EXHIBIT 10.22
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XXXXXX DENTAL MANAGEMENT SERVICES, INC.
$5,000,000
9% Convertible Subordinated Debentures
due May 15, 2001
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INDENTURE
Dated as of May 15, 1996
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COLORADO NATIONAL BANK
Trustee
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EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description of Exhibit Page
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A Form of Security A-1
TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE..................................................................... 1
SECTION 1.01. DEFINITIONS................................................................................................. 1
SECTION 1.02. OTHER DEFINITIONS........................................................................................... 4
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT........................................................... 5
SECTION 1.04. RULES OF CONSTRUCTION....................................................................................... 5
ARTICLE 2. THE SECURITIES................................................................................................. 6
SECTION 2.01. FORM AND DATING............................................................................................. 6
SECTION 2.02. EXECUTION AND AUTHENTICATION................................................................................ 6
SECTION 2.03. REGISTRAR, PAYING AGENT AND CONVERSION AGENT................................................................ 7
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST......................................................................... 7
SECTION 2.05. SECURITYHOLDER LISTS........................................................................................ 7
SECTION 2.06. TRANSFER AND EXCHANGE....................................................................................... 8
SECTION 2.07. REPLACEMENT SECURITIES...................................................................................... 8
SECTION 2.08. OUTSTANDING SECURITIES...................................................................................... 9
SECTION 2.09. TREASURY SECURITIES......................................................................................... 9
SECTION 2.10. TEMPORARY SECURITIES........................................................................................ 9
SECTION 2.11. CANCELLATION................................................................................................ 10
ARTICLE 3. REDEMPTION AND PURCHASES....................................................................................... 10
SECTION 3.01. REDEMPTION BY THE COMPANY................................................................................... 10
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED...................................................................... 10
SECTION 3.03. NOTICE OF REDEMPTION........................................................................................ 10
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.............................................................................. 11
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE................................................................................. 11
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SECTION 3.06. SECURITIES REDEEMED IN PART................................................................................. 12
SECTION 3.07. REPAYMENT TO THE COMPANY.................................................................................... 12
ARTICLE 4. CONVERSION..................................................................................................... 12
SECTION 4.01. CONVERSION AT OPTION OF HOLDERS............................................................................. 12
SECTION 4.02. CONVERSION PROCEDURE........................................................................................ 13
SECTION 4.03. FRACTIONAL SHARES........................................................................................... 13
SECTION 4.04. TAXES ON CONVERSION......................................................................................... 14
SECTION 4.05. COMPANY TO PROVIDE COMMON STOCK............................................................................. 14
SECTION 4.06. ADJUSTMENT OF CONVERSION PRICE.............................................................................. 15
SECTION 4.07. NO ADJUSTMENT............................................................................................... 16
SECTION 4.08. EQUIVALENT ADJUSTMENTS...................................................................................... 17
SECTION 4.09. ADJUSTMENT FOR TAX PURPOSES................................................................................. 17
SECTION 4.10. NOTICE OF ADJUSTMENT........................................................................................ 17
SECTION 4.11. NOTICE OF CERTAIN TRANSACTIONS.............................................................................. 17
SECTION 4.12. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE ON CONVERSION PRIVILEGE........................... 18
SECTION 4.13. TRUSTEE'S DISCLAIMER........................................................................................ 19
SECTION 4.14. VOLUNTARY REDUCTION......................................................................................... 19
SECTION 4.15. MANDATORY CONVERSION........................................................................................ 19
SECTION 4.16. RESTRICTIONS ON TRANSFER.................................................................................... 20
ARTICLE 5. SUBORDINATION.................................................................................................. 20
SECTION 5.01. SECURITIES SUBORDINATED TO SENIOR INDEBTEDNESS.............................................................. 20
SECTION 5.02. SECURITIES SUBORDINATED TO PRIORI PAYMENT OF ALL SENIOR INDEBTEDNESS ON DISSOLUTION,
LIQUIDATION, REORGANIZATION, ETC., OF THE COMPANY........................................................... 21
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SECTION 5.03. SECURITYHOLDERS TO BE SUBROGATED TO RIGHT OF HOLDERS OF SENIOR INDEBTEDNESS........................... 23
SECTION 5.04. OBLIGATIONS OF THE COMPANY UNCONDITIONAL.............................................................. 23
SECTION 5.05. COMPANY NOT TO MAKE PAYMENT WITH RESPECT TO SECURITIES IN CERTAIN CIRCUMSTANCES....................... 23
SECTION 5.06. NOTICE TO TRUSTEE..................................................................................... 24
SECTION 5.07. APPLICATION BY TRUSTEE OF MONIES DEPOSITED WITH IT.................................................... 25
SECTION 5.08. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF COMPANY OR HOLDERS OF SENIOR INDEBTEDNESS... 25
SECTION 5.09. TRUSTEE TO EFFECTUATE SUBORDINATION................................................................... 25
SECTION 5.10. RIGHT OF TRUSTEE TO HOLD SENIOR INDEBTEDNESS.......................................................... 26
SECTION 5.11. ARTICLE 5 NOT TO PREVENT EVENTS OF DEFAULT............................................................ 26
SECTION 5.12. NO FIDUCIARY DUTY CREATED TO HOLDERS OF SENIOR INDEBTEDNESS........................................... 26
SECTION 5.13. ARTICLE APPLICABLE TO PAYING AGENTS................................................................... 26
ARTICLE 6. COVENANTS................................................................................................ 27
SECTION 6.01. PAYMENT OF SECURITIES................................................................................. 27
SECTION 6.02. SEC REPORTS........................................................................................... 27
SECTION 6.03. LIQUIDATION........................................................................................... 27
SECTION 6.04. COMPLIANCE CERTIFICATES............................................................................... 28
SECTION 6.05. NOTICE OF DEFAULTS.................................................................................... 28
SECTION 6.06. PAYMENT OF TAXES AND OTHER CLAIMS..................................................................... 28
SECTION 6.07. CORPORATE EXISTENCE................................................................................... 28
SECTION 6.08. MAINTENANCE OF PROPERTIES............................................................................. 29
SECTION 6.09. FURTHER INSTRUMENTS AND ACTS.......................................................................... 29
ARTICLE 7 SUCCESSOR COPORATION...................................................................................... 29
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SECTION 7.01. WHEN COMPANY MAY MERGE, ETC........................................................................... 29
SECTION 7.02. SUCCESSOR CORPORATION SUBSTITUTED..................................................................... 30
ARTICLE 8 DEFAULT AND REMEDIES...................................................................................... 30
SECTION 8.01. EVENTS OF DEFAULT..................................................................................... 30
SECTION 8.02. ACCELERATION.......................................................................................... 31
SECTION 8.03. OTHER REMEDIES........................................................................................ 32
SECTION 8.04. WAIVER OF DEFAULTS AND EVENTS OF DEFAULT.............................................................. 32
SECTION 8.05. CONTROL BY MAJORITY................................................................................... 33
SECTION 8.06. LIMITATION ON SUITS................................................................................... 33
SECTION 8.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.................................................................. 33
SECTION 8.08. COLLECTION SUIT BY TRUSTEE............................................................................ 33
SECTION 8.09. TRUSTEE MAY FILE PROOF OF CLAIM....................................................................... 34
SECTION 8.10. PRIORITIES............................................................................................ 34
SECTION 8.11. UNDERTAKING FOR COSTS................................................................................. 35
ARTICLE 9 TRUSTEE................................................................................................... 35
SECTION 9.01. DUTIES OF TRUSTEE..................................................................................... 35
SECTION 9.02. RIGHTS OF TRUSTEE..................................................................................... 36
SECTION 9.03. INDIVIDUAL RIGHTS OF TRUSTEE.......................................................................... 36
SECTION 9.04. TRUSTEE'S DISCLAIMER.................................................................................. 36
SECTION 9.05. NOTICE OF DEFAULT OR EVENTS OF DEFAULT................................................................ 37
SECTION 9.06. REPORTS BY TRUSTEE TO HOLDERS......................................................................... 38
SECTION 9.07. COMPENSATION AND INDEMNITY............................................................................ 38
SECTION 9.08. REPLACEMENT OF TRUSTEE................................................................................ 39
SECTION 9.09. SUCCESSOR TRUSTEE BY MERGER, ETC...................................................................... 39
SECTION 9.10. ELIGIBILITY; DISQUALIFICATION......................................................................... 40
SECTION 9.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY..................................................... 40
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ARTICLE 10 SATISFACTION AND DISCHARGE OF INDENTURE.................................................................. 40
SECTION 10.01. TERMINATION OF COMPANY'S OBLIGATIONS................................................................. 40
SECTION 10.02. APPLICATION OF TRUST MONEY........................................................................... 41
SECTION 10.03. REPAYMENT TO COMPANY................................................................................. 41
SECTION 10.04. REINSTATEMENT........................................................................................ 41
ARTICLE 11 AMENDMENTS, SUPPLEMENTS AND WAIVERS...................................................................... 42
SECTION 11.01. WITHOUT CONSENT OF HOLDERS........................................................................... 42
SECTION 11.02. WITH CONSENT OF HOLDERS.............................................................................. 42
SECTION 11.03. COMPLIANCE WITH TRUST INDENTURE ACT.................................................................. 43
SECTION 11.04. REVOCATION AND EFFECT OF CONSENTS.................................................................... 43
SECTION 11.05. NOTATION ON OR EXCHANGE OF SECURITIES................................................................ 43
SECTION 11.06. TRUSTEE TO SIGN AMENDMENTS, ETC...................................................................... 44
ARTICLE 12 MISCELLANEOUS............................................................................................ 44
SECTION 12.01. TRUST INDENTURE ACT CONTROLS......................................................................... 44
SECTION 12.02. NOTICES.............................................................................................. 44
SECTION 12.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS......................................................... 45
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT................................................... 45
SECTION 12.05. RECORD DATE FOR VOTE OR CONSENT OF SECURITYHOLDERS................................................... 45
SECTION 12.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR............................................................ 46
SECTION 12.07. LEGAL HOLIDAYS....................................................................................... 46
SECTION 12.08. GOVERNING LAW........................................................................................ 46
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS........................................................ 46
SECTION 12.10. NO RECOURSE AGAINST OTHERS........................................................................... 47
SECTION 12.11. SUCCESSORS........................................................................................... 47
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SECTION 12.12. MULTIPLE COUNTERPARTS................................................................................ 47
SECTION 12.13. SEPARABILITY......................................................................................... 47
SECTION 12.14. TABLE OF CONTENTS, HEADINGS, ETC..................................................................... 47
vi
INDENTURE dated as of May 15, 1996 between XXXXXX DENTAL MANAGEMENT
SERVICES, INC., a Colorado corporation (the "Company"), and COLORADO NATIONAL
BANK, a national banking association, as Trustee (the "Trustee").
Both parties agree as follows for the benefit of the other and for the
equal and ratable benefit of the registered holders of the Company's 9%
Convertible Subordinated Debentures due May 15, 2001.
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
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"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"Control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or Conversion Agent.
"Associate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as such Rule is in
effect on the date of this Indenture.
"Bank Debt" means any and all amounts payable under or in respect of
any loan agreement between the Company and any commercial bank, promissory notes
executed by the Company in connection therewith, or any other related agreement,
including principal, premium (if any), interest (including, without limitation,
any interest accruing subsequent to the filing of a petition or other action
concerning bankruptcy or other similar proceeding, whether or not constituting
an allowed claim in any such proceedings), fees, charges, expenses,
reimbursement obligations, guarantees and all other amounts payable thereunder
or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or
any authorized committee of the Board of Directors.
"Business Day" means a day that is not a Legal Holiday.
"Capitalized Lease Obligation" means indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting principles
and the amount of such indebtedness shall be the capitalized amount of such
obligations determined in accordance with such principles.
"Cash" or "cash" means such coin or currency of the United States as
at any time of payment is legal tender for the payment of public and private
debts.
"Common Stock" means the common stock of the Company as it exists on
the date of this Indenture or as it may be constituted from time to time.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
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"Default" or "default" means any event which is, or after notice of
passage of time, or both, would be, an Event of Default.
"Holder" or Securityholder" means the person in which name a Security
is registered on the Registrar's books.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Non-payment Event of Default" means a default on Senior Indebtedness
of which the Company has received notice (other than a Payment Event of Default)
that occurs and is continuing and that permits the holders of the Senior
Indebtedness to accelerate the maturity of such Senior Indebtedness.
"Officer" means the Chairman of the Board and Chief Executive Officer,
the President, any Vice President, the Controller, the Chief Financial Officer,
the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or Assistant Secretary of the Company;
provided, however, that for purposes of Section 6.04, "Officers' Certificate"
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means a certificate signed by the Chief Executive Officer, Chief Financial
Officer or Controller of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Payment Event of Default" means any default in the payment of
principal of (or premium, if any) or interest on Senior Indebtedness beyond any
applicable grace period with respect thereto.
"Person" or person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or government or other agency or political
subdivision thereof.
"Principal" or "principal" of a debt security, including Securities,
means the principal of the security plus, when appropriate, the premium, if any,
on the security.
"Redemption Date" or "redemption date", when used with respect to any
Security to be redeemed, means the date fixed for such redemption pursuant to
this Indenture, as set forth in the form of Security annexed as Exhibit A
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hereto.
"Redemption Price" or "redemption price", when used with respect to
any Security to be redeemed, means the price fixed for such redemption pursuant
to this Indenture, as set forth in the form of Security annexed as Exhibit A
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hereto.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities" means the 9% Convertible Subordinated Debentures due May
15, 2001 or any of them (each a "Security"), as amended or supplemented from
time to time, that are issued under this Indenture.
"Senior Indebtedness" means (a) the principal of and premium, if any,
and interest (including, without limitation, any interest accruing subsequent to
the filing of a petition or other
2
action concerning bankruptcy or other similar proceedings, whether or not
constituting an allowed claim in any such proceedings) on the following, whether
presently outstanding or hereafter incurred or created: all indebtedness or
obligations of the Company for money borrowed (other than that evidenced by the
Securities) or assets acquired and which is evidenced by a note, bond, debenture
or similar instrument (including a purchase money mortgage) given in connection
with the acquisition of any property or assets (other than inventory or other
similar property acquired in the ordinary course of business) including
securities, (b) all obligations constituting Bank Debt (including without
limitation principal, interest, fees and expenses); (c) all obligations of the
Company, (c) all obligations for the payment of money relating to a Capitalized
Lease Obligation; (d) any liabilities of others described in the preceding
clauses (a), (b) and (c) which the Company has guaranteed or which are otherwise
its legal liability; and (e) renewals, extensions, refundings, restructurings,
amendments and modifications of any such indebtedness or guarantee.
Notwithstanding, anything to the contrary in this Indenture or the Securities,
"Senior Indebtedness" shall not include (x) any indebtedness of the Company to a
Subsidiary except to the extent any such indebtedness is pledged by such
Subsidiary as security for any Bank Debt, or (y) any indebtedness or guarantee
of the Company which by its terms or the terms of the instrument creating or
evidencing it is not superior in right of payment of the Securities.
"Subsidiary" means any corporation of which at least a majority of the
outstanding capital stock having voting power under ordinary circumstances to
elect directors of such corporation shall at the time be held directly by the
Company, by the Company and one or more Subsidiaries or by one or more
Subsidiaries.
"TIA" means the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 and as in effect on the date of this Indenture,
except as provided in Section 11.03 hereof, and except to the extent any
amendment to the Trust Indenture Act expressly provides for application of the
Trust Indenture Act as in effect on another date.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means the successor.
"Trust Officer" means any officer within the Corporate Trust
Department (or any similarly titled or successor group) of the Trustee,
including without limitation any Vice President, Assistant Vice President, any
trust officer, any Assistant Secretary or any other officer customarily
performing functions similar to those performed by any of the above-designated
officers who shall, in any case, be responsible for the administration of this
Indenture or have familiarity with it, and also means, with respect to a
particular corporate matter, any other officer of the Trustee to whom corporate
trust matters are referred because of this knowledge of and familiarity with the
particular subject.
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SECTION 1.02. OTHER DEFINITIONS.
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Defined in
Term Section
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"Bankruptcy Law"................................ 8.01
"Company Order"................................. 2.02
"Conversion Date"............................... 4.02
"Conversion Agent".............................. 2.03
"Conversion Price".............................. 4.06
"Conversion Shares"............................. 4.06
"Custodian"..................................... 8.01
"Distribution Date.............................. 4.06
"Distribution Record Date"...................... 4.06
"Event of Default".............................. 8.01
"Exchange Act".................................. 3.07
"Legal Holiday"................................. 12.07
"Mandatory Conversion Date"..................... 4.15
"Paying Agent".................................. 2.03
"Payment Blockage Period"....................... 5.05
"Registrar"..................................... 2.03
"Rights"........................................ 4.06
"Rights Record Date"............................ 4.06
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"U.S. Government Obligations".......... 10.01
"1933 Act"............................. 10.01
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
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Whenever this Indenture refers to a provision of the TIA, even though
the Indenture is not subject to the TIA, the provision of the TIA is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"Indenture securities" means the Securities.
"Indenture security holder" means a Securityholder.
"Indenture to be qualified" means this Indenture.
"Indenture trustee" or "institutional trustee" means the Trustee.
"Obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other terms used in this Indenture that are defined in the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.04. RULES OF CONSTRUCTION.
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Unless the context otherwise requires:
(1) a term has the meaning assigned to it; an accounting term not
otherwise defined has the meaning assigned to it in accordance
with generally accepted accounting principles in effect on the
date hereof, and any other reference in this Indenture to
"generally accepted accounting principles" refers to generally
accepted accounting principles in effect on the date hereof;
(2) "or" is not exclusive;
(3) words in the singular include the plural, and words in the plural
include the singular;
(4) provisions apply to successive events and transactions; and
(5) "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.
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ARTICLE 2. THE SECURITIES
SECTION 2.01. FORM AND DATING.
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The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A, which is incorporated in and made
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part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which the
Company is subject or usage. The Company shall approve the form of the
Securities and any notation, legend or endorsement on them. Each Security shall
be dated the date of its authentication except for the Securities initially
issued hereunder which shall be dated May 15, 1996.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
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Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and make available for delivery
Securities for original issue in the aggregate principal amount of up to
$5,000,000, upon a written order or orders of the Company signed by two Officers
or by an Officer and an Assistant Treasurer or Assistant Secretary of the
Company (a "Company Order"). The Company Order shall specify the amount of
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated. The aggregate principal amount of Securities
outstanding at any time may not exceed $5,000,000, except as provided in Section
2.07.
The Trustee or its agent shall act as the initial authenticating
agent. Thereafter, the Trustee may appoint an authenticating agent acceptable
to the Company to authenticate Securities. An 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
agent. An authenticating agent has the same rights as an Agent to deal with the
Company or an Affiliate of the Company.
The Securities shall be issuable only in registered form without
coupons only in denominations of $1,000 and any integral multiple thereof.
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SECTION 2.03. REGISTRAR, PAYING AGENT AND CONVERSION AGENT.
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The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange (the "Registrar"), an
office or agency where Securities may be presented for payment (the "Paying
Agent"), an office or agency where Securities may be presented for conversion
(the "Conversion Agent") and an office or agency where notices and demands to or
upon the Company in respect of the Securities and this Indenture may be served.
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may have one or more co-Registrars, one or more
additional Paying Agents and one or more additional Conversion Agents. The term
"Registrar" includes any co-Registrar, the term "Paying Agent" includes any
additional Paying Agent and the term "Conversion Agent" includes any additional
Conversion Agent.
The Company shall enter into an appropriate agreement with any Agent
not a party to this Indenture. The agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall notify the Trustee
of the name and address of any Agent not a party to this Indenture. If the
Company fails to maintain a Registrar, Paying Agent, Conversion Agent or agent
for service of notice or demands, or fails to give the foregoing notice, the
Trustee shall act as such. The Company or any Affiliate of the Company may act
as Paying Agent (except for the purposes of Section 6.04 and Article 10),
Registrar or Conversion Agent.
The Company initially appoints the Trustee as Registrar, Paying Agent,
Conversion Agent and agent for service of notices and demands in connection with
the Securities.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
-----------------------------------
On or prior to each due date of the principal of or interest on any
Securities, the Company shall deposit with the Paying Agent a sum sufficient to
pay such principal or interest so becoming due. Subject to Section 5.07, the
Paying Agent shall hold in trust for the benefit of Securityholders or the
Trustee, all money held by the Paying Agent for the payment of principal of or
interest on the Securities, and shall notify the Trustee of any default by the
Company (or any other obligor on the Securities) in making any such payment. If
the Company or an Affiliate of the Company acts as Paying Agent, it shall on or
before each due date of the principal of or interest on any Securities segregate
the money and hold it as a separate trust fund. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee and the
Trustee may at any time during the continuance of any default, upon written
request to a Paying Agent, require such Paying Agent to forthwith pay to the
Trustee all sums so held in trust by such Paying Agent. Upon doing so, the
Paying Agent (other than the Company) shall have no further liability for the
money.
SECTION 2.05. SECURITYHOLDER LISTS.
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The Trustee shall preserve in as current form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee on or before each semi-annual interest payment date and at such
other times as the Trustee may request in writing a list in such form and
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as of such date as the Trustee may reasonably require of the names and addresses
of Securityholders.
SECTION 2.06. TRANSFER AND EXCHANGE.
---------------------
When a Security is presented to the Registrar with a request to
register a transfer thereof or to exchange such security for an equal principal
amount of Securities or other authorized denominations, the Registrar shall
register the transfer or make the exchange as requested; provided that every
security presented or surrendered for registration of transfer or exchange shall
be duly endorsed and accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by the Holder thereof or his
attorney duly authorized in writing. To permit registration of transfers and
exchanges, upon surrender of any Security for registration of transfer or
exchange at the office or agency maintained pursuant to Section 2.03, the
Company shall execute and the Trustee shall authenticate Securities at the
Registrar's request. The Company shall provide at its expense to the Trustee
sufficient forms of the Securities for transfer or exchange Any exchange or
transfer shall be without charge, except that the Company may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto, but this provision shall not apply to any exchange
pursuant to Section 2.10, 3.06, or 11.05.
Neither the Company nor the Trustee shall be required to exchange or
register a transfer of (a) any Securities for a period of 15 days next preceding
any selection of Securities to be redeemed or (b) any Securities or portions
thereof selected or called for redemption (except, in the case of redemption of
a Security in part, the portion not to be redeemed) or (c) any Securities or
portion thereof surrendered for conversion.
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 exchange or transfer.
SECTION 2.07. REPLACEMENT SECURITIES.
----------------------
If any mutilated Security is surrendered to the Company or the
Trustee, or the Company and the Trustee receive evidence to their satisfaction
of the destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute, and upon its written request the Trustee shall
authenticate and deliver, in exchange for any such mutilated Security or in lieu
of any such destroyed, lost or stolen Security, a new Security of like tenor and
principal amount, bearing a number not contemporaneously outstanding.
In any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, or is about to be redeemed by the Company
pursuant to Article 3, the Company in its discretion may, instead of issuing a
new Security, pay or redeem such Security, as the case may be.
8
Upon the issuance of any new Securities under this Section 2.07, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) in connection
therewith.
Every new Security issued pursuant to this Section 2.07 in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.08. OUTSTANDING SECURITIES.
----------------------
Securities outstanding at any time are all Securities authenticated by
the Trustee, except for those canceled by it, those delivered to it for
cancellation and those described in this Section 2.08 as not outstanding.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee received proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on a Redemption Date or maturity date money sufficient to pay the
principal of, premium, if any, and accrued interest on Securities payable on
that date, then on and after that date such Securities cease to be outstanding
and interest on them ceases to accrue.
Subject to the restrictions contained in Section 2.09, a Security does
not cease to be outstanding because the Company or an Affiliate of the Company
holds the Security.
SECTION 2.09. TREASURY SECURITIES.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any notice, direction, waiver or consent,
Securities owned by the Company or any other obligor on the Securities or by any
Affiliate of the Company or of such other obligor shall be disregarded, except
that for purposes of determining whether the Trustee shall be protected in
relying on any such notice, direction, waiver or consent, only Securities which
the Trustee has actual knowledge are so owned shall be so disregarded.
Securities so owned which have been pledged in good faith shall not be
disregarded if the pledgee established to the satisfaction of the Trustee the
pledgee's right so to act with respect to the Securities and that the pledgee is
not the Company or any other obligor on the Securities of any Affiliate of the
Company or of such other obligor.
SECTION 2.10. TEMPORARY SECURITIES.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and execute, and, upon the order of the Company, the Trustee shall
authenticate and deliver temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may
9
have variation that the Company with the consent of the Trustee considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate and deliver definitive
Securities in exchange for temporary Securities.
SECTION 2.11. CANCELLATION.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, the Paying Agent and the Conversion Agent shall
forward to the Trustee or its agent any Securities surrendered to them for
transfer, exchange, payment or conversion. The Trustee and no one else shall
cancel and dispose of, in accordance with its standard procedures, all
Securities surrendered for transfer, exchange, redemption, payment, conversion
or cancellation and shall deliver a certificate of such disposition to the
Company unless the Company directs the Trustee to deliver cancelled Securities
to the Company. The Company may not issue new Securities to replace Securities
it has paid or delivered to the Trustee for cancellation or that any Holder has
converted pursuant to Article 4 or had converted pursuant to Section 4.15.
ARTICLE 3. REDEMPTION AND PURCHASES
SECTION 3.01. REDEMPTION BY THE COMPANY.
-------------------------
Except as provided in this Section 3.01, the Securities may not be
redeemed by the Company. The Company will pay to the Trustee not less than one
business day before each of May 15, 1999 and May 15, 2000, a sum on each such
day equal to 20% of the aggregate principal amount of the Securities initially
issued hereunder. Each such payment shall be applied to the redemption of
Securities on such May 15 ("Redemption Date") as herein provided. The
Redemption Price shall be equal to the principal amount of the Securities being
redeemed. Accrued interest shall be paid to the Redemption Date on Securities
redeemed.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED.
--------------------------------------
The Trustee shall, not more than 60 days prior to the Redemption Date,
select the Securities to be redeemed by lot or by a method the Trustee considers
fair and appropriate; provided that such method is not prohibited by any stock
exchange or market on which the Securities are then listed. The Trustee shall
make the selection from the Securities outstanding and not previously called for
redemption. Securities in denominations of $1,000 may only be redeemed in whole.
The Trustee may select for redemption portions (equal to $1,000 or any multiple
thereof) of the principal of Securities that have denominations larger than
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
--------------------
At least 20 days before a Redemption Date, the Company shall mail or
cause to be mailed a notice of redemption by first-class mail to each Holder of
Securities to be redeemed at such Holder's address as it appears on the
Registrar's books.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the Redemption Date;
(2) the Redemption Price;
10
(3) the then current Conversion Price;
(4) the name and address of the Paying Agent and the Conversion
Agent;
(5) that Securities called for redemption must be presented and
surrendered to the Paying Agent to collect the Redemption Price;
(6) that the Securities called for redemption may be converted
at any time before the close of business on the Redemption Date;
(7) that Holders who wish to convert Securities must satisfy the
requirements in paragraph 7 of the Securities;
(8) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue
on and after the Redemption Date and the only remaining right of the
Holder is to receive payment of the Redemption Price upon presentation
and surrender to the Paying Agent of the Securities; and
(9) if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed and that, after
the Redemption Date, upon presentation and surrender of each Security,
a new Security or Securities in principal amount equal to the
unredeemed portion thereof will be issued.
At the Company's request, the Trustee shall give the notice of
redemption (which shall be prepared by the Company) in the Company's name and at
the Company's expense.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
------------------------------
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date and at the Redemption Price stated
in the notice, except for Securities that are converted in accordance with the
provisions of Section 4.01 hereof. Upon presentation and surrender to the
Paying Agent, such Securities shall be paid at the Redemption Price, plus
accrued interest to the Redemption Date.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
---------------------------
On or prior to the Redemption Date, the Company shall deposit with the
Paying Agent (or if the Company or an Affiliate of the Company acts as Paying
Agent, shall segregate and hold in trust) money sufficient to pay the Redemption
Price of and accrued interest on all Securities to be redeemed on that date,
other than Securities or portions thereof called for redemption on that date
which have been delivered by the Company to the Trustee for cancellation or have
been converted. The Paying Agent shall return to the Company any money not
required for that purpose because of the conversion of Securities pursuant to
Article 4 or otherwise. If such money is then held by the Company or an
Affiliate of the Company in trust and is not required for such purpose, it shall
be discharged from the trust.
11
SECTION 3.06. SECURITIES REDEEMED IN PART.
---------------------------
Upon presentation and surrender of a Security that redeemed in part,
the Company shall execute and the Trustee shall authenticate for and deliver to
the Holder a new Security equal in principal amount to the unredeemed portion of
the Security surrendered.
SECTION 3.07. REPAYMENT TO THE COMPANY.
------------------------
If any of the Securities called for redemption under Section 3.01 are
converted into Common Stock pursuant to the terms hereof, the Company shall be
entitled to a credit equal to the principal amount of such Securities or
portions thereof which have been converted. In such event, subject to the
provisions of Section 5.07, to the extent that the aggregate amount of cash
deposited by the Company pursuant to Section 3.01 exceeds the aggregate amount
needed to redeem the Securities called for redemption (other than Securities
converted into Common Stock prior to the Redemption Date), then promptly after
the Business Day following the Redemption Date, the Trustee or the Paying Agent,
as the case may be, shall return any such excess to the Company.
ARTICLE 4. CONVERSION
SECTION 4.01. CONVERSION AT OPTION OF HOLDERS.
-------------------------------
A Holder of a Security may convert such Security into Common Stock at
any time prior to May 15, 2001, at the Conversion Price then in effect; provided
that, if such Security is called for redemption pursuant to Article 3, such
conversion right shall terminate at the close of business on the Redemption Date
for such Security (unless the Company shall default in making the redemption
payment when due, in which case the conversion right shall terminate at the
close of business on the date such default is cured and such Security is
redeemed); provided, further, that if the Holder of a Security presents such
-------- -------
Security for redemption prior to the close of business on the Redemption Date
for such Security, the right of conversion shall terminate upon presentation of
the Security to the Trustee (unless the Company shall default in making the
redemption payment when due, in which case the conversion right shall terminate
at the close of business on the date such default is cured and such Security is
redeemed). The number of shares of Common Stock issuable upon conversion of a
Security shall be determined by dividing the principal amount of the Security or
portion thereof surrendered for conversion by the Conversion Price in effect on
the Conversion Date. The initial conversion price ("Conversion Price") is $3.50
per share and is subject to adjustment as provided in this Article 4.
"Conversion Price" means the initial conversion price and as it may hereafter be
adjusted pursuant to this Article 4.
A Holder may convert a portion of a Security equal to $1,000 or any
integral multiple thereof. Provisions of this Indenture that apply to
conversion of all of a Security also apply to conversion of a portion of a
Security.
A Holder of Securities is not entitled to any rights of a holder of
Common Stock until such Holder has converted his Securities into Common Stock,
and only to the extent such Securities are deemed to have been converted to
Common Stock pursuant to this Article 4.
12
SECTION 4.02. CONVERSION PROCEDURE.
--------------------
To convert a Security, a Holder must (i) complete and manually sign
the conversion notice attached to the Security and deliver such notice to the
Conversion Agent, (ii) surrender the Security to the Conversion Agent, (iii)
furnish appropriate endorsements and transfer documents if required by the
Registrar or the Conversion Agent, (iv) execute any investment letters or other
documents required by the Company pursuant to Section 4.16, and (v) pay any
transfer or similar tax, if required. The date on which the Holder satisfies
all of those requirements is the "Conversion Date." On such date, the rights of
the Holder as a Holder of the Security or portion thereof converted shall cease.
As soon as practicable after the Conversion Date, the Company shall deliver to
the Holder through the Conversion Agent a certificate for the number of whole
shares of Common Stock issuable upon the conversion and cash in lieu of any
fractional shares pursuant to Section 4.03.
The person in whose name the certificate is registered shall be deemed
to be a shareholder of record on the Conversion Date; provided, however, that no
-------- -------
surrender of a Security on any date when the stock transfer books of the Company
shall be closed shall be effective to constitute the person or persons entitled
to receive the shares of Common Stock upon such conversion as the record holder
or holders of such shares of Common Stock on such date, but such surrender shall
be effective to constitute the person or persons entitled to receive such shares
of Common Stock as the record holder or holders thereof for all purposes at the
close of business on the next succeeding day on which such stock transfer books
are open; provided, further, that such conversion shall be at the conversion
-------- -------
rate in effect on the date that such Security shall have been surrendered for
conversion, as if the stock transfer books of the Company had not been closed.
Payment of accrued interest on a converted Security will be made to
the Conversion Date on the next succeeding interest payment date. No adjustment
will be made for dividends or distributions on shares of Common Stock issued
upon conversion of a Security.
If a Holder converts more than one Security at the same time, the
number of shares of Common Stock issuable upon the conversion shall be based on
the aggregate principal amount of Securities converted.
Upon surrender of a Security that is converted in part, the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder, a
new Security equal in principal amount to the unconverted portion of the
Security surrendered.
SECTION 4.03. FRACTIONAL SHARES.
-----------------
The Company will not issue fractional shares of Common Stock upon
conversion of Securities. In lieu thereof, the Company will pay an amount in
cash based upon the then current fair market value per share of the Common Stock
on the last trading day prior to the Conversion Date. Current fair market value
per share of Common Stock on any date shall mean the average of the closing
prices of the Common Stock sold on such date on all securities exchanges,
including the National Market System of NASDAQ, on which the Common Stock may
then be listed, or if there have been no such sales on any such exchange on such
day, the average of such closing prices on the last trading day prior to the
Conversion Date on which sales of the Common Stock on such exchanges occurred.
If the Common Stock is not listed on such date on any such exchange, then the
current fair market value per share of Common Stock shall be as determined
13
by the Board of Directors of the Company (whose determination shall be
conclusive evidence of such fair market value).
SECTION 4.04. TAXES ON CONVERSION.
-------------------
If a Holder converts a Security, the Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon such conversion. However, the Holder shall pay any such
tax which is due because the Holder requests the shares to be issued in a name
other than the Holder's name. The Conversion Agent may refuse to deliver the
certificates representing the Common Stock being issued in a name other than the
Holder's name until the Conversion Agent receives a sum sufficient to pay any
tax which will be due because the shares are to be issued in a name other than
the Holder's name. Nothing herein shall preclude any tax withholding required
by law or regulations.
SECTION 4.05. COMPANY TO PROVIDE COMMON STOCK.
-------------------------------
The Company shall, prior to issuance of any Securities hereunder, and
from time to time as may be necessary, reserve, out of its authorized but
unissued Common Stock a sufficient number of shares of Common Stock to permit
the conversion of all outstanding Securities for shares of Common Stock.
All shares of Common Stock delivered upon conversion of the Securities
shall be newly issued shares or treasury shares, shall be duly authorized,
validly issued, fully paid and nonassessable and shall be free from preemptive
rights and free of any lien or adverse claim.
The Company will endeavor promptly to comply with all Federal and
state securities laws regulating the offer and delivery of shares of Common
Stock upon conversion of Securities, if any, and will list or cause to have
quoted such shares of Common Stock on each national securities exchange or in
the over-the-counter market or such other market on which the Common Stock is
then listed or quoted.
14
SECTION 4.06. ADJUSTMENT OF CONVERSION PRICE.
------------------------------
The Conversion Price shall be adjusted from time to time by the
Company as follows:
(1) In case the Company shall (i) pay a dividend in shares of Common
Stock to Holders of Common Stock, (ii) make a distribution in shares of
Common Stock to holders of Common Stock, (iii) subdivide its outstanding
Common Stock into a greater number of shares, or (iv) combine its
outstanding Common Stock into a smaller number of shares, the Conversion
Price in effect immediately prior thereto shall be adjusted so that the
Holder of any Security thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock which such Holder
would have owned had such Security been converted immediately prior to the
happening of such event. An adjustment made pursuant to this subsection
(a) shall become effective immediately after the record date in the case of
a dividend or distribution in shares and shall become effective immediately
after the effective date in the case of subdivision or combination.
(2) In case the Company shall issue rights or warrants to all or
substantially all holders of its Common Stock entitling them (for a period
commencing no earlier than the record date described below and expiring not
more than 45 days after such record date) to subscribe for or purchase
shares of Common Stock (or securities convertible into Common Stock) at a
price per share less than the current Conversion Price per share of Common
Stock on the record date for the determination of shareholders entitled to
receive such rights or warrants ("Record Date Conversion Pricights Record
Date"), the Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying the Record Date Conversion Price
immediately prior to the Rights Record Date by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding on such
record dimmediately prior to such Rights Record Date, plus the number of
shares which the aggregate offering price of the total number of shares of
Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at such Record Date
Conversion Price, and of which the denominator shall be the number of
shares of Common Stock outstanding immediately prior to such Rights on such
record dRecord Date plus the number of additional shares of Common Stock
offered (or into which the convertible securities so offered are
convertible). Such adjustment shall be made successively whenever any such
rights or warrants are issued, and shall become effective on the date of
such issuance retroactively to immediately after such record dthe opening
of business on the day following the Rights Record Date. If at the end of
the period during which such rights or warrants are exercisable not all
warrants or rights shall have been exercised, the adjusted Conversion Price
shall be immediately readjusted to what it would have been based upon the
number of additional shares of Common Stock actually issued (or the number
of shares of Common Stock issuable upon conversion of convertible
securities actually issued).
(3) In case the Company shall distribute to all holders of its Common
Stock any shares of capital stock of the Company (other than Common Stock)
or evidences of its indebtedness or other assets (excluding cash dividends
or other cash distributions to the extent paid from consolidated net income
or retained earnings of the Company), or shall distribute to all or
substantially all holders of its Common Stock rights or warrants to
subscribe for or purchase any of its securities (excluding those referred
to in subsection (b) above), then in each such case the Conversion Price
shall be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the date of
such distribution by a fraction of which the numerator shall be the current
Conversion Price on the record date for the determination of shareholders
entitled
15
to receive such distribution ("Distribution Record distribution
Date"), less the fair market value on such record Distribution Record
Date (as determined by the Board of Directors of the Company, whose
determination shall be conclusive evidence of such fair market value)
of the portion of the capital stock or assets or evidences of
indebtedness so distributed or of such rights or warrants applicable
to one share of Common Stock, and of which the denominator shall be
the Conversion Price on such record Distribution Record Date. Such
adjustment shall become effective immediately after such record date
for the determination of shareholders entitled to receive such
distribution.on the date of such distribution retroactively to
immediately after the opening of business on the day after the
Distribution Record Date. Notwithstanding the foregoing, in the event
that the Company shall distribute rights or warrants (other than those
referred to in subsection (b) above)("Rights") pro rata to holders of
Common Stock, the Company may, in lieu of making any adjustment
pursuant to this Section 4.06, make proper provision so that each
holder of a Security who converts such Security (or any portion
thereof) after the record date for such distribution and prior to the
expiration or redemption of the Rights shall be entitled to receive
upon such conversion, in addition to the shares of Common Stock
issuable upon such conversion (the "Conversion Shares"), a number of
Rights to be determined as follows: (i) if such conversion occurs on
or prior to the date for the distribution to the holders of Rights of
separate certificates evidencing such Rights (the "Distribution
Date"), the same number of Rights to which a holder of a number of
shares of Common Stock equal to the number of Conversion Shares is
entitled at the time of such conversion in accordance with the terms
and provisions of and applicable to the Rights; and (ii) if such
conversion occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares of Common Stock into
which the principal amount of the Security so converted was
convertible immediately prior to the Distribution Date would have been
entitled on the Distribution Date in accordance with the terms and
provisions of and applicable to the Rights.
(4) In any case in which this Section 4.06 shall require that an
adjustment be made immediately following a record date established for
purposes of Section 4.06, the Company may elect to defer (but only
until 5 Business Days following the filing by the Company with the
Trustee of the certificate described in Section 4.10 below) issuing to
the holder of any Security converted after such record date the shares
of Common Stock and other capital stock of the Company issuable upon
such conversion over and above the shares of Common Stock and other
capital stock of the Company issuable upon such conversion only on the
basis of the Conversion Price prior to adjustment; and, in lieu of the
shares the issuance of which is so deferred, the Company shall issue
or cause its transfer agents to issue due bills or other appropriate
evidence of the right to receive such shares.
SECTION 4.07. NO ADJUSTMENT.
-------------
No adjustment in the Conversion Price shall be required unless the
adjustment would require an increase or decrease of at least 5% in the
Conversion Price as last adjusted; provided, however, that any adjustments which
-------- -------
by reason of this Section 4.07 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Article 4 shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be. No adjustment to the Conversion Price
shall be made for cash or dividend distributions paid out of consolidated net
income or retained earnings.
No adjustment need be made for a transaction referred to in Section
4.06 if all Securityholders are entitled to participate in the transaction on a
basis and with notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of Common Stock
participate in the transaction.
16
No adjustment need be made for rights to purchase Common Stock or
issuances or Common Stock pursuant to a Company plan for reinvestment of
dividends or interest.
No adjustment need be made for a change to par value of the Common
Stock.
To the extent that the Securities become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
SECTION 4.08. EQUIVALENT ADJUSTMENTS.
----------------------
In the event that, as a result of an adjustment made pursuant to
Section 4.06 above, the holder of any Security thereafter surrendered for
conversion shall become entitled to receive any shares of capital stock of the
Company other than shares of its Common Stock, thereafter the Conversion Price
of such other shares so receivable upon conversion of any Securities shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common Stock
contained in this Article 4.
SECTION 4.09. ADJUSTMENT FOR TAX PURPOSES.
---------------------------
The Company shall be entitled to make such reductions in the
Conversion Price, in addition to those required by Section 4.06, as it in its
discretion shall determine to be advisable in order that any stock dividends,
subdivision of shares, distribution of rights to purchase stock or securities,
or a distribution of securities convertible into or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
SECTION 4.10. NOTICE OF ADJUSTMENT.
--------------------
Whenever the Conversion Price is adjusted, the Company shall promptly
mail to Securityholders a notice of the adjustment and file with the Trustee an
Officers' Certificate briefly stating the facts requiring the adjustment and the
manner of computing it. The certificate shall be conclusive evidence of the
correctness of such adjustment.
SECTION 4.11. NOTICE OF CERTAIN TRANSACTIONS.
------------------------------
In the event that:
(1) The Company takes any action which would require an
adjustment in the Conversion Price;
17
(2) The Company consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation and stockholders of
the Company must approve the transaction; or
(3) There is a dissolution or liquidation of the Company,
the Company shall mail to Securityholders and file with the Trustee a notice
stating the proposed record or effective date, as the case may be. The Company
shall mail the notice at least 10 days before such date. Failure to mail such
notice or any defect therein shall not affect the validity of any transaction
referred to in clause (1), (2) or (3) of this Section 4.11.
SECTION 4.12. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE ON
------------------------------------------------------------
CONVERSION PRIVILEGE.
--------------------
If any of the following shall occur, namely: (i) any reclassification or
change of outstanding shares of Common Stock issuable upon conversion of
Securities (other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination), (ii) any consolidation or merger to which the Company is a party
other than a merger in which the Company is the continuing corporation and which
does not result in any reclassification of, or change (other then a change in
name, or par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), in, outstanding
shares of Common Stock, or (iii) any sale or conveyance, of all or substantially
all of the property or business of the Company as an entirety, then the Company,
or such successor or purchasing corporation, as the case may be, shall, as a
condition precedent to such reclassification, change, consolidation, merger,
sale or conveyance, execute and deliver to the Trustee a supplemental indenture
providing that the Holder of each Security then outstanding shall have the right
to convert such Security into the kind and amount of shares of stock and other
securities and property (including cash) receivable upon such reclassification,
change, consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock deliverable upon conversion of such Security immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance. Such supplemental indenture shall provide for adjustments of the
Conversion Price which shall be as nearly equivalent as may be practicable to
the adjustments of the Conversion Price provided for in this Article 4. The
foregoing, however, shall not in any way affect the right a holder of a Security
may otherwise have, pursuant to clause (ii) of the last sentence of subsection
(3) of Section 4.06, to receive Rights upon conversion of a Security. If, in the
case of any such consolidation, merger, sale or conveyance, the stock or other
securities and property (including cash) receivable thereupon by a holder of
Common Stock includes shares of stock or other securities and property of a
corporation other than the successor or purchasing corporation, as the case may
be, in such consolidation, merger, sale or conveyance then such supplemental
indenture shall also be executed by such other corporation and shall contain
such additional provisions to protect the interests of the Holders of the
Securities as the Board of Directors of the Company shall reasonably consider
necessary by reason of the foregoing. The provision of this Section 4.12 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
In the event the Company shall execute a supplemental indenture to this
Section 4.12, the Company shall promptly file with the Trustee an Officers'
Certificate briefly stating the reasons therefor, the kind or amount of shares
of stock or securities or property (including cash) receivable by Holders of the
Securities upon the conversion of their Securities after any such
reclassification, change, consolidation, merger, sale or conveyance, any
adjustment to be made
18
with respect thereto and that all conditions precedent have been complied with.
SECTION 4.13. TRUSTEE'S DISCLAIMER.
--------------------
The Trustee has no duty to determine when an adjustment under this
Article 4 should be made, how it should be made or what such adjustment should
be, but may accept as conclusive evidence of the correctness of any such
adjustment, and shall be protected in relying upon, the Officers' Certificate
with respect thereto which the Company is obligated to file with the Trustee
pursuant to Section 4.10. The Conversion Price, amount of Common Stock to be
received upon conversion, and the amount of cash payment in lieu of fractional
shares shall be calculated and determined by the Company, and Trustee may rely
conclusively thereon and shall have no liability for any distributions made in
accordance with such calculations by the Company. The Trustee makes no
representation as to the validity of value or any securities or assets issued
upon conversion of Securities, and the Trustee shall not be responsible for the
Company's failure to comply with any provisions of this Article 4.
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 4.12, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 4.12.
SECTION 4.14. VOLUNTARY REDUCTION.
-------------------
The Company from time to time may reduce the Conversion Price by any
amount for any period of time if the period is at least 20 days or such longer
period as may be required by law and if the reduction is irrevocable during the
period; provided, that in no event may the Conversion Price be less than the par
value of a share of Common Stock.
SECTION 4.15. MANDATORY CONVERSION.
--------------------
If the Company completes an initial public offering of its Common
Stock, at any time after 180 days after the effective date of the registration
statement covering such offering filed under the Securities Act of 1933, as
amended (the "1933 Act"), the Company has the right to require holders of the
Securities to convert their Securities into Common Stock at the then current
Conversion Price. Such right may be exercised by the Company only if (i) the
Common Stock has traded for 20 of 30 consecutive trading days on any national
securities exchange or on the NASDAQ System at a closing price equal to or
greater than $6.50 per share, and (ii) if the shares of Common Stock issuable
upon conversion of the Securities can be resold by the Holders pursuant to Rule
144 adopted under the 1933 Act, or if Rule 144 is not available, the Company has
in place an effective registration statement under the 1933 Act covering the
resale by the Holders of the Common Stock issuable upon conversion of the
Securities.
The mandatory conversion will be automatically effective as of the
date (the "Mandatory Conversion Date") specified in a written notice sent to all
Holders of the Securities regardless of whether the Securities have been
surrendered for conversion. No interest will accrue on, nor will the Securities
be transferable after the Mandatory Conversion Date. Upon mandatory conversion,
payment will be made for accrued interest on the Securities to the Mandatory
Conversion Date. No fractional shares will be issued upon conversion but a cash
adjustment will be made for any fractional interest as provided in Section 4.03.
No adjustment will be made for dividends or
19
distributions on shares of Common Stock issued upon mandatory conversion of the
Securities. In the event of mandatory conversion, certificates for the shares of
Common Stock issuable upon the conversion will not be delivered to any Holders
of the Securities until the Securities owned by such Holder have been
surrendered to the Trustee.
SECTION 4.16. RESTRICTIONS ON TRANSFER.
------------------------
Unless otherwise instructed by the Company, all instruments
representing the Securities and certificates representing any shares of Common
Stock issued upon conversion of the Securities and any and all securities issued
in replacement thereof or in exchange therefor toshall bear the following
legend, or one substantially similar thereto:
"The securities represented hereby have not been registered under
the Securities Act of 1933 (the "Act") or any applicable state
securities laws ("State Acts") and are restricted securities as
that term is defined in Rule 144 under the Act. The securities may
not be offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement or qualification
under the Act and applicable State Acts or pursuant to an exemption
from registration under the Act and applicable State Acts, the
availability of which is to be established to the satisfaction of
the Company."
The Trustee shall permit transfer of the Securities and any shares of Common
Stock issued upon conversion of the Securities only upon written instructions
from the Company or its counsel that such transfer is permitted under the Act
and applicable State Acts. Unless otherwise instructed by the Company, each
Holder who is a transferee of the Securities or shares of Common Stock issuable
upon the conversion of the Securities (including Holders whose securities are
converted) may be required to execute investment letters and other documents as
required by the Company. If instructed in writing by the Company or its
counsel, there shall be also placed on any instruments representing the
Securities and any shares of Common Stock issued upon conversion of the
Securities and any and all securities issued in replacement thereof or in
exchange therefor, any legend as may be required by the securities laws of the
state in which the Holder of such Securities or shares of Common Stock resides.
ARTICLE 5. SUBORDINATION
SECTION 5.01. SECURITIES SUBORDINATED TO SENIOR INDEBTEDNESS.
----------------------------------------------
The Company covenants and agrees, and each Holder of Securities issued
hereunder by such Holder's acceptance thereof likewise covenants and agrees,
that all Securities shall be issued subject to the provisions of this Article 5;
and each Person holding any Security, whether upon
20
original issue or upon transfer or assignment thereof, accepts and agrees to be
bound by such provisions.
The payment of the principal of, premium, if any, and interest on all
Securities issued hereunder shall, to the extent and in the manner hereinafter
set forth, be subordinated and subject in right of payment to the indefeasible
prior payment in full, in cash, of all Senior Indebtedness, whether outstanding
at the date of this Indenture or thereafter created, incurred, assumed or
guaranteed.
SECTION 5.02. SECURITIES SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR
------------------------------------------------------
INDEBTEDNESS ON DISSOLUTION, LIQUIDATION, REORGANIZATION, ETC.,
---------------------------------------------------------------
OF THE COMPANY.
--------------
Upon any payment of distribution of the assets of the Company of any
kind or character, whether in cash, property or securities (including any
collateral at any time securing the Securities), to creditors upon any
dissolution, winding-up, total or partial liquidation, or reorganization,
liquidation, receivership proceedings, or upon an assignment for the benefit of
creditors, or any other marshalling of the assets and liabilities of the
Company, or otherwise), then in such event:
(1) all Senior Indebtedness (including principal thereof, interest
thereon and fees and expenses relating thereto) and up to $5,000 of the
reasonable fees and expenses of the Trustee shall first be paid in full, in
cash, or have provision made for such payment in a manner reasonably
satisfactory to the holders of Senior Indebtedness, before any payment is
made on account of the principal of or interest on the indebtedness
evidenced by the Securities, or any deposit is made pursuant to Section
6.03;
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted, or securities of
the Company or any other company, trust or corporation provided for by a
plan of reorganization or readjustment, junior, or the payment of which is
otherwise subordinate, at least to the extent provided in this Article 5,
with respect to the Securities to the payment of all Senior Indebtedness at
that time outstanding and to the payment of all securities issued in
exchange therefor to the holders of the Senior Indebtedness at the time
outstanding), to which the Holders or the Trustee on behalf of the Holders
would be entitled except for the provisions of this Article 5, including
any such payment or distribution which may be payable or deliverable by
reason of the payment of another debt of the Company being subordinated to
the payment of the Securities, shall be paid or delivered by any debtor,
Custodian or other person making such payment or distribution, directly to
(i)s the holders of the Senior Indebtedness or their representative or
representatives, or the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness may have
been issued, ratably according to the aggregate amounts remaining unpaid on
account of the principal of, interest on and fees and expenses relating to
the Senior Indebtedness held or represented by each, and (ii) the Trustee
with respect to up to $5,000 of the reasonable fees and expenses of the
Trustee, for application to payment of all Senior Indebtedness and up to
$5,000 of the reasonable fees and expenses of the Trustee remaining unpaid
on a pro rata basis according to the outstanding amount of Senior
Indebtedness (including interest, fees and expenses) and reasonable fees
and expenses of the Trustee (up to a maximum of $5,000), to the extent
necessary to pay all Senior Indebtedness and up to $5,000 of the reasonable
fees and expenses of the Trustee in full, in cash, after giving
21
effect to any concurrent payment or distribution, or provision therefor, to
the holders of such Senior Indebtedness or the Trustee, as the case may be;
and
(3) in the event that, notwithstanding the foregoing provisions
of this Section 5.02, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or
securities (other than securities of the Company as reorganized or
readjusted, or securities of the Company or any other company, trust
or corporation provided for by a plan of reorganization or
readjustment, junior, or the payment of which is otherwise
subordinate, at least to the extent provided for in this Article 5,
with respect to the Securities, to the payment in full, in cash, of
all Senior Indebtedness at the time outstanding and to the payment of
all securities issued in exchange therefor to the holders of Senior
Indebtedness at the time outstanding), shall be received by the
Trustee on behalf of the Holders or the Holders before all Senior
Indebtedness and up to $5,000 of the reasonable fees and expenses of
the Trustee are paid in full, in cash, or provision made for their
payment in a manner reasonably satisfactory to the holders of Senior
Indebtedness, such payment or distribution (subject to the provisions
of Section 5.06 and 5.07) shall be held in trust for the benefit of,
and shall be immediately paid or delivered by the Trustee on behalf of
the Holders or such Holders, as the case may be, to (i) the holders of
Senior Indebtedness remaining unpaid or unprovided for, or their
representative or representatives, or the trustee or trustees under
any indenture pursuant to which any instruments evidencing any of such
Senior Indebtedness may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the principal of,
interest on and fees and expenses relating to the Senior Indebtedness
held or represented by each, and (ii) the Trustee with respect to up
to $5,000 of the reasonable fees and expenses of the Trustee, for
application to the payment of all Senior Indebtedness and up to $5,000
of the reasonable fees and expenses of the Trustee remaining unpaid on
a pro rata basis according to the outstanding amount of Senior
Indebtedness (including interest, fees and expenses) and reasonable
fees and expenses of the Trustee (up to a maximum of $5,000), to the
extent necessary to pay all Senior Indebtedness and up to $5,000 of
the reasonable fees and expenses of the Trustee in full, in cash,
after giving effect to any concurrent payment or distribution, or
provision therefor, to the holders of such Senior Indebtedness or the
Trustee, as the case may be.
The Company shall give prompt notice to the Trustee of any
dissolution, winding-up, liquidation or reorganization of the Company.
Upon any distribution of assets of the Company referred to in this
Article 5, the Trustee, subject to the provisions of Section 9.01 and 9.02, and
the Holders shall be entitled to rely upon any order or decree by any court of
competent jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceeding is pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the Trustee or to
the Holders, for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 5.
22
SECTION 5.03. SECURITYHOLDERS TO BE SUBROGATED TO RIGHT OF HOLDERS OF SENIOR
--------------------------------------------------------------
INDEBTEDNESS.
------------
Subject to the prior payment in full, in cash, of all Senior
Indebtedness then due, the Holders shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of assets of
the Company applicable to the Senior Indebtedness until the principal of and
interest on the Securities shall be paid in full, and for purposes of such
subrogation, no payments or distributions to the holders of Senior Indebtedness
of assets, whether in cash, property or securities, distributable to the holders
of Senior Indebtedness under the provisions hereof to which the Holders would be
entitled except for the provisions of this Article 5, and no payment pursuant to
the provisions of this Article 5 to the holders of Senior Indebtedness by the
Holders shall, as among the Company, its creditors other than the holders of
Senior Indebtedness, and the Holders, be deemed to be a payment by the Company
to or on account of Senior Indebtedness, it being understood that the provisions
of this Article 5 are, and are intended, solely for the purpose of defining the
relative rights of the Holders, on the one hand, and the holders of Senior
Indebtedness, on the other hand.
SECTION 5.04. OBLIGATIONS OF THE COMPANY UNCONDITIONAL.
----------------------------------------
Nothing contained in this Article 5 or elsewhere in this Indenture or
in any Security is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness, and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of and interest on the Securities, as and when the same
shall become due and payable in accordance with the terms of the Securities, or
to affect the relative rights of the Holders and other creditors of the Company
other than the holders of Senior Indebtedness, nor shall anything herein or
therein prevent the Trustee or any Holder from exercising all remedies otherwise
permitted by applicable law upon the happening of an Event of Default under this
Indenture, subject to the provisions of Article 8, and the rights, if any, under
this Article 5 of the holders of Senior Indebtedness in respect of assets,
whether in cash, property or securities, of the Company received upon the
exercise of any such remedy.
SECTION 5.05. COMPANY NOT TO MAKE PAYMENT WITH RESPECT TO SECURITIES IN CERTAIN
-----------------------------------------------------------------
CIRCUMSTANCES.
-------------
(1) Upon the occurrence of a Payment Event of Default, unless and
until the amount of such Senior Indebtedness then due shall have been
paid in full, in cash, or provision made therefor in a manner
reasonably satisfactory to the holders of such Senior Indebtedness, or
such default shall have been cured or waived or shall have ceased to
exist, the Company shall not pay principal of, premium, if any, or
interest on the Securities or make any deposit pursuant to Sections
6.03 or 10.01 and shall not repurchase, redeem or otherwise retire any
Securities (collectively, "Pay the Securities").
(2) Unless Section 5.02 shall be applicable, upon (1) the
occurrence of a Non-payment Event of Default and (2) receipt by the
Company and the Trustee from the representative of the holders of
Senior Indebtedness to which the Non-payment Event of Default applies
of written notice of such occurrence, then the Company shall not Pay
the Securities for a period (the "Payment Blockage Period") commencing
on the earlier of the date of receipt by the Company or the Trustee of
such notice from such representative and ending on the earlier of
(subject to any blockage of payments that may then be in effect under
subsection (a) of this Section) (x) the date 180 days after such date,
(y) the date
23
such Non-payment Event of Default shall have been cured or waived in
writing or shall have ceased to exist or such Senior Indebtedness
shall have been discharged, or (z) the date such Payment Blockage
Period shall have been terminated by written notice to the Company or
the Trustee from the representative of the holders of the Senior
Indebtedness initiating such Payment Blockage Period, after which, in
case of clause (x), (y) or (z), as the case may be, the Company shall
resume making any and all required payments. Notwithstanding any other
provision of this Agreement, only on Payment Blockage Period may be
commenced within any consecutive 365-day period, and no event of
default with respect to any Senior Indebtedness which existed or was
continuing on the date of the commencement of any Payment Blockage
Period with respect to the Senior Indebtedness the holders of which
initiated such Payment Blockage Period shall be, or can be made, the
basis for the commencement of a second Payment Blockage Period whether
or not within a period of 365 consecutive days unless such event of
default shall have been cured or waived for a period of not less than
90 consecutive days. In no event will a Payment Blockage Period extend
beyond 179 days.
(3) In the event that, notwithstanding the foregoing provisions
of this Section 5.05, any payment on account of principal of or
interest on the Securities shall be made by or on behalf of the
Company and received by the Trustee, any Holder or any Paying Agent
(or, if the Company is acting as its own Paying Agent, money for any
such payment shall be segregated and held in trust), after the
happening of a default under any Senior Indebtedness, then, unless and
until the amount of such Senior Indebtedness then due shall have been
paid in full in cash, or provision made therefor or such default shall
have been cured or waived, such payment (subject, in each case, to the
provisions of Sections 5.06 and 5.07) shall be held in trust for the
benefit of, and shall be immediately paid over to, the holders of
Senior Indebtedness or their representative or representatives or the
trustee or trustees under any indenture under which any instruments
evidencing any of the Senior Indebtedness may have been issued,
ratably according to the aggregate amounts remaining unpaid on account
of the principal of and interest on the Senior Indebtedness held or
represented by each, for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay all
Senior Indebtedness in accordance with its terms, after giving effect
to any concurrent payment or distribution to or for the benefit of the
holders of Senior Indebtedness. The Company shall give prompt written
notice to the Trustee of any default under any Senior Indebtedness or
under any agreement pursuant to which Senior Indebtedness may have
been issued.
SECTION 5.06. NOTICE TO TRUSTEE.
-----------------
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article 5 or any other provision of this Indenture, the Trustee shall not
at any time be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee, unless and until the
Trustee shall have received written notice thereof from the Company or from the
holder or holders of Senior Indebtedness or from their representative or
representatives; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Sections 9.01 and 9.02, shall be entitled
to assume conclusively that such facts do not exist.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a person representing himself to be a holder of Senior
Indebtedness (or a representative of such holder) to establish that such notice
has been given by a holder of Senior indebtedness or a representative of
24
any such holder. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any person as a holder
of Senior Indebtedness to participate in any payment or distribution pursuant to
this Article 5, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, the extent of which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
each person under this Article 5, and if such evidence is not furnished, the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment.
SECTION 5.07. APPLICATION BY TRUSTEE OF MONIES DEPOSITED WITH IT.
--------------------------------------------------
Money or U.S. Government Obligations deposited in trust with the
Trustee pursuant to Sections 6.03 and 10.01 and not in violation of this Article
5 shall be for the sole benefit of Securityholders and shall thereafter not be
subject to the subordination provisions of this Article 5. Otherwise, any
deposit of monies by the Company with the Trustee or any Paying Agent (whether
or not in trust) for the payment of the principal of or interest on any
Securities shall be subject to the provisions of Sections 5.01, 5.02, 5.03 and
5.05; except that, if two Business Days prior to the date on which by the terms
of this Indenture any such monies may become payable for any purpose (including,
without limitation, the payment of either the principal of or interest on any
Security) the Trustee shall not have received with respect to such monies the
notice provided for in Section 5.06, then the Trustee or any Paying Agent shall
have full power and authority to receive such monies and to apply such monies to
the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such date. This
Section 5.07 shall be construed solely for the benefit of the Trustee and the
Paying Agent and shall not otherwise affect the rights that holders of Senior
Indebtedness may have to recover any such payments from the Holders in
accordance with the provisions of this Article 5.
SECTION 5.08. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF COMPANY
-----------------------------------------------------------------
OR HOLDERS OF SENIOR INDEBTEDNESS.
---------------------------------
No right of any present or future holders of any Senior Indebtedness
to enforce subordination, as herein provided, shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof which any such holder may have or
be otherwise charged with. The holders of any Senior Indebtedness may extend,
renew, modify or amend the terms of such Senior Indebtedness or any security
therefor and release, sell or exchange such security and otherwise deal freely
with the Company, all without affecting the liabilities and obligations of the
parties to this Indenture or the Holders. No provision in any supplemental
indenture which affects the superior position of the holders of the Senior
Indebtedness shall be effective against the holders of the Senior Indebtedness
unless the holders of such Senior Indebtedness (required pursuant to the terms
of such Senior Indebtedness to give such consent) have consented thereto.
SECTION 5.09. TRUSTEE TO EFFECTUATE SUBORDINATION.
-----------------------------------
Each holder of a Security by his acceptance thereof authorizes and
directs the Trustee in his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article 5 and
appoints the Trustee his attorney-in-fact for any and all such purposes.
25
SECTION 5.10. RIGHT OF TRUSTEE TO HOLD SENIOR INDEBTEDNESS.
--------------------------------------------
The Trustee, in its individual capacity, shall be entitled to all of
the rights set forth in this Article 5 in respect of any Senior Indebtedness at
any time held by it to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall be construed to deprive the
Trustee of any of its rights as such holder.
SECTION 5.11. ARTICLE 5 NOT TO PREVENT EVENTS OF DEFAULT.
------------------------------------------
The failure to make a payment on account of the principal of or
interest on the Securities by reason of any provision in this Article 5 shall
not be construed as preventing the occurrence of any Event of Default under
Section 8.01.
SECTION 5.12. NO FIDUCIARY DUTY CREATED TO HOLDERS OF SENIOR INDEBTEDNESS.
-----------------------------------------------------------
Notwithstanding any other provision in this Article 5, the Trustee
shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness by virtue of the provisions of this Article 5.
SECTION 5.13. ARTICLE APPLICABLE TO PAYING AGENTS.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article 5 shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully for all intents and purposes as if such Paying Agent were named
in this Article 5 in addition to or in place of the Trustee; provided, however,
-------- -------
that Sections 5.06, 5.10 and 5.12 shall not apply to the Company if it acts as
Paying Agent.
26
ARTICLE 6. COVENANTS
SECTION 6.01. PAYMENT OF SECURITIES.
---------------------
The Company shall promptly make all payments in respect of the
Securities on the dates and in the manner provided in the Securities and this
Indenture. An installment of principal or interest shall be considered paid on
the date it is due if the Paying Agent (other than the Company or an Affiliate
of the Company) holds on that date money designated for and sufficient to pay
the installment. The Company shall pay interest on overdue principal at the
rate borne by the Securities per annum; it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 6.02. SEC REPORTS.
-----------
If the Company subsequently becomes subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file
all reports and other information and documents which it is required to file
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act and within 15
days after it files them with the SEC, the Company shall file copies of all such
reports, information and other documents with the Trustee. The Company will
cause any quarterly and annual reports which it mails to its stockholders to be
mailed to the Holders of the Securities.
In the event the Company is at any time not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will
prepare on an annual basis, complete audited consolidated financial statements
including, but not limited to, a balance sheet, a statement of income and
retained earnings, a statement of cash flows and all appropriate notes. All
such financial statements will be prepared in accordance with generally accepted
accounting principles consistently applied, except for changes with which the
Company's independent accountants concur. The Company will cause a copy of such
financial statements to be filed with the Trustee and mailed to the Holders of
the Securities within 95 days after the end of each fiscal year of the Company,
commencing with the fiscal year ending December 31, 1996.
SECTION 6.03. LIQUIDATION.
-----------
Subject to the provisions of Article 5, so far as they may be
applicable hereto, the Board of Directors or the shareholders of the Company may
not adopt a plan of liquidation which plan provides for, contemplates or the
effectuation of which is preceded by (a) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company otherwise
than substantially as an entirety (Article 7 of this Indenture being the Article
which governs any such sale, lease, conveyance or other disposition
substantially as an entirety), and (b) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and of
the remaining assets of the Company to the holders of the capital stock of the
Company, unless the Company shall in connection with the adoption of such plan
make provision for, or agree that prior to making any liquidating distributions
it will make provision for, the satisfaction of the Company's obligations
hereunder and under the Securities as to the payment of the principal and
interest. The Company shall be deemed to make provision for such payments only
if (1) the Company irrevocably deposits in trust with the Trustee money or U.S.
Government Obligations maturing as to principal and interest in such amounts and
at such times as are sufficient, without consideration of any reinvestment of
such interest, to pay the principal of and interest on the Securities then
outstanding to maturity and to pay all other sums payable by it
27
hereunder, or (2) there is an express assumption of the due and punctual payment
of the Company's obligations hereunder and under the Securities and the
performance and observance of all covenants and conditions to be performed by
the Company hereunder, by the execution and delivery of a supplemental indenture
in form satisfactory to the Trustee by a person who acquires, or will acquire
(otherwise than pursuant to a lease) a portion of the assets of the Company, and
which person will have assets (immediately after the acquisition) and aggregate
earnings (for such person's four full fiscal quarters immediately preceding such
acquisition) equal to not less than the assets of the Company (immediately
preceding such acquisition) and the aggregate earnings of the Company (for is
four full fiscal quarters immediately preceding the acquisition), respectively,
and which is a corporation organized under the laws of the United States, any
State thereof or the District of Columbia; provided, however, that Company shall
-------- -------
not make any liquidating distribution until after the Company shall have
certified to the Trustee with an Officers' Certificate at least five days prior
to the making of any liquidating distribution that it has complied with the
provisions of this Section 6.03.
SECTION 6.04. COMPLIANCE CERTIFICATES.
-----------------------
The Company shall deliver to the Trustee within 120 days after the end
of each fiscal year of the Company, an Officers' Certificate as to the signer's
knowledge of the Company's compliance with all conditions and covenants on its
part contained in this Indenture and stating whether or not the signer knows of
any default or Event of Default. If such signer knows of such a default or
Event of Default, the Certificate shall describe the default or Event of Default
and the efforts to remedy the same. For the purposes of this Section 6.04,
compliance shall be determined without regard to any grace period or requirement
of notice provided pursuant to the terms of this Indenture. The Certificate
need not comply with Section 12.04 hereof.
SECTION 6.05. NOTICE OF DEFAULTS.
------------------
In the event that indebtedness of the Company in an aggregate amount
in excess of $500,000 is declared due and payable before its maturity because of
the occurrence of any default under such indebtedness, the Company will promptly
give written notice to the Trustee of such declaration or of the occurrence of
any event which, with the giving of notice or the passage of time or both, would
entitle the holder or holders of such indebtedness to declare such indebtedness
due and payable before its maturity.
SECTION 6.06. PAYMENT OF TAXES AND OTHER CLAIMS.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes, assessments and
governmental charges levied or imposed upon the Company, directly or by reason
of its ownership of any Subsidiary or upon the income, profits or property of
the Company, and (2) all material lawful claims for labor, materials and
supplies, which, if unpaid, might by law become a lien upon the property of the
Company; provided, however, that the Company shall not be required to pay or
-------- -------
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which adequate provision has been made.
SECTION 6.07. CORPORATE EXISTENCE.
-------------------
Subject to Section 6.03 and Article 7, the Company will do or cause to
be done all things
28
necessary to preserve and keep in full force and effect its corporate existence
and rights (charter and statutory); provided, however, that the Company shall
-------- -------
not be required to preserve any right if the Board of Directors shall determine
that the preservation is no longer desirable in the conduct of the Company's
business and that the loss thereof is not, and will not be, adverse in any
material respect to the Holders.
SECTION 6.08. MAINTENANCE OF PROPERTIES.
-------------------------
Subject to Section 6.03, the Company will cause all material
properties owned, leased or licensed in the conduct of its business to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof and thereto, all as
in the judgment of the Company may be necessary so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times while any Securities are outstanding; provided, however, that nothing in
-------- -------
this Section 6.08 shall prevent the Company from discontinuing the maintenance
of any such properties if, in the judgment of the Board of Directors, such
discontinuance is desirable in the conduct of the Company's business and is not,
and will not be, adverse in any material respect to the Holders.
SECTION 6.09. FURTHER INSTRUMENTS AND ACTS.
----------------------------
Upon request of the Trustee, the Company will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purposes of this Indenture.
ARTICLE 7
SUCCESSOR CORPORATION
SECTION 7.01. WHEN COMPANY MAY MERGE, ETC.
----------------------------
The Company shall not consolidate with or merge with or into, or
transfer all or substantially all of its assets to, any person unless:
(1) Either the Company shall be the resulting or surviving entity
or such person is a corporation organized and existing under the laws
of the United States, a State thereof or the District of Columbia, and
such person expressly assumes by supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and this Indenture (in
which case all such obligations of the Company shall terminate); and
(2) Immediately before and immediately after giving effect to
such transaction and treating any indebtedness which becomes an
obligation of the Company as a result of such transaction as having
been incurred by the Company at the time of such transaction, no
default or Event of Default shall have occurred and be continuing.
The Company shall deliver to the Trustee prior to the proposed
transaction an Officers' Certificate and an Opinion of Counsel, each of which
shall comply with Section 12.04 and shall state that such consolidation, merger
or transfer and such supplemental indenture comply with this Article 7 and that
all conditions precedent herein provided for relating to such transaction have
29
been complied with.
SECTION 7.02. SUCCESSOR CORPORATION SUBSTITUTED.
---------------------------------
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company in accordance with Section 7.01,
the successor corporation formed by such consolidation or into which the Company
is merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such successor corporation had been named as the
Company herein.
ARTICLE 8
DEFAULT AND REMEDIES
SECTION 8.01. EVENTS OF DEFAULT.
-----------------
An "Event of Default" occurs if:
(1) The Company defaults in the payment of interest on any
Security when the same becomes due and payable and the default
continues for a period of 30 days;
(2) The Company defaults in the payment of the principal of any
Security when the same becomes due and payable at maturity, upon
redemption or otherwise;
(3) The Company fails to comply with any of its other agreements
contained in the Securities or this Indenture and the default
continues for the period and after the notice specified below;
(4) The Company shall fail to pay at maturity or at a date fixed
for prepayment or by acceleration (provided, however, such
acceleration is not withdrawn, cancelled or otherwise annulled within
10 days following the occurrence of such acceleration) principal of,
premium, if any, or interest under any bond, debenture, note or other
evidence of indebtedness for money borrowed or under any mortgage,
indenture or other instrument under which there may be issued or by
which there may be secured or evidenced any indebtedness of money
borrowed by the Company or under any guarantee of payment by the
Company of indebtedness for money borrowed, whether such indebtedness
or guarantee now exists or shall hereafter be created; provided,
however, no such Event of Default shall exist under this Section
8.01(4) unless the aggregate amount (which is due and unpaid whether
by reason of maturity or at a date fixed for prepayment or by
acceleration, provided, however, such acceleration is not withdrawn,
cancelled or otherwise annulled within 10 days following the
occurrence of such acceleration) of such principal, premium, if any,
and interest is in excess of $500,000.
(5) The Company or any Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it
in an
30
involuntary case or proceeding;
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property; or
(D) makes a general assignment for the benefit of its
creditors; or
(6) a court of competent jurisdiction enters an order or decree
under any Bankruptcy law that:
(A) is for relief against the Company or any Subsidiary in
an involuntary case or proceeding;
(B) appoints a Custodian of the Company or any Subsidiary or
for all or substantially all of the property of any of them; or
(C) orders the liquidation of the Company or any Subsidiary;
and in each case the order or decree remains unstayed and in
effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator or similar official under
any Bankruptcy Law.
A default under clause (3) is not an Event of Default until the
Trustee notifies the Company or the Holders of at least 25% in principal amount
of the Securities then outstanding notify the Company and the Trustee, of the
default, and the Company does not cure the default within 30 days after receipt
of such notice. The notice given pursuant to this Section 8.01 must specify the
default, demand and that it be remedied and state that the notice is a "Notice
of Default." When a default is cured, it ceases.
Subject to the provisions of Sections 9.01 and 9.02, the Trustee shall
not be charged with knowledge of any Event of Default unless written notice
thereof shall have been given to a Trust Officer at the corporate trust office
of the Trustee by the Company, the Paying Agent, any Holder or an agent of any
Holder.
SECTION 8.02. ACCELERATION.
------------
If an Event of Default (other than an Event of Default specified in
Section 8.01(5) or (6)) occurs and is continuing, the Trustee may, by notice to
the Company, or the Holders of at least 25% in principal amount of the
Securities then outstanding may, by notice to the Company and the Trustee, and
the Trustee shall, upon the request of such Holders, declare all unpaid
principal of and accrued interest to the date of acceleration on the Securities
then outstanding (if not then due and payable) to be due and payable upon any
such declaration, the same shall become and be immediately due and payable;
provided, however, that as long as any Bank Debt shall be outstanding, any
-------- -------
acceleration pursuant to the preceding clause shall not be effective until the
earlier of (a) 5 Business Days following a notice of acceleration given to the
Company and only if on such fifth Business Day, the Event of Default triggering
such notice of acceleration shall be continuing, or (b) the acceleration of the
Bank Debt. The Holders delivering the notice of acceleration shall deliver a
copy of such notice to the holders of such Bank Debt contemporaneously with the
delivery of such notice to the Company and the Trustee. If an Event of Default
specified in Section 8.01(5) or (6) occurs, all unpaid principal of and accrued
interest
31
on the Securities then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Securityholder. The Holders of a majority in principal
amount of the Securities then outstanding by notice to the Trustee may rescind
an acceleration and its consequences if (i) all existing Events of Default,
other than the nonpayment of the principal of and accrued interest on the
Securities which has become due solely by such declaration of acceleration, have
been cured or waived; (ii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, had been paid;
(iii) the rescission would not conflict with any judgment or decree of a court
of competent jurisdiction; and (iv) all payments due to the Trustee and any
predecessor Trustee under Section 9.07 have been made.
SECTION 8.03. OTHER REMEDIES.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of the principal of or 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 Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 8.04. WAIVER OF DEFAULTS AND EVENTS OF DEFAULT.
----------------------------------------
Subject to Sections 8.07 and 11.02, the Holders of a majority in
principal amount of the Securities then outstanding by notice to the Trustee may
waive an existing default or Event of Default and its consequences, except a
default in the payment of the principal of or interest on any
32
Security as specified in clauses (1) and (2) of Section 8.01. When a default or
Event of Default is waived, it is cured and ceases.
SECTION 8.05. CONTROL BY MAJORITY.
-------------------
The Holders of a majority in principal amount of the Securities then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that the Trustee determines may be unduly
prejudicial to the rights of another Securityholder or the Trustee, or that may
involve the Trustee in personal liability; provided that the Trustee may take
any other action deemed proper by the Trustee which is not inconsistent with
such direction.
SECTION 8.06. LIMITATION ON SUITS.
-------------------
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities (except actions for payment of overdue principal or
interest or for the conversion of the Securities pursuant to Article 4) unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in principal amount of the then
outstanding Securities make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Securities then outstanding.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 8.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of the principal of and interest on
the Security, on or after the respective due dates expressed in the Security, or
to bring suit for the enforcement of any such payment on or after such
respective dates, is absolute and unconditional and shall not be impaired or
affected without the consent of the Holder.
SECTION 8.08. COLLECTION SUIT BY TRUSTEE.
--------------------------
In an Event of Default in the payment of principal or interest
specified in Section 8.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee
33
of an express trust against the Company or another obligor on the Securities for
the whole amount of principal and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate per annum borne by the Securities 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 8.09. TRUSTEE MAY FILE PROOF OF CLAIM.
-------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholder allowed in any judicial proceedings relative to the Company (or
any other obligor on the Securities), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceeding is hereby authorized by each
Securityholder 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
Securityholders, 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 9.07, and to
the extent that such payment of the reasonable compensation, expenses,
disbursements and advances in any such proceedings 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, monies, securities and other property
which the Securityholders may be entitled to receive in such proceedings,
whether in liquidation, or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or the Trustee to authorize or accept or adopt on behalf
of any Securityholder any plan or reorganization, arrangement or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Securityholder in any such
proceeding.
SECTION 8.10. PRIORITIES.
----------
If the Trustee collects any money pursuant to this Article 8, it shall
pay out the money in the following order:
First, to the Trustee for amounts due under Section 9.07;
Second, to the holders of Senior Indebtedness to the extent
required by Article 5;
34
Third, to Securityholders for amounts due and unpaid on the
Securities of principal and interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Fourth, to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 8.10.
SECTION 8.11. 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 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 defense made by the party litigant.
This Section 8.11 does not apply to suit made by the Trustee, a suit by a
Holder pursuant to Section 8.07, or a suit by Holders of more than 10% in
principal amount of the Securities then outstanding.
ARTICLE 9
TRUSTEE
SECTION 9.01. DUTIES OF TRUSTEE.
-----------------
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties as are
specifically set forth in this Indenture and no others; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. The Trustee, however, shall examine the
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section 9.01;
35
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 8.05.
(d) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability, expense or fee.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 9.01.
(f) 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.
SECTION 9.02. RIGHTS OF TRUSTEE.
-----------------
Subject to Section 9.01:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel, which shall conform to Section
12.04(b). 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.
(c) The Trustee may act through its agents and shall not be
responsible for the misconduct or negligence of any agent appointed with
reasonable care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization and
protection in respect of any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
SECTION 9.03. INDIVIDUAL RIGHTS OF TRUSTEE.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or an
affiliate of the Company with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 9.10 and 9.11.
SECTION 9.04. TRUSTEE'S DISCLAIMER.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or
36
the Securities, it shall not be accountable for the Company's use of the
proceeds from the Securities, and it shall not be responsible for any statement
in the Securities other than its certificate of authentication.
SECTION 9.05. NOTICE OF DEFAULT OR EVENTS OF DEFAULT.
--------------------------------------
If a default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Securityholder notice of
the default or Event of Default within 90 days after it occurs. Except in the
case of a default or an Event of Default in payment of the principal of or
interest on any Security, the Trustee may withhold the notice if and so long as
a committee of its Trust Officers in good faith determines that withholding the
notice is in the interest of Securityholders.
37
SECTION 9.06. REPORTS BY TRUSTEE TO HOLDERS.
If such report is required by TIA '313, within 60 days after each
February 1, beginning with the February 1 following the date of this Indenture,
the Trustee shall mail to each Securityholder a brief report dated as of such
February 1 that complies with TIA '313(a).
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the securities are listed. The Company shall notify the
Trustee whenever the Securities become listed on any stock exchange and any
changes in the stock exchanges on which the Securities are listed.
SECTION 9.07. COMPENSATION AND INDEMNITY.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its services, including reasonable Trustee default fees, (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust). The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it. Such expenses may include the reasonable compensation,
disbursements and expenses of Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss, liability or expense incurred by it in connection with its
duties under this Indenture or any action or failure to act as authorized or
within the discretion or rights or powers conferred upon the Trustee hereunder.
The Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. The Trustee shall have the option of
undertaking the defense of such claims; provided, however, that if the Trustee
-------- -------
opts not to defend itself, the Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need
not pay for any settlement without its written consent, which consent shall not
be unreasonably withheld.
The Company need not reimburse the Trustee for any expense or
indemnify it against any loss or liability incurred by it through its negligence
or bath faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a senior claim to which the Securities are hereby made
subordinate on all money or property held or collected by the Trustee, except
such money or property held in trust to pay the principal of and interest on
particular Securities. The obligations of the Company under this Section 9.07
to compensate or indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall be secured by a lien prior 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. The obligations of the Company under this Section 9.07 shall
survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 8.01(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy law.
38
SECTION 9.08. REPLACEMENT OF TRUSTEE.
----------------------
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities then outstanding may remove the
Trustee by so notifying the Trustee and may appoint a successor Trustee with the
Company's written consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 9.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 45 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of 10% in principal amount of the Securities then outstanding may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 9.10 any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee and be released from its obligations (exclusive of any
liabilities Trustee may have incurred while acting as Trustee) hereunder, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Securityholder.
Notwithstanding replacement of the Trustee pursuant to this Section
9.08, the Company's obligations under Section 9.07 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 9.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
---------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee, provided such transferee corporation
shall qualify and be eligible under Section 9.10.
39
SECTION 9.10. ELIGIBILITY; DISQUALIFICATION.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of paragraphs(1), (2) and (5) of TIA '310(a). If at any time the
Trustee shall cease to satisfy any such requirements, it shall resign
immediately in the manner and with the effect specified in this Article 9. The
Trustee shall be subject to the provisions of TIA '310(b). Nothing herein shall
prevent the Trustee from filing with the SEC the application referred to in the
penultimate paragraph of TIA '319(b).
SECTION 9.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
-------------------------------------------------
The Trustee shall comply with TIA '311(a), excluding any creditor
relationship listed in TIA '311(b). A trustee who has resigned or been removed
shall be subject to TIA '311(a) to the extent indicated therein.
ARTICLE 10
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 10.01. TERMINATION OF COMPANY'S OBLIGATIONS.
------------------------------------
The Company may terminate all of its obligations under the Securities
and this Indenture (exception those obligations referred to in the immediately
succeeding paragraph) if all Securities previously authenticated and delivered
(other than destroyed, lost or stolen Securities which have been replaced or
paid or Securities for whose payment money has theretofore been held in trust
and thereafter repaid to the Company, as provided in Section 10.03) have been
delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or if the Company irrevocably deposits in trust with
the Trustee money or U.S. Government Obligations maturing as to principal and
interest in such amounts and at such times as are sufficient, without
consideration of any reinvestment of such interest, to pay the principal of and
interest on the Securities then outstanding to maturity or to the date fixed for
redemption and to pay all other sums payable by it hereunder provided that, as
long as any Bank Credit Agreement shall be in force and effect, at least five
Business Days prior to making such payment of deposit, the Company shall give
notice to the lender(s) under any Bank Credit Agreement then in force, of its
intention to make such payment or deposit. The Company may make an irrevocable
deposit pursuant to this Section 10.01 only if at such time it is not prohibited
from doing so under the provisions of Article 5 and the Company shall have
delivered to the Trustee and any such Paying Agent an Officer's Certificate to
that effect and that all other conditions to such deposit have been complied
with.
The Company's obligations in paragraph 12 of the Securities, in
Section 2.03, 2.04, 2.05, 2.06, 2.07, 2.11, 6.01, 9.07, 9.08 and 10.04, and in
Article 4 shall survive until the Securities are
40
no longer outstanding. Thereafter, the Company's obligations in such paragraph
12 and in Section 9.07 shall survive.
After such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture, except for those surviving obligations specified
above.
"U.S. Government Obligations" means direct non-callable obligations
of, or none-callable obligations guaranteed by, the United States of America for
the payment of which guarantee or obligation the full faith and credit of the
Untied States is pledged.
SECTION 10.02. APPLICATION OF TRUST MONEY.
--------------------------
The Trustee or the Paying Agent shall hold in trust, for the benefit
of the Holders, money or U.S. Government Obligations deposited with it pursuant
to Section 10.01, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with this Indenture to the payment of the
principal of and interest on the Securities. Money and U.S. Government
Obligations so held in trust shall not be subject to the subordination
provisions of Article 5.
SECTION 10.03. REPAYMENT TO COMPANY.
--------------------
Subject to Section 10.01, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess money or U.S. Government
Obligations held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon request
any money held by them for the payment of principal or interest that remains
unclaimed for two years after a right to such money has matured; provided,
--------
however, that the Trustee or such Paying Agent, before being required to make
-------
any such payment, may at the expense of the Company cause to be published once
in a newspaper of general circulation in the City of New York or mail to each
Holder entitled to such money notice that such money remains unclaimed and that
after a date specified therein, which shall be at least 30 days from the date of
such publication or mailing, any unclaimed balance of such money then remaining
will be repaid to the Company. After payment to the Company, Securityholders
entitled to money must look to the Company for payment as general creditors
unless otherwise prohibited by law.
SECTION 10.04. REINSTATEMENT.
-------------
If the Trustee or the Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 10.01 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 10.01 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
10.01; provided, however, that if the Company has made any payment of the
-------- -------
principal of or interest on any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive any such payment from the money or U.S. Government
Obligations held by the Trustee or the Paying Agent.
41
ARTICLE 11
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 11.01. WITHOUT CONSENT OF HOLDERS.
--------------------------
The Company and the Trustee may amend or supplement this Indenture or
the Securities without notice to or consent of any Securityholder:
(a) to comply with Sections 6.03 and 7.01;
(b) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(c) to cure any ambiguity, defect or inconsistency, or to make any
other change that does not adversely affect the rights of any Securityholder; or
(d) to comply with the provisions of the TIA, if this Indenture is
then subject to the TIA.
SECTION 11.02. WITH CONSENT OF HOLDERS.
-----------------------
The Company and the Trustee may amend or supplement this Indenture or
the Securities without notice to any Securityholder with the written consent of
the Holders of 66-2/3% in principal amount of the Securities then outstanding.
The Holders of a majority in 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 notice to any Securityholder.
Subject to Section 10.04, without the written consent of each Securityholder
affected, however, an amendment, supplement or waiver, including a waiver
pursuant to Section 8.04, may not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of
interest on any Security;
(3) reduce the principal of or premium on or change the fixed
maturity of any Security or alter the redemption provisions with
respect thereto;
(4) alter the conversion provisions with respect to any
Security in a manner adverse to the holder thereof;
(5) waive a default in the payment of the principal of or
premium or interest on any Security;
(6) make any changes in Section 8.04, 8.07 or this sentence;
(7) modify the provisions of Article 5 hereof in a manner
adverse to the Holders; or
42
(8) make any Security payable in money other than that stated
in the Security.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders 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 amendment, supplement or waiver.
An amendment under this Section 11.02 may not make any change that
adversely affects the rights under Article 5 of any holder of an issue of Senior
Indebtedness unless the holders of that issue, pursuant to its terms, consent to
the change.
SECTION 11.03. COMPLIANCE WITH TRUST INDENTURE ACT.
-----------------------------------
Every amendment to or supplement of this Indenture or the Securities
shall, if required, comply with TIA as in effect at the date of such amendment
or supplement.
SECTION 11.04. 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 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 make on any
Security. However, any such Holder or subsequent Holder may revoke the consent
as to his Security or portion of a Security if the Trustee receives the notice
of revocation before the date the amendment, supplement or waiver becomes
effective.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (8) of Section 11.02. In that case the amendment, supplement or
waiver shall bind each Holder of a Security that evidences the same debt as the
consenting Holder's Security.
SECTION 11.05. NOTATION ON OR EXCHANGE OF SECURITIES.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the
43
Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms.
SECTION 11.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
--------------------------------
The Trustee shall sign any amendment or supplement authorized pursuant
to this Article 11 if the amendment or supplement does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may but need not sign it. In signing or refusing to sign such amendment
or supplement, the Trustee shall be entitled to receive and, subject to Section
9.01 shall be fully protected in relying upon, an Opinion of Counsel stating
that such amendment or supplement is authorized or permitted by this Indenture.
The Company shall not sign an amendment or supplement until the Board of
Directors approves it.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
----------------------------
If the Trust Indenture Act applies and any provision of this Indenture
limits, qualifies or conflicts with the duties imposed by any of Sections 310 to
317, inclusive, of the TIA through operation of Section 318(c) thereof, such
imposed duties shall control.
SECTION 12.02. NOTICES.
-------
Any notice or communication shall be given in writing and delivered in
person or mailed by first-class mail, postage prepaid, addressed as follows:
if to the Company:
Xxxxxx Dental Management Services, Inc.
0000 X. Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
if to the Trustee:
Colorado National Bank
000 Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxx Xxxxx, Corporate Trust Department
Such notices or communications shall be effective when received.
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notice or communications.
44
Any notice or communication mailed to a Securityholder shall be mailed
by first-class mail to him at his address shown on the register kept by the
Registrar.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication to a Securityholder is mailed in
the manner provided above, it is duly given, whether or not the addressee
receives it.
SECTION 12.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
--------------------------------------------
Securityholders may communicate pursuant to TIA '312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA '312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
--------------------------------------------------
(a) 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
at the request of the Trustee:
(1) an Officer's Certificate stating that, in the opinion
of the signers, all conditions precedent (including any covenants
compliance with which constitutes a condition precedent), if any,
provided for this Indenture relating to the proposed action have been
complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent (including any covenants
compliance with which constitutes a condition precedent) have been
complied with.
(b) Each Officer's Certificate and Opinion of Counsel with respect to
compliance with a condition or covenant provided for in this Indenture (other
than annual certificates provided pursuant to Section 6.04 hereof) shall
include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such 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;
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with; provided,
--------
however, that with respect to matters of fact an Opinion of Counsel
-------
may rely on an Officer's Certificate or certificates of public
officials.
SECTION 12.05. RECORD DATE FOR VOTE OR CONSENT OF SECURITYHOLDERS.
--------------------------------------------------
The Company (or, in the event deposits have been made pursuant to
Sections 6.03 or
45
10.01, the Trustee), may set a record date for purposes of determining the
identify of Securityholders entitled to vote or consent to any action by vote or
consent authorized or permitted under this Indenture, which record date shall be
the later of 10 days prior to the first solicitation of such vote or consent or
the date of the most recent list of Securityholders furnished to the Trustee
pursuant to Section 2.05 hereof prior to such solicitation. If a record date is
fixed, those persons who were Holders or Securities at such record date (or
their duly designated proxies), and only those persons, shall be entitled to
take such action by vote or consent or to revoke any vote or consent previously
given, whether or not such persons continue to be Holders after such record
date.
SECTION 12.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
-----------------------------------------
The Trustee may make reasonable rules for action by or at a meeting
Holders. The Registrar or the Paying Agent may make reasonable rules for its
functions.
SECTION 12.07. LEGAL HOLIDAYS.
--------------
A "Legal Holiday" is a Saturday, or a Sunday or a day on which state
or Federally chartered banking institutions in New York, New York or the city
and state where the Trustee's corporate trust operations are located, which
initially are Denver, Colorado are not required to be open. If a payment date
is a Legal Holiday at a place of payment, payment may be made at that place on
the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 12.08. GOVERNING LAW.
-------------
The laws of the State of Colorado shall govern this Indenture and the
Securities without regard to principles of conflicts of law.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
46
SECTION 12.10. NO RECOURSE AGAINST OTHERS.
--------------------------
All liability described in paragraph 17 of the Securities of any
director, officer, employee or stockholder, as such, of the Company is waived
and released.
SECTION 12.11. SUCCESSORS.
----------
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 12.12. MULTIPLE COUNTERPARTS.
---------------------
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent the same agreement.
SECTION 12.13. SEPARABILITY.
------------
In case any provisions 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 12.14. TABLE OF CONTENTS, HEADINGS, ETC.
---------------------------------
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
[The remainder of this page intentionally left blank]
47
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
as of this 15/th/ day of May, 1996.
XXXXXX DENTAL MANAGEMENT SERVICES, INC.
By:/s/ Xxxx Xxxxxx
_____________________________________________
Name: Xxxx Xxxxxx
Title: CEO
[SEAL]
Attest:
/s/ Xxxxxx Xxxxx
________________________________________
Name: Xxxxxx Xxxxx
___________________________________
Title: CEO
__________________________________
COLORADO NATIONAL BANK
as Trustee
By:/s/ Xxxx X. Xxxxx
____________________________________________
Name: Xxxx X. Xxxxx
Title: Vice President
[SEAL OF
COLORADO NATIONAL BANK
APPEARS HERE]
Attest:
/s/ Xxxxxxx X. XxxXxxxxx
________________________________________
Name: Xxxxxxx X. XxxXxxxxx
___________________________________
Title: Vice President
__________________________________
48
EXHIBIT A
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 ("THE ACT") OR ANY APPLICABLE STATE SECURITIES LAWS ("STATE ACTS")
AND ARE RESTRICTED SECURITIES AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT.
THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR QUALIFICATION UNDER THE ACT
AND APPLICABLE STATE ACTS, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE ACT AND APPLICABLE STATE ACTS, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF XXXXXX DENTAL MANAGEMENT SERVICES, INC.
XXXXXX DENTAL MANAGEMENT SERVICES, INC.
9% CONVERTIBLE SUBORDINATED DEBENTURE DUE MAY 15, 2001
XXXXXX DENTAL MANAGEMENT SERVICES, INC., a Colorado corporation, promises
to pay to _______________________ or registered assigns the principal sum of
_________________ Dollars on May 15, 2001.
Interest Payment Dates: June 1 and December 1
Regular Record Dates: May 15 and November 15
This Debenture is convertible as set forth herein. Additional provisions
of this Debenture are set forth in Paragraphs 1 through 22 hereof.
Dated: XXXXXX DENTAL MANAGEMENT SERVICES, INC.
By: _______________________________________________
Name: Xxxx Xxxxxx
Title: Chief Executive Officer
[SEAL]
Attest:
By:___________________________
Secretary
Trustee's Certificate of Authentication:
This is one of the Securities referred to
in the within-mentioned Indenture.
COLORADO NATIONAL BANK
as Trustee
By:___________________________
A-1
XXXXXX DENTAL MANAGEMENT SERVICES, INC.
9% CONVERTIBLE SUBORDINATED DEBENTURE DUE MAY 15, 2001
1. Interest.
--------
Xxxxxx Dental Management Services, Inc., a Colorado corporation (the
"Company"), promises to pay interest on the principal amount of this Debenture
at the rate per annum shown above. The Company shall pay interest semi-annually
on June 1 and December 1 of each year, commencing December 1, 1996. Interest on
the Debentures will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of first issuance of the
Debentures under the Indenture (as defined below); provided that, if there is
not an existing default in the payment of interest, and if this Debenture is
authenticated after May 29, 1996 and between a record date referred to on the
facirst page hereof and the next succeeding interest payment date, interest
shall accrue from such interest payment date. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment.
-----------------
The Company will pay interest on this Debenture (except defaulted
interest) to the person who is the registered Holder of this Debenture at the
close of business on May 15 and November 15 next preceding the Interest Payment
Date. The Holder must surrender this Debenture to the Paying Agent to collect
payment of principal. The Company will pay principal and interest in money of
the United States that at the time of payment is legal tender for payment of
public and private debts. The Company, however, may pay principal and interest
by its check payable in such money. It may mail an interest check to the
Holder's registered address.
3. Paying Agent, Registrar and Conversion Agent.
--------------------------------------------
Initially, Colorado National Bank (the "Trustee") will act as Paying
Agent, Registrar and Conversion Agent. The Company may change any Paying Agent,
Registrar or Conversion Agent without notice to the holder. The Company or any
of its Subsidiaries may act as Paying Agent, Registrar or Conversion Agent.
4. Indenture, Limitations.
----------------------
This Debenture is one of a duly authorized issue of Debentures of the
Company designated as its 9% Convertible Subordinated Debentures due May 15,
2001 (the "Debentures"), issued under an Indenture dated as of May 15, 1996 (the
"Indenture"), between the Company and the Trustee. The terms of this Debenture
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended, and as in effect on
the date of the Indenture. This Debenture is subject to all such terms, and the
holder of this Debenture is referred to the Indenture and said Act for a
statement of them.
A-2
The Debentures are subordinated unsecured obligations of the Company
limited to up to $5,000,000 aggregate principal amount. The Indenture does not
limit other debt of the Company, secured or unsecured, including Senior
Indebtedness.
5. Redemption by the Company.
-------------------------
Except as provided in this Section 5.Paragraph 5, the Debentures may
not be redeemed by the Company. The Company will redeem on each of May 15, 1999
and May 15, 2000, 20% of the aggregate principal amount of the Debentures
initially issued under the Indenture. The Redemption Price shall be equal to
the principal amount of the Debentures being redeemed. Accrued interest shall
be paid to the date of redemption on Debentures redeemed. The Trustee shall
select the Debentures to be redeemed by lot or by a method the Trustee considers
fair and appropriate; provided that such method is not prohibited by any stock
exchange or market on which the Debentures are then listed. The Trustee shall
make the selection from the Debentures outstanding and not previously called for
redemption. Debentures in denominations of $1,000 may only be redeemed in
whole. The Trustee may select for redemption portions (equal to $1,000 or any
multiple thereof) of the principal Debentures that have denominations larger
than $1,000.
6. Notice of Redemption.
--------------------
Notice of redemption will be mailed by first class mail at least 20
days before the Redemption Date to each Holder of Debentures to be redeemed at
his registered address. Debentures in denominations larger than $1,000 may be
redeemed in part, but only in whole multiples of $1,000. On and after the
Redemption Date, subject to the deposit with the Paying Agent of funds
sufficient to pay the Redemption Price, interest ceases to accrue on Debentures
or portions of them called for redemption.
7. Conversion.
----------
A Holder of a Debenture may convert such Debenture into shares of
Common Stock of the Company at any time prior to maturity; provided that if the
Debenture is called for redemption, the conversion right will terminate at the
close of business on the Redemption Date for such Debenture (unless the Company
shall default in making the redemption payment when due, in which case the
conversion right shall terminate at the close of business on the date such
default is cured and such Debenture is redeemed); provided, further, that if the
-------- -------
Holder of a Debenture presents such Debenture for redemption prior to the close
of business on the Redemption Date for such Debenture the right of conversion
shall terminate upon presentation of the Debenture to the Trustee (unless the
Company shall default in making the redemption payment when due, in which case
the conversion right shall terminate on the close of business on the date such
default is cured and such Debenture is redeemed). The initial conversion
pConversion Price is $3.50 per share, subject to adjustment under certain
circumstances. The number of shares issuable upon conversion of a Debenture is
determined by dividing the principal amount converted by the conversion
pConversion Price in effect on the conversion date. Payment of accrued interest
on a converted Debenture will be made to the conversion date on the next
succeeding interest payment date. Upon conversion, no adjustment for dividends
will be made for dividends or distributions on shares of Common Stock issued
upon conversion of a Debenture. No fractional shares will be
A-3
issued upon conversion; in lieu thereof, an amount will be paid in cash based
upon the conversion pConversion Price of the Common Stock on the last trading
day prior to the date of conversion.
To convert a Debenture, a Holder must (a) complete and manually sign
the conversion notice attached hereto and deliver such notice to the Conversion
Agent, (b) surrender the Debenture to the Conversion Agent, (c) furnish
appropriate endorsements or transfer documents if required by the Registrar or
the Conversion Agent, (d) execute any investment letters or other documents
required by the Company, and (e) pay any transfer or similar tax, if required.
If a Holder surrenders a Debenture for conversion between the record date for
the payment of an installment of interest and the next interest payment date,
the amount of interest payable on such interest payment date will be the amount
accrued to the date of conversion on the principal amount of the Debenture or
portion thereof then converted. A Holder may convert a portion of a Debenture
equal to $1,000 or any integral multiple thereof.
8. Restrictions on Transfer.
------------------------
Unless otherwise instructed by the Company, the Trustee shall cause
any and all instruments representing the Debentures and certificates
representing any shares of Common Stock issued upon conversion of the Debentures
and any and all securities issued in replacement thereof or in exchange therefor
to bear the following legend, or one substantially similar thereto:
"The securities represented hereby have not been registered under the
Securities Act of 1933 (the "Act") or any applicable state securities
laws ("State Acts") and are restricted securities as that term is
defined in Rule 144 under the Act. The securities may not be offered
for sale, sold or otherwise transferred except pursuant to an
effective registration statement or qualification under the Act and
applicable State Acts or pursuant to an exemption from registration
under the Act and applicable State Acts, the availability of which is
to be established to the satisfaction of the Company."
The Trustee shall permit transfer of the Debentures and any shares of Common
Stock issued upon conversion of the Debentures only upon written instructions
from the Company or its counsel that such transfer is permitted under the Act
and applicable State Acts. Unless otherwise instructed by the Company, each
Holder who is a transferee of the Debentures or shares of Common Stock issuable
upon the conversion of the Debentures (including Holders whose dDebentures are
converted) may be required to execute investment letters and other documents as
required by the Company. If instructed in writing by the Company or its
counsel, there should also be placed on any instruments representing the
Debentures and certificates representing any shares of Common Stock issued upon
conversion of the Debentures and any and all securities issued in replacement
thereof or in exchange therefor, any legend as may be required by the securities
laws of the state in which the Holder of such Debentures or shares of Common
Stock resides.
9. Subordination.
-------------
The indebtedness evidenced by the Debentures is, to the extent and in
the manner provided in the Indenture, subordinate and junior in right of payment
to the prior payment in full of all Senior Indebtedness of the Company, as
defined in the Indenture. Senior Indebtedness must
A-4
be paid before any payment may be made to any Holder of this Debenture. Any
Holder by accepting this Debenture agrees to and shall be bound by such
subordination provisions and authorizes the Trustee to give them effect.
In addition to all other rights of Senior Indebtedness described in
the Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness
and entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any terms of any instrument relating to the
Senior Indebtedness or any extension or renewal of the Senior Indebtedness.
10. Denominations, Transfer, Exchange.
---------------------------------
The Debentures are in registered form without coupons in denominations
of $1,000 and integral multiples of $1,000. A Holder may register the transfer
of or exchange Debentures in accordance with the Indenture. The Register may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes or other governmental charges that may
be imposed by law or permitted by the Indenture.
11. Persons Deemed Owners.
---------------------
The registered holder of a Debenture may be treated as the owner of
it for all purposes.
12. Unclaimed Money.
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent will pay the money back to the
Company at its request. After that, Holders entitled to money must look solely
to the Company for payment.
13. Amendment, Supplement, Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Debentures may be
amended or supplemented with the consent of the Holders of 66-2/3% in principal
amount of the Debentures then outstanding and any past default or compliance
with any provision may be waived in a particular instance with the consent of
the Holders of a majority in principal amount of the Debentures then
outstanding. Without the consent of or notice to any Holder, the Company and
the Trustee may amend or supplement the Indenture or the Debentures to, among
other things, provide for uncertificated Debentures in addition to or in place
of certificated Debentures, or to cure any ambiguity, defect or inconsistency or
make any other change that does not adversely affect the rights of any Holder.
14. Successor Corporation.
---------------------
When a successor corporation assumes all the obligations of its
predecessor under the Debentures and the Indenture, the predecessor corporation
will be released from those obligations.
A-5
15. Defaults and Remedies.
---------------------
An Event of Default is: default for 30 days in payment of interest on
the Debentures; default in payment of principal on the Debentures when due;
failure by the Company for 30 days after notice to it to comply with any of its
other agreements contained in the Indenture or the Debentures; certain events of
bankruptcy, insolvency or reorganization of the Company or any of its
subsidiaries; and certain defaults on other indebtedness. If an Event of
Default (other than as a result of certain events of bankruptcy, insolvency or
reorganization), occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the Debentures then outstanding may declare all
unpaid principal of and accrued interest to the date of acceleration on the
Debentures then outstanding to be due and payable immediately, all as and to the
extent provided in the Indenture. If an Event of Default occurs as a result of
certain events of bankruptcy, insolvency or reorganization, all unpaid principal
of and accrued interest on the Debentures then outstanding shall become due and
payable immediately without any declaration or other act on the part of the
-----------
Trustee or any Holder, all as and to the extent provided in the Indenture.
Holders may not enforce the Indenture or the Debentures except as provided in
the Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Debentures. Subject to certain limitations,
Holders of a majority in principal amount of the Debentures then outstanding may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders notice of any continuing default (except a default in
payment of principal or interest) if it determines that withholding notice is in
their interests. The Company is required to file periodic reports with the
Trustee as to the absence of default.
16. Trustee Dealings with the Company.
---------------------------------
Colorado National Bank, the Trustee under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or an Affiliate of the Company, and may
otherwise deal with the Company or an Affiliate of the Company, as if it were
not the Trustee.
17. No Recourse Against Others.
--------------------------
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Debentures or the Indenture or for any claim based on, in respect or by reason
of, such obligations or their creation. The Holder of this Debenture by
accepting this Debenture waives and releases all such liability. The waiver and
release are part of the consideration for the issue of this Debenture.
18. Discharge Prior to Maturity.
---------------------------
If the Company deposits with the Trustee or the Paying Agent money or
U.S. Government Obligations sufficient to pay the principal of and interest on
the Debentures to maturity, the Company will be discharged from the Indenture
except for certain Sections thereof.
A-6
19. Authentication.
--------------
This Debenture shall not be valid until the Trustee or an
authenticating agent signs the certificate of authentication on this Debenture.
20. Abbreviations and Definitions.
-----------------------------
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN or JTWROS (= joint tenants with right of survivorship and
not as tenants in common), CUST (= Custodian), POA (= Power of Attorney), DTD
Custodian(= dated), TTEE (= Trustee), FBO (= for benefit of) and U/G/M/A (=
Uniform Gifts to Minors Act).
All capitalized terms used in this Debenture and not specifically
defined herein are defined in the Indenture and are used herein as so defined.
21. Indenture to Control.
--------------------
In the case of any conflict between the provisions of this Debenture
and the Indenture, the provisions of the Indenture shall control.
The Company will furnish to any Holder, upon written request and
without charge, a copy of the Indenture. Requests may be made to: Xxxxxx
Dental Management Services, Inc., Xxxxx 000, 0000 Xxxx Xxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxx 00000, Attention: Chief Executive Officer.
Surrender of Debentures
-----------------------
Holders surrendering Debentures for redemption or conversion
should send them to:
Colorado National Bank
Principal Operations Center
First Trust N.A.
180 East 5/th/ Street
4/th/ Floor
Bond Drop Window
Xx. Xxxx, Xxxxxxxxx 00000
A-7
ASSIGNMENT FORM
To assign this Debenture, fill in the form below:
I or we assign and transfer this Debenture to ______________________
____________________________________________________________________
____________________________________________________________________
(Insert assignee's name, soc. sec. or tax I.D. no.)
____________________________________________________________________
____________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint:
____________________________________________________________________
agent to transfer this Debenture on the books of the Company. The Agent may
substitute another to act for him.
Date: _______________________________________________
Your signature:_____________________________________________________
(Sign exactly as your name appears on the other side of this
Debenture)
_____________________________________________________
(Sign exactly as your name appears on the other side of this
Debenture)
*Signature guaranteed by:
_____________________________________________________
By: _________________________________________________
______________
*The signature must be guaranteed by an eligible institution (as defined in
Rule 17Ad-15 under the Exchange Act) that participates in a Securities Transfer
Association recognized signature guarantee program or such other guarantee
acceptable to the Trustee.
CONVERSION NOTICE
To convert this Debenture into common Stock of the Company, check the box: [ ]
To convert only part of this Debenture, state the amount:______________________
If you want the stock certificate made out in another person's name, fill in the
form below:
______________________________________________________________________
(insert other person's soc. sec. or tax I.D. no.)
______________________________________________________________________
(Print or type other person's name, address and zip code)
______________________________________________________________________
______________________________________________________________________
Date: _______________________________________________
Your signature:________________________________________________________________
(Sign exactly as your name appears on the other side of this
Debenture)
________________________________________________________________
(Sign exactly as your name appears on the other side of this
Debenture)
*Signature guaranteed by____________________________________________
____________________________________________________________________
By: ________________________________________________________________
______________
*The signature must be guaranteed by an eligible institution (as defined in
Rule 17Ad-15 under the Exchange Act) that participates in a Securities Transfer
Association recognized signature guarantee program or such other guarantee
acceptable to the Trustee.
