitration Cost") shall be deducted from the
Contingent Amount as provided in Exhibit B. Notwithstanding
the foregoing, the Independent Actuary shall have discretion
to apportion such fees and expenses differently between the
parties as the Independent Actuary deems equitable under the
circumstances based upon its views as to the relative
accuracy of the Contingent Amount contained in the Reserve
Reports prepared by each of the Company Actuary and the
Holder Actuary. The Arbitration Cost shall not be subject
to the limits relating to the Holder Actuary Cost set forth
above under Section 10.2(a).
SECTION 10.6 Annual Review of Reserves And
-----------------------------
Claims. Within 90 calendar days following December 31 of
------
each calendar year prior to the Settlement Date, other than
December 31, 2005 (each such December 31, a "Report Date"),
the Company shall deliver to the Holder Actuary and to the
Trustee a written statement setting forth in reasonable
detail, including all supporting calculations and
methodology, the Adverse Reserve Development calculated as
of the Report Date for such year. In addition, each year
the Company Actuary shall provide to the Holder Actuary and
the Trustee a written report stating that all such amounts
have been calculated in accordance with the guidelines set
forth in Exhibit B hereto. Annually following delivery of
each Report, the Company shall cause the Company Actuary to
meet with the Holder Actuary and review in detail with the
Holder Actuary the Adverse Reserve Development occurring
during such calendar year. Following each such annual
meeting, the Holder Actuary shall provide a written report
to the Company Actuary expressing any material issues that
have come to its attention regarding the Company's
calculation of the Adverse Reserve Development. All
statements and reports of the Company, the Company Actuary
60
and the Holder Actuary under this Section 10.6 shall be
solely for informational purposes, shall be non-binding and
may not be used or considered for any purpose in any
arbitration.
SECTION 10.7 Settlement in Stock. (a) The
-------------------
Company shall have the right to satisfy the Payment Amount
due to Holders under the Securities, whether at maturity,
upon redemption or upon the occurrence of a Change of
Control, in Registered Common Stock; provided that (i) at
--------
the time of payment such stock is quoted for trading on any
U.S. national securities exchange or on The NASDAQ Stock
Market and (ii) the Payment Amount of all Securities is able
to be satisfied through the delivery of Registered Common
Stock. In connection therewith, the Company shall not be
required to issue fractional shares of common stock, and
instead may pay cash in lieu of any such fractional shares.
The Company shall not have the right to pay the Payment
Amount due under the Securities in Registered Common Stock
if an Event of Default has occurred and is continuing.
(b) For purposes of any such payment, such
Registered Common Stock shall be valued at 85.0% of its Fair
Value. For these purposes, "Fair Value" of such Registered
Common Stock shall mean the average of the closing sales or
last reported sales prices of such Common Stock of the
Company for the 20 trading days immediately preceding the
date that is five trading days prior to the Settlement Date.
Holders on the Settlement Date who receive upon repayment of
the Securities Common Stock of the Company and who as of
such date are or could reasonably be considered Affiliates
of the Company shall have registration rights (the
"Registration Rights") set forth in Exhibit C to this
Indenture.
ARTICLE 11
MISCELLANEOUS
SECTION 11.1 Trust Indenture Act of 1939. This
---------------------------
Indenture shall incorporate and be governed by the
provisions of the Trust Indenture Act that are required to
be part of and to govern indentures qualified under the
Trust Indenture Act.
SECTION 11.2 Notices. Any notice or
-------
communication shall be sufficiently given if written and
(a) if delivered in person when received or (b) if mailed by
first class mail 5 days after mailing, or (c) as between the
Company and the Trustee if sent by facsimile transmission,
61
when transmission is confirmed, in each case addressed as
follows:
if to the Company:
-----------------
Piedmont Management Company Inc.
00 Xxxxxx Xxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Financial Officer
if to the Trustee:
-----------------
Shawmut Bank Connecticut, N.A.
____________
New York, New York _______
Telecopy: (212) ___-____
Attention: [Corporate Trust Administration]
The Company or the Trustee by written notice to
the other may designate additional or different addresses
for subsequent notices or communications.
Any notice or communication shall be sufficiently
given to Holders by mailing to such Holders at their
addresses as they shall appear on the Security Register.
Notice mailed shall be sufficiently given if so mailed
within the time prescribed. Copies of any such
communication or notice to a Holder shall also be mailed to
the Trustee and each Agent at the same time.
Failure to mail a notice or communication to a
Holder or any defect in it shall not affect its sufficiency
with respect to other Holders. Except as otherwise provided
in this Indenture, if a notice or communication is mailed in
the manner provided in this Section 11.2, it is duly given,
whether or not the addressee receives it.
Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the
event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance
upon such waiver.
In case it shall be impracticable to give notice
as herein contemplated, then such notification as shall be
made with the approval of the Trustee shall constitute a
sufficient notification for every purpose hereunder.
62
SECTION 11.3 Certificate and Opinion as to
-----------------------------
Conditions Precedent. Upon any request or application by
--------------------
the Company to the Trustee to take any action under this
Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the
opinion of the signers, all conditions precedent, if
any, provided for in this Indenture relating to the
proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the
opinion of such counsel, all such conditions precedent
have been complied with.
SECTION 11.4 Statements Required in Certificate
----------------------------------
or Opinion. Each certificate or opinion with respect to
----------
compliance with a condition or covenant provided for in this
Indenture shall include:
(i) a statement that each person signing such
certificate or opinion has read such covenant or
condition and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope
of the examination or investigation upon which the
statement or opinion contained in such certificate or
opinion is based;
(iii) a statement that, in the opinion of each such
person, 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
(iv) a statement as to whether or not, in the
opinion of each such person, such condition or covenant
has been complied with; provided that, with respect to
--------
matters of fact, an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public
officials.
The Company, the Trustee and any agent of the
Company or the Trustee may deem and treat the person in
whose name any Security shall be registered upon the
Security Register as the absolute owner of such Security
(whether or not such Security shall be overdue and
notwithstanding any notation of ownership or other writing
thereon) for the purpose of receiving payment of or on
account of such Security and for all other purposes; and
neither the Company nor the Trustee nor any agent of the
63
Company or the Trustee shall be affected by any notice to
the contrary.
SECTION 11.5 Rules by Trustee, Paying Agent or
---------------------------------
Registrar. The Trustee may make reasonable rules for action
---------
by or at a meeting of Holders. The Paying Agent or
Registrar may make reasonable rules for its functions.
SECTION 11.6 Payment Date Other Than a Business
----------------------------------
Day. If any date for payment of any amount due on any
---
Security shall not be a Business Day at any place of
payment, then payment of principal of or interest on such
Security, as the case may be, need not be made on such date,
but may be made on the next succeeding Business Day at any
place of payment with the same force and effect as if made
on such date and no interest shall accrue in respect of such
payment for the period from and after such date.
SECTION 11.7 Governing Law. The internal laws
-------------
of the State of New York shall govern this Indenture and the
Securities.
SECTION 11.8 No Adverse Interpretation of Other
----------------------------------
Agreements. This Indenture may not be used to interpret
----------
another indenture or loan or debt agreement of the Company
or any Subsidiary of the Company. Any such indenture or
agreement may not be used to interpret this Indenture.
SECTION 11.9 Successors. All agreements of the
----------
Company in this Indenture and the Securities shall bind its
successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 11.10 Duplicate 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.
SECTION 11.11 Separability. In case any
------------
provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 11.12 Table of Contents, Headings, Etc.
---------------------------------
The Table of Contents and headings of the Articles and
Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of
the terms and provisions hereof.
64
SECTION 11.13 Incorporators, Stockholders,
----------------------------
Officers and Directors of Company Exempt from Individual
--------------------------------------------------------
Liability. No recourse under or upon any obligation,
---------
covenant or agreement contained in this Indenture or any
indenture supplemental hereto, or in any Security or any
coupons appertaining thereto, or because of any indebtedness
evidenced thereby, shall be had against any incorporator, as
such or against any past, present or future stockholder,
officer, director or employee, as such, of the Company or of
any successor, either directly or through the Company or any
successor, under any rule of law, statute or constitutional
provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the
acceptance of the Securities by the holders thereof and as
part of the consideration for the issue of the Securities.
SECTION 11.14 Judgment Currency. The Company
-----------------
agrees, to the fullest extent that it may effectively do so
under applicable law, that (a) if for the purpose of
obtaining judgment in any court it is necessary to convert
the sum due in respect of the Securities (the "Required
--------
Currency") into a currency in which a judgment will be
--------
rendered (the "Judgment Currency"), the rate of exchange
-----------------
used shall be the rate at which in accordance with normal
banking procedures the Trustee could purchase in The City of
New York the Required Currency with the Judgment Currency on
the day on which final unappealable judgment is entered,
unless such day is not a Business Day, then, to the extent
permitted by applicable law, the rate of exchange used shall
be the rate at which in accordance with normal banking
procedures the Trustee could purchase in The City of New
York the Required Currency with the Judgment Currency on the
Business Day preceding the day on which final unappealable
judgment is entered and (b) its obligations under this
Indenture to make payments in the Required Currency (i)
shall not be discharged or satisfied by any tender, or any
recovery pursuant to any judgment (whether or not entered in
accordance with subsection (a)), in any currency other than
the Required Currency, except to the extent that such tender
or recovery shall result in the actual receipt, by the
payee, of the full amount of the Required Currency expressed
to be payable in respect of such payments, (ii) shall be
enforceable as an alternative or additional cause of action
for the purpose of recovering in the Required Currency the
amount, if any, by which such actual receipt shall fall
short of the full amount of the Required Currency so
expressed to be payable and (iii) shall not be affected by
judgment being obtained for any other sum due under this
Indenture.
65
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed, all as of the date first
written above.
(SEAL) PIEDMONT MANAGEMENT COMPANY
INC.
Attest:
_____________________
By:
---------------------------
Name:
Title:
(SEAL) SHAWMUT BANK CONNECTICUT,
N.A., as Trustee
Attest:
_____________________
By:
---------------------------
Name:
Title:
66
STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, on this __
day of ________, 1995, personally appeared ____________,
____________ of Piedmont Management Company Inc., a Delaware
corporation, known to me (or proved to me by introduction
upon the oath of a person known to me) to be the person and
officer whose name is subscribed to the foregoing
instrument, and acknowledged to me that he/she executed the
same as the act of such corporation for the purposes and
consideration herein expressed and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL THIS ____ DAY OF
________, 1995.
(SEAL)
________________________________
NOTARY PUBLIC, STATE OF ________
Print Name:_____________________
Commission Expires:_____________
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, on this
_______ day of ________, 1995, personally appeared
_________________, _______________ of Shawmut Bank
Connecticut, N.A., a national association, known to me (or
proved to me by introduction upon the oath of a person known
to me) to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that
he/she executed the same as the act of such trust for the
purposes and consideration herein expressed and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS _____ DAY OF
________, 1995.
(SEAL)
________________________________
NOTARY PUBLIC, STATE OF NEW YORK
Print Name:_____________________
Commission Expires:_____________
67
Exhibit A
[FORM OF FACE OF SECURITY]
No. $[principal amount]*
Piedmont Management Company Inc.
Contingent Interest Notes Due June 30, 2006.
Piedmont Management Company Inc., a Delaware
corporation (such company, and its successors and assigns
under the Indenture hereinafter referred to, being herein
called the "Company"), for value received, hereby promises
to pay to ________________ or registered assigns, on the
relevant Settlement Date (as defined in the Indenture), the
following amounts (the "Payment Amount"):
(1) the principal amount of this Security plus
interest on such principal amount from the Issue
Date through the Settlement Date at a rate of 8.0%
per annum, compounded annually, at the Company's
office or agency for said purpose in New York, New
York, on the relevant Settlement Date (as defined
in the Indenture);
(2) the pro rata portion (as defined below) of the
Contingent Amount, as defined in the Indenture
(the "Indenture"), dated as of __________ __, 1995
between the Company and Shawmut Bank Connecticut,
N.A., as trustee (the "Trustee"), at the Company's
office or agency for said purpose in New York, New
York, on the relevant Settlement Date; and
(3) the pro rata portion (as defined below) of the
Extension Interest (as defined in the Indenture),
if any, at the Company's office or agency for said
purpose in New York, New York, on the relevant
Settlement Date.
For these purposes, "pro rata portion" means the
ratio of the principal amount of this Security to the
aggregate principal amount of all of the Securities issued
under the Indenture.
--------------------
*The dollar amount indicated is the principal amount of
the Security. In addition to the principal amount, the
Holder of this Security shall receive such other amounts as
indicated in this Security.
1
Payment of the Payment Amount due under this
Security shall be made in such coin or currency of the
United States of America as at the time of payment shall be
legal tender for the payment of public and private debts
("U.S. Currency"); provided that under certain circumstances
--------
as set forth in the Indenture such payment may be made in
Registered Common Stock (as defined in the Indenture).
Reference is made to the further provisions set
forth on the reverse hereof. Such further provisions shall
for all purposes have the same effect as though fully set
forth at this place.
Capitalized terms used herein without definition
shall have the same meaning as in the Indenture.
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed under its corporate seal.
Dated: ___________ __, 1995
[Seal]
______________________________
______________________________
2
[FORM OF REVERSE OF SECURITY]
Piedmont Management Company Inc.
Contingent Interest Notes Due June 30, 2006
1. Interest
--------
The Company promises to pay interest on the
principal amount of this Security from the Issue Date
through the Settlement Date at a rate of 8.0% per annum,
compounded annually.
In the event that Extension Interest, if any,
shall become due and payable on this Security pursuant to
the Indenture, the Company promises to pay such Extension
Interest in accordance with the terms and rates set forth in
Section 2.13 of the Indenture.
2. Method of Payment
-----------------
The Company through the Paying Agent shall pay any
Payment Amount on this Security to the registered holder of
this Security on any Settlement Date. Except as otherwise
provided in the Indenture, the Holder of this Security must
surrender this Security to the Paying Agent to collect any
Payment Amount. Payment of the Payment Amounts due under
this Security shall be made in U.S. Currency; provided that
--------
under certain circumstances as set forth in the Indenture
such payment may be made in Registered Common Stock (as
defined in the Indenture).
3. Paying Agent and Registrar
--------------------------
Initially, the Trustee will act as Paying Agent
and Registrar. The Company may appoint and change any
Paying Agent, Registrar or transfer agent without prior
notice to the Holder of this Security. The Company may have
one or more additional Paying Agents or transfer agents with
respect to this Security. The Company or any affiliate of
the Company may act as Paying Agent or Registrar to the
Holder of this Security.
4. Indenture
---------
The Company issued the Securities under the
Indenture. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by
3
reference to the Trust Indenture Act of 1939 (15 U.S.C.
------
Sec.Sec. 77aaa-77bbbb) as in effect on the date of the Indenture
(the "Act"). The Securities are subject to all such terms,
and Holders of the Securities are referred to the Indenture
and the Act for a statement of those terms.
Subject to Section 2.8 of the Indenture, the
aggregate principal amount of Securities which may be
authenticated and delivered under the Indenture is limited
to $1,000,000 plus interest accreting thereon from the Issue
Date through the Settlement Date at a rate of 8.0% per
annum, compounded annually. The Securities are general
unsecured obligation of the Company and rank equally and
pari passu with all other unsecured and unsubordinated debt
of the Company.
5. Optional Redemption
-------------------
(a) The Securities are subject to redemption, in
whole but not in part, at any time on or after the third
anniversary of the Issue Date, at 100% of the Payment
Amount, upon not less than 180 nor more than 190 days'
notice furnished to the Trustee and the Holder Actuary
pursuant to Section 3.1 of the Indenture. Once such notice
is furnished, Securities called for redemption become
irrevocably due and payable on the Redemption Date at the
redemption price. A notice of redemption may not be
conditional.
(b) Notice of redemption will be mailed, by either
the Company or the Trustee as determined pursuant to the
terms of the Indenture, at least 140 days but not more than
150 days before the Redemption Date to each Holder of a
Security to be redeemed at the address of such Holder as it
appears in the Security Register. Such notice of redemption
shall state all such matters as may be required to be stated
pursuant to Section 3.2 of the Indenture.
(c) Except as set forth in Section 4.6 of the
Indenture, the Company shall not be required to make
mandatory redemption or sinking fund payments with respect
to the Securities.
6. Purchase of Securities upon a Change of Control
-----------------------------------------------
(a) In the event that a Change of Control (as
defined in the Indenture) occurs, the Company shall make a
Change of Control Offer to each Holder of Securities to
4
repurchase all, but not less than all, of such Holder's
Securities at a purchase price equal the Change of Control
Purchase Price on the Change of Control Purchase Date.
(b) Within 15 days following the date on which
the Change of Control occurs, the Company shall mail a
notice to each Holder of Securities stating that a Change of
Control Offer is being made pursuant to the Indenture and
such other matters as may be required to be stated pursuant
to Section 4.6 of the Indenture.
(c) A Holder may accept the Change of Control
Offer upon (1) delivery to any Paying Agent of a written
Change of Control Purchase Notice at any time prior to the
close of business on the third Business Day before the
Change of Control Purchase Date, stating that such Holder
accepts the Company's offer to repurchase all of such
Holder's Securities and (2) delivery of such Securities to
such Paying Agent at such office prior to, on or after the
Change of Control Purchase Date (together with all necessary
endorsements), such delivery being a condition to receipt by
the Holder of the Change of Control Purchase Price therefor.
(d) A Change of Control Purchase Notice may be
withdrawn before or after delivery by the Holder to the
relevant Paying Agent at the office of such Paying Agent of
the Security to which such Change of Control Purchase Notice
relates, by means of a written notice of withdrawal (by
telegram, telex, facsimile transmission or letter) received
by such Paying Agent at such office not later than three
Business Days prior to the Change of Control Purchase Date,
specifying, as applicable:
(1) the name of such Holder and
(2) a statement that such Holder is withdrawing
his election to have such Securities
purchased.
Each Paying Agent will promptly return to the
prospective Holders thereof any Securities with respect to
which a Change of Control Purchase Notice has been withdrawn
in compliance with the Indenture.
7. Deposit of Redemption or Purchase Price
---------------------------------------
If the Company has deposited with the Paying Agent
money (or Registered Common Stock, if permitted under the
Indenture) sufficient to pay the redemption or purchase
price of, and unpaid and accrued interest, if any, on all
5
Securities to be redeemed or purchased on the Redemption
Date or Change of Control Purchase Date, interest shall
cease to accrue on the Securities or the portions of
Securities called for redemption or tendered and not
withdrawn in a Change of Control Offer (regardless of
whether certificates for such securities are actually
surrendered), and the only remaining right of the Holder
with respect to such Security or portion thereof shall be to
receive such payment upon proper presentation and surrender
of the Securities.
8. Exchange
--------
This Security is in registered form and in a
denomination that the Company and the Trustee have
determined. A Holder may only transfer or exchange this
Security in accordance with the Indenture. A Holder may be
required to, among other things, furnish appropriate
endorsements or transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture.
9. Persons Deemed Owners
---------------------
The Company, the Trustee and any agent of the
Company or the Trustee may deem and treat the person in
whose name any Security shall be registered upon the
Security Register as the absolute owner of such Security
(whether or not such Security shall be overdue and
notwithstanding any notation of ownership or other writing
thereon) for the purpose of receiving payment of or on
account of such Security and for all other purposes; and
neither the Company nor the Trustee nor any agent of the
Company or the Trustee shall be affected by any notice to
the contrary.
10. Amendment, Waiver
-----------------
The Indenture permits, with certain exceptions as
therein provided, the amendment or supplement thereof with
the consent of the Holders of a majority in aggregate
Principal Amount of the Securities then outstanding at the
time of such amendment or supplement. The Indenture also
contains provisions permitting the Holders of a majority in
aggregate Principal Amount of the then outstanding
Securities to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under
the Indenture and their consequences. A consent to an
amendment, supplement or waiver by or on behalf of the
6
Holder of the Security is conclusive and binding upon such
Holder and upon every subsequent Holder of the Security or
portion of the Security that evidences the same debt as the
consenting Holder's Security, even if notation of such
consent is not made upon the Security.
11. Defaults and Remedies
---------------------
The Securities have the Events of Default as set
forth in Section 6.1 of the Indenture. If an Event of
Default occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate Principal Amount of the
Securities, subject to certain limitations, may declare all
the Securities to be due and payable immediately. Certain
events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being due and payable
immediately upon the occurrence of such Events of Default.
Holders of Securities may not enforce the
Indenture or the Securities except as provided in the
Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or
security. Subject to certain limitations, Holders of a
majority in aggregate Principal Amount of the then
outstanding Securities may direct the Trustee in its
exercise of any trust or power. The Holders of a majority
in aggregate Principal Amount of the then outstanding
Securities, by written notice to the Trustee, may rescind an
acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal or
interest that has become due solely because of the
acceleration) have been cured or waived. Except in the case
of a default or Event of Default in the payment of any
amount with respect to any Security, the Trustee shall be
protected in withholding notice of such default or Event of
Default from the Holders, if the Trustee in good faith
determines that the withholding of such notice is in the
interests of the Holders. The above description of Events
of Default and remedies is qualified by reference, and
subject in its entirety, to the more complete description
thereof contained in the Indenture.
12. Trustee Dealings with the Company or Its Affiliates
---------------------------------------------------
The Trustee, in its individual or any other
capacity, may become the owner or pledgee of Securities and
may otherwise deal with the Company or its Affiliates with
the same rights it would have if it were not the Trustee.
7
Any Agent may do the same with like rights. However, the
Trustee is subject to Trust Indenture Act Sections 310(b)
and 311.
13. No Recourse Against Others
--------------------------
No recourse under or upon any obligation, covenant
or agreement contained in this Indenture or any indenture
supplemental hereto, or in any Security or any coupons
appertaining thereto, or because of any indebtedness
evidenced thereby, shall be had against any incorporator, as
such or against any past, present or future stockholder,
officer, director or employee, as such, of the Company or of
any successor, either directly or through the Company or any
successor, under any rule of law, statute or constitutional
provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the
acceptance of the Securities by the Holders thereof and as
part of the consideration for the issue of the Securities.
14. Authentication
--------------
This Security shall not be valid or obligatory
until an authorized officer of the Trustee (or an
Authenticating Agent) manually signs the certificate of
authentication below.
15. Governing Law
-------------
The internal laws of the State of New York shall
govern the Indenture and this Security.
The Company will furnish to the Holder of this
Security upon written request and without charge to such
Holder a copy of the Indenture which has in it the text of
this Security in larger type. Requests may be made to the
Company at the address set forth in the Indenture.
8
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the
within-mentioned Indenture.
SHAWMUT BANK CONNECTICUT,
N.A., as Trustee
________________________
Authorized Officer
9
Exhibit B
Calculation of
Contingent Amount
-----------------
With respect to any Settlement Date, the Contingent Amount
shall be calculated in accordance with the following
definitions:
Contingent Amount: With respect to any Settlement
Date, the amount equal to:
(A) (x) the sum of (i) the
Maximum Interest and (ii) the
Tax Benefit minus (y) the
Adverse Reserve Development;
provided that in no event will
--------
the amount resulting from this
clause (A) be less than the
Minimum Amount or greater than
the Maximum Interest
minus
(B) the sum of (i) the Actuary
Cost and (ii) the Arbitration
Cost.
Maximum Interest: With respect to any Settlement
Date, the amount equal to $55.0
million discounted back from the
Maturity Date to the applicable
Settlement Date at a rate of 8.0%
compounded annually.
Adverse Reserve
Development: For any Determination Date, the
amount equal to:
(A) (i) Incurred Loss and
Allocated Loss Expense
Development plus (ii)
Commission Development minus
Earned Premium Development, in
each case as of the applicable
Determination Date;
minus
1
(B) $25.0 million.
Incurred Loss and
Allocated Loss
Expense Development: Shall mean:
(1) the sum of the
development of incurred
losses and allocated loss
expenses for each
calendar year beginning
with the calendar year
ending December 31, 1996
through the calendar year
ending on the
Determination Date,
reflected on RECO's
Statutory Annual
Statement, Schedule P -
Part 2 - Summary (one
year development column
of Incurred losses and
allocated loss expenses)
with respect to the
Protected Business for
accident years 1994 and
prior;
plus
(2) the development of
incurred losses and
allocated loss expenses
for the calendar year
ended December 31, 1995,
reflected on RECO's 1995
Statutory Annual
Statement, Schedule P -
Part 2 - Summary (one
year development column
of incurred losses and
allocated loss expenses)
with respect to the
Protected Business for
accident years 1994 and
prior, minus $831,000;
plus
(3) the sum of 25% of the
development of incurred
2
losses and allocated loss
expenses for each
calendar year beginning
with the calendar year
ending December 31, 1996
through the calendar year
ending on the
Determination Date,
reflected on RECO's
Statutory Annual
Statement, Schedule P -
Part 2 - Summary (one
year development column
of incurred losses and
allocated loss expenses)
with respect to all
business for accident
year 1995;
plus
(4) any GAAP adjustment
related to the provision
for uncollectible
reinsurance of incurred
losses and allocated loss
expenses applicable to
the Protected Business.
Earned Premium
Development: Shall mean estimated ultimate
premiums recorded in the GAAP
financial statements of the Company
through the Determination Date
minus estimated ultimate premiums
recorded in the GAAP financial
statements of the Company through
March 31, 1995, in each case with
respect to retrospectively rated
casualty treaty excess contracts
included in the Protected Business.
Commission Development: Shall mean the estimated ultimate
commissions recorded in the GAAP
financial statements of the Company
through the Determination Date
minus estimated ultimate
commissions recorded in the GAAP
financial statements of the Company
through March 31, 1995 with respect
3
to the contracts applicable to the
Protected Business.
Verification: In determining any component of
Incurred Loss and Allocated Loss
Expense Development, Earned Premium
Development or Commission
Development, whether as reflected
on RECO's Statutory Annual
Statement or on RECO's GAAP
financial statements, each such
component shall be subject to
verification by the Holder Actuary
and the Company Actuary against the
books and records of RECO.
Actuary Cost: With respect to any Settlement
Date, if the sum of (x) the amount
determined pursuant to clause (A)
of the definition of "Contingent
Amount" above and (y) the Fixed
Amount is equal to or less than
$10.0 million, 50% of the Holder
Actuary Cost, and if such amount is
greater than $10.0 million, 100% of
the Holder Actuary Cost.
Determination Date: With respect to the final Maturity
Date, December 31, 2005, and with
respect to any other Settlement
Date, December 31 of the year
immediately preceding (i) a Change
of Control, (ii) an acceleration of
the Securities pursuant to Section
6.2 of the Indenture following an
Event of Default, and (iii)
delivery of a notice of redemption
to the Trustee under Section 3.1 of
the Indenture.
Protected Business: All insurance and reinsurance
business, however denominated, as
to which premiums earned have been
reflected on the books of RECO on
or prior to March 31, 1995.
GAAP: U.S. generally accepted accounting
principles as in effect on the
Determination Date. Subject to
"Applicable Standards" and "Certain
Changes" below, all amounts shall
4
be calculated in accordance with
GAAP.
Tax Benefit: For any Settlement Date, means
without duplication the sum of (A)
the "Actual Tax Benefit" (as
defined below) of the Adverse
Reserve Development and (B) the
"Deferred Tax Benefit" (as defined
below) of the Adverse Reserve
Development. The Actual Tax
Benefit shall be equal to the
difference between the amount of
United States federal income tax
payable by the affiliated group of
which the Company is the common
parent with respect to all taxable
periods beginning on (or including)
March 31, 1995 and ending on the
applicable Determination Date (the
"Taxable Period") and the amount of
United States federal income tax
that would have been payable with
respect to such Taxable Period in
the absence of such Adverse Reserve
Development. The Deferred Tax
Benefit shall be equal to the
deferred tax asset reflected on the
GAAP consolidated financial
statements of the Company as of the
applicable Determination Date
attributable to the Adverse Reserve
Development, after taking account
of the valuation allowance, if any,
with respect thereto (to the extent
such valuation allowance is not
allocable to a specific component
of the deferred tax asset, it shall
be apportioned ratably); provided
--------
that the Settlement Date is the
Maturity Date. In the event that
the Settlement Date is not the
Maturity Date, the Deferred Tax
Benefit shall be equal to the
product of (i) the maximum
corporate United States federal
income tax rate as of the
applicable Determination Date and
(ii) the amount of the Adverse
Reserve Development which did not
5
result in an Actual Tax Benefit
during the Taxable Period.
Minimum Amount: For any Settlement Date, an amount
equal to the lesser of (x) the Tax
Benefit and (y) $10.0 million minus
the Fixed Amount.
Further Provisions
------------------
Applicable Standards: The components of Adverse Reserve
Development in the aggregate are to
be determined and calculated in
accordance with generally accepted
actuarial standards of practice as
applied in the insurance industry,
from time to time, including but
not limited to Actuarial Standard
of Practice #9 of the Actuarial
Standards Board (specifically,
Documentation and Disclosure in
Property and Casualty Ratemaking,
Loss Reserving, and Valuation), as
amended from time to time. Both
the Company Actuary and the Holder
Actuary are to be bound by these
standards in the determination of
Adverse Reserve Development.
Certain Changes: In determining any component of
Adverse Reserve Development, there
shall be taken into account, as
appropriate, changes in insurance
industry standards, generally
accepted accounting principles,
generally accepted actuarial
standards and changes in prevailing
law. Without limiting the
foregoing, in the event of any
legislative reform that has the
effect of reducing any liability
that relates to Protected Business,
the Adverse Reserve Development
shall be appropriately reduced.
Conversely, in the event of any
legislative reform that has the
effect of substantially
transforming any liability that
relates to Protected Business into
a charge that would not be included
in the definition of "Adverse
6
Reserve Development" appropriate
adjustment shall be made to include
the amount of such charge in the
calculation of the Contingent
Amount.
Consistency: Each year Adverse Reserve
Development at RECO shall be
established on a basis and using a
methodology that is no more
conservative than those used to
determine reserves and assets for
the other insurance and reinsurance
on the books of the Company and its
other subsidiaries.
7
Exhibit C
REGISTRATION RIGHTS
Holders on the Settlement Date who receive upon
repayment of the Securities Common Stock of the Company and
who as of such date are or could reasonably be considered
Affiliates of the Company (collectively, the "Stockholders"
and individually a "Stockholder") shall have the
registration rights set forth in this Exhibit C
(hereinafter, the "Agreement"):
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. As used in this
-----------
Agreement, the following terms shall have the following
meanings:
"Affiliate" shall mean any person that directly,
---------
or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the
Company.
"Business Day" shall mean any day except a
------------
Saturday, Sunday or other day on which commercial banks in
the City of New York are authorized by law or executive
order to close.
"Disadvantageous Condition" shall have the meaning
-------------------------
given such term in Section 3.1(a)(i) hereof.
"Exchange Act" shall mean the Securities Exchange
------------
Act of 1934, as amended.
"Minimum Registration Amount" shall mean, in the
---------------------------
event that the Company exercises its right to satisfy the
Payment Amount due to the holders of CI Notes under the
Indenture in Registered Common Stock pursuant to Section
10.7 of the Indenture, 25% or more of the total number of
shares of Common Stock of the Company issued to the
Stockholders in such satisfaction.
"NASD" shall mean the National Association of
----
Securities Dealers, Inc.
"NASDAQ" shall mean the National Association of
------
Securities Dealers Automated Quotation System.
8
"Other Stockholders" shall have the meaning given
------------------
such term in Section 3.1(a)(i) hereof.
"Person" shall mean an individual, a corporation,
------
a partnership, an association, a joint-stock company, a
trust, any unincorporated organization, or a government or
political subdivision thereof.
"Priority Securities" shall have the meaning given
-------------------
such term in Section 3.1(a)(i) hereof.
"Registrable Securities" shall mean, in the event
----------------------
that the Company exercises its right to satisfy the Payment
Amount due to the holders of CI Notes under the Indenture in
Registered Common Stock pursuant to Section 10.7 of the
Indenture, the shares of Common Stock of the Company issued
to the Stockholders in such satisfaction, other than Rule
144 Securities (as defined herein) which may be distributed
to the public pursuant to Rule 144(k) under the Securities
Act; provided, however, that such securities shall cease to
-------- -------
be Registrable Securities if and when (A) a registration
statement with respect to the disposition of such securities
shall have become effective under the Securities Act and
such securities shall have been disposed of pursuant to such
effective registration statement, (B) such securities shall
have been otherwise transferred, if new certificates or
other evidence of ownership for such securities not bearing
a legend restricting further transfer and not subject to any
stop transfer order or other restrictions on transfer shall
have been delivered by the Company, and subsequent
disposition of such securities shall not require
registration or qualification of such securities under the
Securities Act, or (C) such securities shall have ceased to
be outstanding.
"Registration Expenses" shall mean all expenses
---------------------
incident to the Company's performance of or compliance with
its obligations under Article III of this Agreement,
including, without limitation, all SEC and stock exchange or
NASD registration and filing fees and expenses, fees and
expenses of compliance with applicable state securities or
"blue sky" laws (including, without limitation, reasonable
fees and disbursements of counsel for the underwriters in
connection with "blue sky" qualifications of the Registrable
Securities), printing expenses, messenger and delivery
expenses, the fees and expenses incurred in connection with
the listing of such securities to be registered on each
securities exchange or national market system on which such
securities are listed, fees and disbursements of counsel for
the Company and all independent auditors (including the
expenses of any "comfort" letters required by or incident to
9
such performance and compliance), the fees and disbursements
of underwriters customarily paid by issuers or sellers of
securities (including the fees and expenses of any
"qualified independent underwriter" required by the NASD),
the reasonable fees of one counsel retained in connection
with each such registration by the holders of a majority of
the Registrable Securities being registered, and the
reasonable fees and expenses of any special experts retained
by the Company in connection with such registration (but not
including any underwriting discounts or commissions or
transfer taxes, if any, attributable to the sale of
Registrable Securities by holders of such Registrable
Securities).
"Requesting Stockholders" shall have the meaning
-----------------------
given such term in Section 3.1(a)(i) hereof.
"SEC" shall mean the Securities and Exchange
---
Commission.
"Securities Act" shall mean the Securities Act of
--------------
1933, as amended.
All capitalized terms used and not defined herein shall have
the meaning assigned to them in the Indenture.
ARTICLE II
REPRESENTATIONS
SECTION 2.1. The Company represents to the
Stockholders that it has full legal right, power and
authority to enter into and perform its obligations under
this Agreement, and the consummation by the Company of the
transactions contemplated by this Agreement have been or
will be duly authorized by the Company. This Agreement is a
valid, binding and enforceable agreement of the Company.
ARTICLE III
REGISTRATION RIGHTS
SECTION 3.1. Registration Rights. The
-------------------
Stockholders shall have the right to register their
Registrable Securities in accordance with the following
provisions.
10
(a) Registration on Request.
-----------------------
(i) For a period of two years after the
Settlement Date, at any time and from time to time,
upon the written request of Stockholders holding
Registrable Securities equal to at least the Minimum
Registration Amount (the "Requesting Stockholders")
that the Company effect the registration under the
Securities Act of an amount of Registrable Securities
held by them equal to at least the Minimum Registration
Amount, the Company will promptly give written notice
to all other Stockholders of Registrable Securities
(the "Other Stockholders") that a request for
registration has been received with respect to the
Minimum Registration Amount. For a period of 15 days
following delivery of such notice, the Other
Stockholders may request that the Company also register
their Registrable Securities and after the expiration
of such 15 day period, the Company shall notify all
Stockholders of the number of Registrable Securities to
be registered. Thereupon, the Company will use its
best efforts to cause the prompt registration under the
Securities Act, subject to the provisions of this
Section 3.1, of (A) the Registrable Securities which
the Requesting Stockholders have requested the Company
to register and (B) all other Registrable Securities
which the Company has been requested to register by the
Other Stockholders, and in connection therewith,
prepare and file on such appropriate form as the
Company, in its reasonable discretion, shall determine,
a registration statement under the Securities Act to
effect such registration; provided, however, that the
-----------------
Company shall not be obligated to effect such
registration in the event that the aggregate offering
price of (A) the Registrable Securities which the
Requesting Stockholders have requested the Company to
register, (B) all other Registrable Securities which
the Company has been requested to register by the Other
Stockholders and (C) all other securities to be
registered in such registration is less than
$10,000,000.
With respect to any registration statement
filed, or to be filed, pursuant to this Section
3.1(a)(i), if the Company shall furnish to the
Requesting Stockholders and the Other Stockholders a
certified resolution of the Board of Directors stating
that in the Board of Directors' good faith judgment it
would (because of the existence of, or in anticipation
of, any acquisition or financing, merger, sale of
assets, capitalization or other similar corporate
11
activity, or the unavailability for reasons beyond the
Company's control of any required audited financial
statements, or any other event or condition of similar
significance to the Company) be materially
disadvantageous (a "Disadvantageous Condition") to the
Company or its stockholders for such a registration
statement to be maintained effective, or to be filed
and become effective, and setting forth the general
reasons for such judgment, the Company shall be
entitled to cause such registration statement to be
withdrawn and the effectiveness of such registration
statement terminated, or, in the event no registration
statement has yet been filed, shall be entitled not to
file any such registration statement, until such
Disadvantageous Condition no longer exists (notice of
which the Company shall promptly deliver to the
Requesting Stockholders and the Other Stockholder);
provided, however, that the Company shall not be
--------
entitled to delay any such registration statement
pursuant to the foregoing (A) for more than a total of
180 days or (B) more than once during any 12 month
period. Upon receipt of any such notice of a
Disadvantageous Condition, such Requesting Stockholders
and Other Stockholders will forthwith discontinue use
of the prospectus contained in such registration
statement and, if so directed by the Company, each such
Stockholder will deliver to the Company all copies,
other than permanent file copies then in such
Stockholder's possession, of the prospectus then
covering such Registrable Securities current at the
time of receipt of such notice, and, in the event no
registration statement has yet been filed, all drafts
of the prospectus covering such Registrable Securities.
In the event that the Company shall give any notice of
a Disadvantageous Condition, the Company shall at such
time as it in good xxxxx xxxxx appropriate file a new
registration statement covering the Registrable
Securities that were covered by such withdrawn
registration statement, and such registration statement
shall be maintained effective for such time as may be
necessary so that the period of effectiveness of such
new registration statement shall be such time as may be
otherwise required by Section 3.1(a)(iii).
Requesting Stockholders holding a majority of
the Registrable Securities held by all Requesting
Stockholders may, at any time prior to the effective
date of the registration statement relating to such
registration, revoke such request, without liability to
any of the other Requesting Stockholders or the Other
12
Stockholders, by providing a written notice to the
Company revoking such request.
(ii) Number of Registrations; Expenses. The
---------------------------------
Company shall not be obligated to effect more than one
registration in any nine-month period of Registrable
Securities pursuant to requests from Requesting
Stockholders under this Section 3.1(a) and, in any
event, no more than two such registrations during the
term of this Agreement. Each Stockholder shall pay all
underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of
such Stockholder's Registrable Securities pursuant to
this Section 3.1(a). Notwithstanding any other
provisions contained in this Section 3.1(a), the
Company shall not be required to register any
Registrable Securities pursuant to an effective
registration statement in connection with a request for
such registration made in accordance with this Section
3.1(a) if the previous registration statement with
respect to any request made pursuant to this Section
3.1(a) became effective less than 180 days prior to
such request.
(iii) Effective Registration Statement. A
--------------------------------
registration requested pursuant to this Section 3.1(a)
shall not be deemed to have been effected unless the
registration statement relating thereto (A) has become
effective under the Securities Act and at least 50% of
the Registrable Securities of the Stockholders included
in such registration have actually been sold
thereunder, and (B) has remained effective for a period
of at least 180 days (or such shorter period in which
all Registrable Securities of the Requesting
Stockholders and the Other Stockholders included in
such registration have actually been sold thereunder);
provided, however, that if any effective registration
-------- -------
statement requested pursuant to this Section 3.1(a) is
discontinued in connection with a Disadvantageous
Condition, such registration statement shall not be
included as one of the registrations which may be
requested pursuant to Section 3.1(a) hereof if less
than 80% of all the Registrable Securities included in
such registration have been sold thereunder; provided
--------
further, that if after any registration statement
-------
requested pursuant to this Section 3.1(a) becomes
effective (A) such registration statement is subject to
any stop order, injunction or other order or
requirement of the SEC or other government agency or
court due to the actions or omissions to act of the
Company and (B) less than 80% of all of the Registrable
13
Securities included in such registration have been sold
thereunder, or less than 80% of the Registrable
Securities of a particular Requesting Stockholder
included in such registration have been sold
thereunder, such registration statement shall not be
included as one of the registrations which such
Requesting Stockholders are entitled to request
pursuant to Section 3.1(a)(ii).
(iv) Selection of Underwriters. If any
-------------------------
requested registration pursuant to this Section 3.1(a)
is in the form of an underwritten offering, the
Stockholders holding a majority of the Registrable
Securities in respect of which registration has been
requested shall have the right to select the investment
banker and manager or co-managers that will administer
the offering, subject to the consent of the Company,
which consent shall not be unreasonably withheld.
(v) Pro Rata Participation in Requested
-----------------------------------
Registration. If a requested registration pursuant to
------------
this Section 3.1(a) involves an underwritten offering
and the managing underwriter shall advise the Company
that, in its view, the number of equity securities
requested to be included in such registration exceeds
the largest number of securities which can be sold
without having a material adverse effect on such
offering, including the price at which such securities
can be sold, the number of Registrable Securities
requested to be registered by the Requesting
Stockholders and the Other Stockholders included by the
Company in such registration shall be allocated pro
rata among the Requesting Stockholders and the Other
Stockholders on the basis of the relative number of
shares of Registrable Securities owned by them;
provided, however, that if in any such underwritten
-------- -------
offering the Company includes in such registration
statement less than 80% of the Registrable Securities
requested to be included therein by any Requesting
Stockholder, then such registration statement shall not
be included as one of the registrations which the
Requesting Stockholders are entitled to request
pursuant to Section 3.1(a)(ii).
(b) Incidental Registration.
-----------------------
(i) For a period of five years from the
Settlement Date, if the Company at any time proposes to
register any of its equity securities (the "Priority
Securities") under the Securities Act (other than a
registration (A) relating to shares of Common Stock of
14
the Company issuable upon exercise of employee stock
options or in connection with any employee benefit or
similar plan of the Company, (B) in connection with an
acquisition by the Company of another company or (C)
pursuant to Section 3.1(a) hereof) in a manner which
would permit registration of Registrable Securities for
sale to the public under the Securities Act (whether or
not for sale for its own account), it shall each such
time, subject to the provisions of Section 3.1(b)(ii)
hereof, give prompt written notice to all holders of
record of Registrable Securities of its intention to do
so and of such Stockholders' rights under this Section
3.1(b), at least 30 days prior to the anticipated
filing date of the registration statement relating to
such registration. Such notice shall offer all such
Stockholders the opportunity to include in such
registration statement such number of Registrable
Securities as each such Stockholder may request. Upon
the written request of any such Stockholder made within
20 days after the receipt of the Company's notice
(which request shall specify the number of Registrable
Securities intended to be disposed of by such
Stockholder and the intended method of disposition
thereof), the Company will use its best efforts to
effect the registration under the Securities Act of all
Registrable Securities which the Company has been so
requested to register by the Stockholders thereof;
provided, that (A) if such registration involves an
--------
underwritten offering, all holders of Registrable
Securities requesting to be included in the Company's
registration must sell their Registrable Securities to
the underwriters selected by the Company on the same
terms and conditions as apply to the Company; and (B)
if, at any time after giving written notice of its
intention to register any securities pursuant to this
Section 3.1(b)(i) and prior to the effective date of
the registration statement filed in connection with
such registration, the Company shall determine for any
reason not to register such securities, the Company
shall give written notice to all holders of Registrable
Securities and shall thereupon be relieved of its
obligation to register any Registrable Securities in
connection with such registration (without prejudice,
however, to rights of Stockholders under Section 3.1(a)
hereof). If a registration pursuant to this Section
3.1(b)(i) involves an underwritten public offering, any
holder of Registrable Securities requesting to be
included in such registration may elect, in writing
prior to the effective date of the registration
securities filed in connection with such registration,
not to register such Registrable Securities in
15
connection with such registration. No registration
effected under this Section 3.1(b) shall relieve the
Company of its obligations to effect registrations upon
request under Section 3.1(a) hereof. The Company shall
pay all Registration Expenses in connection with each
registration of Registrable Securities requested
pursuant to this Section 3.1(b). However, each
Stockholder shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the
sale or disposition of such Stockholder's Registrable
Securities pursuant to a registration statement
effected pursuant to this Section 3.1(b).
(ii) Priority in Incidental Registrations.
------------------------------------
If a registration pursuant to this Section 3.1(b)
involves an underwritten offering and the managing
underwriter advises the Company that, in its good faith
view, the number of equity securities (including all
Registrable Securities) which the Company, the
Stockholders and any other Persons intend to include in
such registration exceeds the largest number of
securities which can be sold without having a material
adverse effect on such offering, including the price at
which such Registrable Securities can be sold, the
Company will include in such registration (A) first,
all the Priority Securities to be sold for the
Company's own account; (B) second, to the extent that
the number of Priority Securities is less than the
number of Registrable Securities which the underwriter
has advised the Company can be sold in such offering
without having the material adverse effect referred to
above, as many Registrable Securities requested to be
included in such registration by the Stockholders
pursuant to Section 3.1(b)(i) hereof, provided that if
the number of Registrable Securities requested to be
included in such registration by the Stockholders
pursuant to Section 3.1(b)(i) hereof, together with the
number of Priority Securities, exceeds the number which
the Company has been advised can be sold in such
offering without having the material adverse effect
referred to above, the number of such Registrable
Securities requested to be included in such
registration by the Stockholders pursuant to Section
3.1(b)(i) hereof shall be allocated pro rata among all
such requesting Stockholders on the basis of the
relative number of Registrable Securities owned by
them; and (C) third, to the extent that the number of
Priority Securities and Registrable Securities, as
contemplated by (A) and (B) above, is less than the
number of Registrable Securities which the underwriter
has advised the Company can be sold in such offering
16
without having the material adverse effect referred to
above, the number of equity securities requested to be
included in such registration by Persons other than the
Stockholders shall be allocated among such other
Persons on a basis as determined (or to be determined)
by the Company and such other Persons.
(c) Holdback Agreements.
-------------------
(i) If any registration of Registrable
Securities shall be in connection with an underwritten
public offering, upon the request of the managing
underwriter each holder of Registrable Securities
agrees not to effect any sale or distribution,
including any private placement or any sale pursuant to
Rule 144 or any successor provision, under the
Securities Act, of any Registrable Securities, and not
to effect any such sale or distribution of any other
equity security of the Company or of any security
convertible into or exchangeable or exercisable for any
equity security of the Company (in each case, other
than as part of such underwritten public offering)
during the seven days prior to, and during the 120 day
period which begins on, the effective date of such
registration statement (except as part of such
registration), provided that each holder of Registrable
Securities has received written notice of such
registration at least two Business Days prior to the
anticipated beginning of the seven day period referred
to above.
(ii) If any registration of Registrable
Securities shall be in connection with an underwritten
public offering, the Company agrees (A) not to effect
any sale or distribution of any of its equity
securities or of any security convertible into or
exchangeable or exercisable for any equity security of
the Company (other than any such sale or distribution
of such securities in connection with any merger or
consolidation by the Company or any Affiliate or the
acquisition by the Company or an Affiliate of the
capital stock or substantially all of the assets of any
other Person or in connection with an employee stock
ownership or other benefit plan) during the seven days
prior to, and during the 120 day period which begins
on, the effective date of such registration statement
(except as part of such registration) and (B) that any
agreement entered into after the date hereof pursuant
to which the Company issues or agrees to issue any
privately placed equity securities shall contain a
provision under which the holders of such securities
17
agree not to effect any sale or distribution of any
such securities during the period referred to in the
foregoing clause (i), including any sale pursuant to
Rule 144 under the Securities Act (except as part of
such registration, if permitted).
(d) Registration Procedures. In connection with
-----------------------
any offering of Registrable Securities registered pursuant
to this Section 3.1, the Company shall:
(i) Prepare and file with the SEC within 90
days after receipt of a request for registration, a
registration statement on any form for which the
Company then qualifies or which counsel for the Company
shall deem appropriate, and which form shall be
available for the sale of the Registrable Securities in
accordance with the intended methods of distribution
thereof, and use its best efforts to cause such
registration statement to become and remain effective
as provided herein, provided that before filing with
--------
the SEC a registration statement or prospectus or any
amendments or supplements thereto, the Company will (A)
furnish to one counsel selected by the holders of a
majority of the Registrable Securities covered by such
registration statement copies of all such documents
proposed to be filed for said counsel's review and
comment and (B) notify each Stockholder of Registrable
Securities covered by such registration statement of
any stop order issued or threatened by the SEC and take
all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
(ii) Prepare and file with the SEC such
amendments and supplements to such registration
statement and the prospectus used in connection
therewith as may be necessary to keep such registration
statement effective for a period of not less than 180
days or such shorter period which will terminate when
all Registrable Securities covered by such registration
statement have been sold (but not before the expiration
of the 90 day period referred to in Section 4(3) and
Rule 174 of the Securities Act, or any successor
thereto, if applicable), and comply with the provisions
of the Securities Act with respect to the disposition
of all securities covered by such registration
statement during such period in accordance with the
intended methods of disposition by the sellers thereof
set forth in such registration statement.
(iii) Furnish to each holder and each
underwriter, if any, of Registrable Securities covered
18
by such registration statement such number of copies of
such registration statement, each amendment and
supplement thereto (in each case including all exhibits
thereto), and the prospectus included in such
registration statement (including each preliminary
prospectus), in conformity with the requirements of the
Securities Act, and such other documents a any
Stockholder may reasonably request in order to
facilitate the disposition of the Registrable
Securities owned by such Stockholder.
(iv) Use its best efforts to register or
qualify such Registrable Securities under such other
state securities or "blue sky" laws of such
jurisdictions as any holder, and underwriter, if any,
of Registrable Securities covered by such registration
statement reasonably requests and do any and all other
acts and things which may be reasonably necessary or
advisable to enable such Stockholder and each
underwriter, if any, to consummate the disposition in
such jurisdictions of the Registrable Securities owned
by such Stockholder; provided that the Company will not
--------
be required to (A) qualify generally to do business in
any jurisdiction where it would not otherwise be
required to qualify but for this clause (iv), (B)
subject itself to taxation in any such jurisdiction or
(C) consent to general service of process in any such
jurisdiction.
(v) Use its best efforts to cause the
Registrable Securities covered by such registration
statement to be registered with or approved by such
other governmental agencies or authorities as may be
necessary by virtue of the business and operations of
the Company to enable the holder or holders thereof to
consummate the disposition of such Registrable
Securities.
(vi) Immediately notify each holder of such
Registrable Securities at any time when a prospectus
relating thereto is required to be delivered under the
Securities Act of the happening of any event which
comes to the Company's attention if as a result of such
event the prospectus included in such registration
statement contains an untrue statement of a material
fact or omits to state any material fact required to be
stated therein or necessary to make the statements
therein not misleading; and the Company will promptly
prepare and furnish to such Stockholder a supplement or
amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable
19
Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any
material fact required to be stated therein or
necessary to make the statements therein not
misleading.
(vii) Use its best efforts to cause all such
Registrable Securities to be listed on a national
securities exchange (including NASDAQ) and on each
securities exchange on which similar securities issued
by the Company may then be listed, and enter into such
customary agreements including a listing application
and indemnification agreement in customary form, and to
provide a transfer agent and registrar for such
Registrable Securities covered by such registration
statement no later than the effective date of such
registration statement.
(viii) Enter into such customary agreements
(including an underwriting agreement in customary form)
and take all such other actions as the holders of a
majority of the Registrable Securities being covered by
such registration statement or the underwriters
retained by such Stockholders, if any, reasonably
request in order to expedite or facilitate the
disposition of such Registrable Securities, including
customary representations, warranties, indemnities and
agreements.
(ix) Make available for inspection by any
holder of Registrable Securities covered by such
registration statement, any underwriter participating
in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent
retained by any such Stockholder or underwriter
(collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and
properties of the Company and its subsidiaries, if any,
as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause
the Company's and its Affiliates' officers, directors
and employees to supply all information and respond to
all inquiries reasonably requested by any such
Inspector in connection with such registration
statement.
(x) Use its best efforts to obtain a
"comfort" letter from the Company's independent public
accountants in customary form and covering such matters
of the type customarily covered by "comfort" letters as
20
the holders of a majority in interest of the
Registrable Securities being sold reasonably request.
(xi) Use its best efforts to obtain an
opinion of outside counsel for the Company covering
substantially the same matters with respect to such
registration statement (and the prospectus included
therein) as are customarily covered in opinions of
issuer's counsel and delivered to underwriters in
underwritten public offerings of securities, and such
other legal matters as the holders of a majority in
interest of the Registrable Securities being sold
reasonably request.
(xii) Otherwise use its best efforts to
comply with all applicable rules and regulations of the
SEC, and make available to the Stockholders, as soon as
reasonably practicable, an earnings statement covering
a period of at least twelve months, beginning with the
first month after the effective date of the
registration statement (as the term "effective date" is
defined in Rule 158(c) under the Securities Act), which
earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158
thereunder.
It shall be a condition precedent to the
obligation of the Company to take any action with respect to
securities of a holder of Registrable Securities that such
Stockholder shall furnish to the Company such information
regarding the securities held by such Stockholder and the
intended method of disposition thereof as the Company shall
reasonably request and as shall be required in connection
with the action taken by the Company.
Each holder of Registrable Securities agrees that,
upon receipt of any notice from the Company of the happening
of any event of a kind described in Section 3.1(d)(vi)
hereof, such Stockholder will forthwith discontinue
disposition of Registrable Securities until such
Stockholder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.1(d)(vi)
hereof, and, if so directed by the Company, such Stockholder
will deliver to the Company (at the Company's expense) all
copies (including, without limitation, any and all drafts),
other than permanent file copies, then in such Stockholder's
possession of the existing prospectus covering such
Registrable Securities. In the event the Company shall give
any such notice, the period mentioned in Section 3.1(d)(ii)
hereof shall be extended by the greater of (A) three months
or (B) the number of days during the period from and
21
including the date of the giving of such notice pursuant to
Section 3.1(d)(vi) hereof to and including the date when
each Stockholder of Registrable Securities covered by such
registration statement shall have received the copies of the
supplemented or amended prospectus contemplated by Section
3.1(d)(vi) hereof.
(e) Indemnification.
---------------
(i) Indemnification by the Company. In the
------------------------------
event of any registration of any securities of the
Company under the Securities Act pursuant to this
Agreement, the Company will indemnify and hold
harmless, to the full extent permitted by law, each of
the holders of any Registrable Securities covered by
such registration statement, their respective directors
and officers, general partners, limited partners and
managing directors, each other Person who participates
as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls,
is controlled by or is under common control with any
such Stockholder or any such underwriter within the
meaning of the Securities Act (and directors, officers,
controlling Persons, partners and managing directors of
any of the foregoing), against any and all losses,
claims, damages or liabilities, joint or several, and
expenses (including any amounts paid in any settlement
effected with the Company's consent, which consent will
not be unreasonably withheld) to which such
Stockholder, any such director or officer or general or
limited partner or managing director or any such
underwriter or controlling Person may become subject
under the Securities Act, state securities or "blue
sky" laws, common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) or expenses arise out
of or are based upon (A) any untrue statement or
alleged untrue statement of any material fact
contained, on the effective date thereof, in any
registration statement under which such securities were
registered under the Securities Act, any preliminary,
final or summary prospectus contained therein, or any
amendment or supplement thereto, (B) any omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, or (C) any violation
or alleged violation by the Company of any federal,
state or common law rule or regulation applicable to
the Company and relating to action required of or
inaction by the Company in connection with any such
registration. The Company shall reimburse each such
22
Stockholder and each such director, officer, general
partner, limited partner, managing director or
underwriter and controlling Person for any legal or any
other expenses reasonably incurred by them in
connection with investigating or defending such loss,
claim, liability, action or proceeding, provided, that
--------
the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense
arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged
omission made in such registration statement or
amendment or supplement thereto or in any such
preliminary, final or summary prospectus in reliance
upon and in conformity with written information
furnished to the Company through an instrument duly
executed by such Stockholder in its capacity as a
Stockholder in the Company or any such director,
officer, general or limited partner, managing director
or underwriter specifically stating that it is for use
in the preparation thereof; and, provided further, that
-------- -------
the Company shall not be liable to any holder of
Registrable Securities, any Person who participates as
an underwriter in the offering or sale of Registrable
Securities, if any, or any other Person, if any, who
controls such underwriter within the meaning of the
Securities Act, pursuant to this Section with respect
to any preliminary prospectus or the final prospectus
or the final prospectus as amended or supplemented, as
the case may be, to the extent that any such loss,
claim, damage or liability of such underwriter or
controlling Person results from the fact that such
underwriter sold Registrable Securities to a Person to
whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final
prospectus or of the final prospectus as then amended
or supplemented, whichever is most recent, if the
Company has previously furnished copies thereof to such
underwriter and such final prospectus, as then amended
or supplemented, had corrected any such misstatement or
omission. The indemnity provided for herein shall
remain in full force and effect regardless of any
investigation made by or on behalf of such Stockholder
or any such director, officer, general partner, limited
partner, managing director, underwriter or controlling
Person and shall survive the transfer of such
securities by such Stockholder.
(ii) Indemnification by the Stockholders and
---------------------------------------
Underwriters. The Company may require, as a condition
------------
to including any Registrable Securities in any
23
registration statement filed in accordance with the
provisions hereof, that the Company shall have received
an undertaking reasonably satisfactory to it from the
holders of such Registrable Securities or any
underwriter, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in
paragraph (i) above) the Company and its directors,
officers, controlling Persons and all other prospective
sellers and their respective directors, officers,
general and limited partners, managing directors, and
their respective controlling Persons with respect to
any statement or alleged statement in or omission or
alleged omission from such registration statement, any
preliminary, final or summary prospectus contained
therein, or any amendment or supplement, if such
statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity
with written information furnished to the Company or
its representatives through an instrument duly executed
by or on behalf of such Stockholder or underwriter
specifically stating that it is for use in the
preparation of such registration statement,
preliminary, final or summary prospectus or amendment
or supplement, or a document incorporated by reference
into any of the foregoing. Such indemnity shall remain
in full force and effect regardless of any
investigation made by or on behalf of the Company or
any of the Stockholders, underwriters, or any of their
respective directors, officers, general or limited
partners, managing directors or controlling Persons and
shall survive the transfer of such securities by such
Stockholder, provided, however, that no such
-------- -------
Stockholder shall be liable in the aggregate for any
amounts exceeding the product of the sale price per
Registrable Security and the number of Registrable
Securities being sold pursuant to such registration
statement or prospectus by such Stockholder.
(iii) Notices of Claims, Etc. Promptly
-----------------------
after receipt by an indemnified party hereunder of
written notice of the commencement of any action or
proceeding with respect to which a claim for
indemnification may be made pursuant to this Section,
such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party,
promptly give written notice to the indemnifying party
of the commencement of such action, provided that the
--------
failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying
party of its obligations under the preceding sections
of this Section, except to the extent that the
24
indemnifying party is actually materially prejudiced by
such failure to give notice. In case any such action
is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying
parties may exist in respect of such claim, the
indemnifying party will be entitled to participate in
and, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, to
the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof,
the indemnifying party will not be liable to such
indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with
the defense thereof, unless in such indemnified party's
reasonable judgment a conflict of interest between such
indemnified and indemnifying parties arises in respect
of such claim after the assumption of the defense
thereof, and the indemnifying party will not be subject
to any liability for any settlement made without its
consent (which consent shall not be unreasonably
withheld). No indemnifying party will consent to entry
of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such
claim or litigation. An indemnifying party who is not
entitled to, or elects not to, assume the defense of a
claim will not be obligated to pay the fees and
expenses of more than one counsel in any single
jurisdiction for all parties indemnified by such
indemnifying party with respect to such claim, unless
in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified
party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses
of such additional counsel or counsels as may be
reasonably necessary. Notwithstanding anything to the
contrary set forth herein, and without limiting any of
the rights set forth above, in any event any party will
have the right to retain, at its own expense, counsel
with respect to the defense of a claim.
(iv) Other Indemnification. Indemnification
---------------------
similar to that specified in the preceding Sections of
this Section (with appropriate modifications) shall be
given by the Company and each holder of Registrable
Securities with respect to any required registration or
25
other qualification of securities under any federal or
state law or regulation or governmental authority other
than the Securities Act.
(v) Contribution. In order to provide for
------------
just and equitable contribution in circumstances in
which the indemnity agreement provided for in this
Section is for any reason held to be unenforceable
although applicable in accordance with its terms, the
Company, the Stockholders and the underwriters shall
contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated
by such indemnity agreement incurred by the Company,
the Stockholders and the underwriters, in such
proportions that the underwriters are responsible for
that portion represented by the percentage that the
underwriting discount appearing on the cover page of
the prospectus bears to the initial public offering
price appearing thereon and the Company and the
Stockholders are responsible for the balance; provided,
--------
however, that no Person guilty of fraudulent
-------
misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such
fraudulent misrepresentation. As between the Company
and the Stockholders, such parties shall contribute to
the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity
agreement in such proportion as shall be appropriate to
reflect (A) the relative benefits received by the
Company, on the one hand, and the holders of the
Registrable Securities included in the offering on the
other hand, from the offering of the Registrable
Securities and any other securities included in such
offering, and (B) the relative fault of the Company, on
the one hand, and the holders of the Registrable
Securities included in the offering, on the other, with
respect to the statements or omissions which resulted
in such loss, liability, claim, damage or expense, or
action in respect thereof, as well as any other
relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and
the holders of the Registrable Securities on the other,
with respect to such offering shall be deemed to be in
the same proportion as the sum of the total purchase
price paid to the Company in respect of the Registrable
Securities plus the total net proceeds from the
offering of any securities included in such offering
(net of underwriting discounts and commissions before
deducting expenses) received by the Company bears to
the amount by which the total net proceeds from the
26
offering of Registrable Securities (net of underwriting
discounts and commissions before deducting expenses)
received by the holders of the Registrable Securities
with respect to such offering exceeds the purchase
price paid to the Company in respect of the Registrable
Securities, and in each case the net proceeds received
from such offering shall be determined as set forth on
the table to the cover page of the prospectus. The
relative fault shall be determined by reference to,
among other things, whether the untrue or alleged
untrue statement of a material fact or omission or
alleged omission to state a material fact relates to
information supplied by the Company or the holders of
the Registrable Securities, the intent of the parties
and their relative access to information and the
Company and the holders of the Registrable Securities
agree that it would not be just and equitable if
contribution pursuant to this Section were to be
determined by pro rata allocation or by any other
method of allocation which does not take into account
the equitable considerations referred to herein.
Notwithstanding anything to the contrary contained
herein, the Company and the Stockholders agree that any
contribution required to be made by a Stockholder
pursuant to this Section 3.1(e)(v) shall not exceed the
net proceeds from the offering of Registrable
Securities (net of underwriting discounts and
commissions before deducting expenses) received by such
Stockholder with respect to such offering. For
purposes of this Section, each Person, if any, who
controls a Stockholder or an underwriter within the
meaning of Section 15 of the Securities Act shall have
the same rights to contribution as such Stockholder or
underwriter, and each director of the Company, each
officer of the Company who signed the registration
statement, and each Person, if any, who controls the
Company within the meaning of Section 15 of the
Securities Act shall have the same rights to
contribution as the Company.
(vi) Rule 144. The Company agrees that it
--------
will file in a timely manner all reports required to be
filed by it pursuant to the Exchange Act, and, if at
any time the Company is not required to file such
reports, it will make available to the public, to the
extent required to permit the sale of shares by any
Stockholder pursuant to Rule 144, current information
about itself and its activities as contemplated by Rule
144 under the Securities Act, as such Rule may be
amended from time to time. Notwithstanding the
foregoing, the Company may deregister any class of its
27
equity securities under Section 12 of the Exchange Act
or suspend its duty to file reports with respect to any
class of its securities pursuant to Section 15(d) of
the Exchange Act if it is then permitted to do so
pursuant to the Exchange Act and the rules and
regulations thereunder. For purposes of this Agreement
"Rule 144 Securities" are Registrable Securities which
are of a class which is registered under Section 12 of
the Exchange Act and which may be publicly sold
pursuant to the provisions of Rule 144 under the
Securities Act.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. Effective Date. This Agreement
--------------
shall become effective as of the date that the shares of
Common Stock covered by this Agreement are distributed to
Stockholders.
SECTION 4.2. Headings. The headings in this
--------
Agreement are for convenience of reference only and shall
not control or affect the meaning or construction of any
provisions hereof.
SECTION 4.3. Entire Agreement, Further
-------------------------
Assurances. This Agreement constitutes the entire agreement
----------
and understanding of the parties hereto in respect of the
subject matter contained herein, and there are no
restrictions, promises, representations, warranties,
covenants, or undertakings with respect to the subject
matter hereof, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties hereto
with respect to the subject matter hereof. In the event
that after the date hereof, any further action by any party
hereto is necessary to carry out the provisions of this
Agreement, each such party shall take all such necessary
action.
SECTION 4.4. Notices. Any notice, request,
-------
instruction or other document to be given hereunder by any
party hereto to another party hereto shall be in writing,
shall be delivered personally, sent by registered mail,
postage prepaid, return receipt requested, by overnight
courier service or by facsimile transmission (with
appropriate confirmation) to the address or number of the
party set forth below, or to such other address or number as
the party to whom notice is to be given may provide in a
written notice to the Company, a copy of which written
28
notice shall be on file with the Secretary of the Company.
No notice shall be effective except upon actual delivery.
If to the Company:
to its address set forth in its latest filing with
the SEC.
If to a Stockholder:
to the address for such holder as set forth on the
books of the Company's transfer agent with respect
to the Securities.
SECTION 4.5. Applicable Law. The laws of the
--------------
State of Delaware shall govern the interpretation, validity
and performance of the terms of this Agreement, regardless
of the law that might be applied under applicable principles
of conflicts of law.
SECTION 4.6. Consent to Jurisdiction. Each party
-----------------------
hereto agrees to the non-exclusive jurisdiction of any state
or Federal court within the State of Delaware, with respect
to any claim or cause of action, whether in law or equity
arising under or relating to this Agreement, and waives
personal service of any and all process upon it, and
consents that all services of process be made by registered
mail, to the address of the party as set forth in Section
4.4, or to such other address as the party to whom notice is
to be given may provide in a written notice to the Company,
a copy of which written notice shall be on file with the
Secretary of the Company and service so made shall be deemed
to be completed when received. Each party hereto waives any
objection based on forum non conveniens and waives any
objection to venue of any action instituted hereunder. Each
party hereto waives trial by jury in any action brought
hereunder. Each party hereto agrees that a final judgment
in any such action shall be conclusive and may be enforced
in any other jurisdiction by suit on the judgment or in any
other manner provided by law. Nothing in this paragraph
shall affect the right of any party hereto to serve legal
process in any other manner permitted by law. To the extent
that any party hereto has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal
process with respect to itself or its property, such party
hereby waives such immunity in respect of its obligations
hereunder.
SECTION 4.7. Severability. The invalidity,
------------
illegality or unenforceability of one or more of the
provisions of this Agreement in any jurisdiction shall not
29
affect the validity, legality or enforceability of the
remainder of this Agreement in such jurisdiction or the
validity, legality or enforceability of this Agreement,
including any such provision, in any other jurisdiction, it
being intended that all rights and obligations of the
parties hereunder shall be enforceable to the fullest extent
permitted by law.
SECTION 4.8. Agreement to be Filed. A copy of
---------------------
this Agreement shall be filed with the Secretary of the
Company and kept with the records of the Company.
SECTION 4.9. Other Agreements. Nothing contained
----------------
in this Agreement shall be deemed to be a waiver of, or
release from, any obligations any party hereto may have
under, or any restrictions on the transfer of the Common
Stock of the Company imposed by, any other agreement.
SECTION 4.10. Successors; Assigns; Transferees.
--------------------------------
The provisions of this Agreement shall be binding upon and
accrue to the benefit of the parties hereto and, except as
set forth below, their respective successors and assigns.
Notwithstanding the foregoing, neither this Agreement nor
any right, remedy, obligation or liability arising hereunder
or by reason hereof shall be assignable by the Company or
any Stockholder except concurrently with a transfer of its
Common Stock of the Company (other than a transfer pursuant
to a public offering under the Securities Act or pursuant to
Rule 144 under the Securities Act) and then only if, at such
time, the Person to whom such transfer is proposed to be
made shall execute a counterpart of this Agreement, and such
other documents as are necessary to confirm such Person's
agreement to become a party to, and to be bound by, all
terms and conditions of this Agreement.
SECTION 4.11. Defaults. A default by any party
--------
to this Agreement in such party's compliance with any of the
conditions or covenants hereof or performance of any of the
obligations of such party hereunder shall not constitute or
excuse a default by any other party.
SECTION 4.12. Term. This Agreement shall
----
terminate upon the first to occur of (i) the liquidation or
dissolution of the Company, or (ii) five years from the
Settlement Date to the extent the registration rights
hereunder have not theretofore been exercised.
SECTION 4.13. Amendments. This Agreement may be
----------
amended, modified, waived or supplemented only by written
instrument executed by the Company and any Stockholder whose
rights hereunder would be adversely affected thereby;
30
provided that the sale or transfer by a Stockholder of
--------
Common Stock of the Company (and, as a result, the
purchaser's or transferee's becoming a party hereto) shall
not be deemed an amendment, modification, waiver or
supplement of this Agreement.
SECTION 4.14. Waiver and Consent. No action
------------------
taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations,
warranties, covenants or agreements contained herein. The
waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver
of any preceding or succeeding breach, and no failure by any
party to exercise any right or privilege hereunder shall be
deemed a waiver of such party's rights to exercise the same
at any subsequent time or times hereunder.
SECTION 4.15. Recapitalization, Exchanges, and
--------------------------------
Similar Actions Affecting the Common Stock. The provisions
------------------------------------------
of this Agreement shall apply, to the full extent set forth
herein, with respect to the Common Stock of the Company and
to any and all shares of capital stock of the Company or any
successor which may be issued in respect of, in exchange
for, or in substitution of the Common Stock of the Company.
SECTION 4.16. Counterparts. This Agreement may
------------
be executed in two or more counterparts, each of which shall
be deemed an original but all of which shall constitute one
and the same Agreement.
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