EXHIBIT 4.1
SOUTHWEST SECURITIES GROUP, INC.,
Company
and
NORWEST BANK, MINNESOTA, NATIONAL ASSOCIATION,
Trustee
Indenture
Dated as of ____ __, 1999
$150,000,000
__% Exchangeable Subordinated Notes Due 2004
Cross Reference Table
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Trust Indenture Act Section Indenture Section
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310(a)(1).................................................................... 6.10
(a)(2)....................................................................... 6.10
(a)(3)....................................................................... Not Applicable
(a)(4)....................................................................... Not Applicable
(a)(5)....................................................................... 6.10
(b).......................................................................... 6.8, 6.10
311(a)....................................................................... 6.11
(b).......................................................................... 6.11
312(a)....................................................................... 2.5
(b).......................................................................... 11.9
(c).......................................................................... 11.9
313(a)....................................................................... 6.6
(b).......................................................................... 6.6
(c).......................................................................... 6.6
(d).......................................................................... 6.6, 12.2
314(a)....................................................................... 3.4, 3.7, 12.2
(b).......................................................................... Not Applicable
(c)(1)....................................................................... 12.3, 12.4
(c)(2)....................................................................... 12.3,12.4
(c)(3)....................................................................... Not Applicable
(d).......................................................................... Not Applicable
(e).......................................................................... 12.4
(f).......................................................................... Not Applicable
315(a)....................................................................... 6.1(b)
(b).......................................................................... 6.5, 12.2
(c).......................................................................... 6.1(a)
(d).......................................................................... 6.1(c)
(e).......................................................................... 5.11
316(a)....................................................................... 2.10
(a)(1)(A).................................................................... 5.5
(a)(1)(B).................................................................... 5.4
(a)(2)....................................................................... Not Applicable
(b).......................................................................... 5.7
(c).......................................................................... 8.4, 11.1
317(a)(1).................................................................... 5.8
(a)(2)....................................................................... 5.9
(b).......................................................................... 2.4
318(a)....................................................................... 12.1
___________________
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
INDENTURE dated as of May __, 1999 between Southwest Securities Group,
Inc., a Delaware corporation, and Norwest Bank, Minnesota, National Association,
as trustee.
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the registered holders of the Company's __%
Exchangeable Subordinated Notes due ________1, 2004 (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions.
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"Affiliate" of a Person means (i) any other Person which, directly or
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indirectly, is in control of, is controlled by or is under common control with
such specified Person. For the purpose of this definition, "control" of a
Person means the power, directly or indirectly, to direct or cause the direction
of the management and policies of such Person, whether by ownership of voting
securities, by contract or otherwise, and "controlling" or "controlled" have
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corresponding meanings.
"Agent" means any Registrar or Paying Agent.
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"Board of Directors" means the Board of Directors of the Company or any
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duly authorized committee thereof.
"Business Day" means any day other than a Saturday, Sunday or other day on
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which banking institutions in the City of New York, New York or Dallas, Texas
are required or authorized by law or other governmental action to be closed.
"Closing Price" means, when used with respect to any security as of any
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date, the last sale price, regular way, or, in case no such sale takes place on
such date, the average of the closing bid and asked prices, regular way, of such
security in either case as reported for consolidated transactions on the New
York Stock Exchange or, if such security is not listed or admitted to trading on
the New York Stock Exchange, as reported for consolidated transactions with
respect to securities listed on the principal national securities exchange on
which such security is listed or admitted to trading or, if such security is not
listed or admitted to trading on any national securities exchange, as reported
on the Nasdaq National Market, or, if such security is not listed or admitted to
trading on the Nasdaq National Market, as reported on the Nasdaq SmallCap
Market, or if such security is not listed or admitted to trading on any national
securities exchange or the Nasdaq National Market or the Nasdaq SmallCap Market,
the average of the high bid and low asked prices of such security in the over-
the-counter market as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System or such other system then in use or,
if such security is not quoted by any such organization, the average of the
closing bid and asked prices of such security furnished by a New York Stock
Exchange member firm selected by the Company. If such security is not quoted by
any such organization and no such New York Stock Exchange member firm is able to
provide such prices, the Closing Price of such security shall be the Fair Market
Value thereof.
"Common Stock" means, subject to adjustment as described in Section 9.3(a),
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the Class A common stock, par value $0.01 per share, of Knight/Trimark and any
shares of capital stock of Knight/Trimark received upon reclassification or
reclassifications thereof; provided that if at any time there shall be more than
one such resulting class, the shares of each such class issuable upon exchange
shall be substantially in the proportion which the total number of shares of
such class resulting from all such reclassifications bears to the total number
of shares of all such classes resulting from all such reclassifications. For
purposes of all Sections of this Indenture other than Article 9, "Common Stock"
also includes any Spin-Off Securities and Property received as a result of a
Reorganization Event.
"Company" means Southwest Securities Group, Inc., a Delaware corporation,
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until a successor replaces it in accordance with the applicable provisions of
this Indenture and, thereafter, "Company" shall mean such successor.
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"Corporate Trust Office" of the Trustee means the principal office at which
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the Trustee conducts its corporate business, initially at ____________________,
New York, New York _____.
"Default" means any event which is, or with the passage of time or the
-------
giving of notice or both would be, an Event of Default.
"Depositary" means, with respect to the Notes issued in global form, the
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Trustee and any successor entity thereto or such other Person as appointed by
the Company from time to time in accordance with the provisions of this
Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
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the rules and regulations promulgated thereunder.
"Fair Market Value" means, at any date as to any asset, Property or right
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(including, without limitation, Capital Stock of any Person, evidences of
indebtedness or other securities, but excluding cash), the fair market value of
such item as determined in good faith by the Board of Directors, whose
determination shall be conclusive; provided, however, that such determination is
described in an Officers' Certificate filed with the Trustee and that, if there
is a Closing Price for such item on such date, "Fair Market Value" means such
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Closing Price (without giving effect to the last sentence of the definition
thereof).
"GAAP" means, as of any date, generally accepted accounting principles in
----
the United States and does not include any interpretations or regulations that
have been proposed but that have not become effective.
"Global Security" means a Note that evidences all or part of the Notes and
---------------
bears the legend set forth in Section 2.7.
"Holder" means a Person in whose name a Note is registered on the Register.
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2
"Indenture" means this Indenture, as amended or supplemented from time to
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time.
"Interest Payment Date" means _______ 1, ______ 1, _________ 1 and _____1
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of each year, commencing _________ 1, 1999.
"Initial Price" means $___.
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"Knight/Trimark" means, subject to Section 9.3(a)(v), Knight/Trimark Group,
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Inc., a Delaware corporation.
"Knight/Trimark Successor" has the meaning specified in Section 9.3.
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"Maturity" when used with respect to any Note, means the date on which the
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principal of such Note or an installment of principal becomes due and payable as
therein or herein provided, whether at the stated maturity, by declaration of
acceleration or otherwise.
"Maturity Price" means the average of Closing Price per share of Common
--------------
Stock for the 20 Trading Days ending on the Business Day prior to Maturity.
"Officer" means, with respect to any Person, the Chairman of the Board, the
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Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary, any Assistant Secretary or any Vice President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
---------------------
by two Officers, one of whom must be the Chairman of the Board, the President,
the Treasurer or a Vice-President of the Company, that meets the requirements of
Sections 12.3 and 12.4; provided, however, that for purposes of Section 3.7,
"Officers' Certificate" means a certificate signed on behalf of the Company by
the principal executive officer, principal financial officer or principal
accounting officer of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
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reasonably acceptable to the Trustee and that meets the requirements of Sections
12.3 and 12.4. The counsel may be an employee of or counsel to the Company or
to the Trustee.
"Person" means any individual, corporation, partnership, association, trust
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or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof.
"Principal" of a debt security means the principal of the security plus the
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premium, if any, on the security. With respect to the Notes, Principal means
the value the Company is obligated to deliver at Maturity, whether in Common
Stock or cash.
3
"Property" of any Person means any and all types of real, personal,
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tangible, intangible or mixed property owned by such Person whether or not
included on the most recent consolidated balance sheet of such Person in
accordance with GAAP.
"Representative" means the indenture trustee or other trustee, agent or
--------------
representative for an issue of Senior Indebtedness.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
"Senior Indebtedness" means the principal of (and premium, if any) and
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accrued interest on (including all interest accruing subsequent to the
commencement of any bankruptcy or similar proceeding, whether or not a claim for
post-petition interest is allowable as a claim in any such proceeding) (a)
indebtedness of the Company (including indebtedness of other Persons guaranteed
by the Company), other than the Notes, outstanding on the date of this Indenture
which is (i) for money borrowed or (ii) evidenced by a note, debenture or
similar instrument given in connection with the acquisition of any business,
Property or assets, (b) obligations of the Company, whether outstanding on the
date of this Indenture or hereafter created, incurred or assumed, as lessee
under leases required to be capitalized on the balance sheet of the lessee under
GAAP and leases of Property or assets made as part of any sale and leaseback
transaction to which the Company is a party, (c) all reimbursement obligations
and other liabilities (contingent or otherwise) with respect to letters of
credit, bank guarantees or bankers' acceptances, (d) amendments, renewals,
extensions, modifications and refundings of any such indebtedness or obligation
and (e) indebtedness of the Company (including indebtedness of other Persons
guaranteed by the Company) created, incurred or assumed after the date of this
Indenture which is (i) for money borrowed or (ii) evidenced by a note, debenture
or similar instrument given in connection with the acquisition of any business,
Property or assets and amendments, renewals, extensions, modifications and
refundings thereof, if the instrument creating or evidencing such indebtedness
provides by its terms that such indebtedness or obligation is senior in right of
payment to the Notes (all of which indebtedness will have the benefit of the
subordination provisions of Article 10); provided, however, that indebtedness of
the Company (including indebtedness of other Persons guaranteed by the Company)
created, incurred or assumed after the date of this Indenture which is (i) for
money borrowed or (ii) evidenced by a note, debenture or similar instrument and
which, in either case, by its terms is convertible or exchangeable into capital
stock of any Person, and amendments, renewals, extensions, modifications and
refundings thereof, will rank pari passu with the Notes, unless the instruments
creating or evidencing such indebtedness provide by their terms that such
indebtedness is junior in right of payment to the Notes. "Senior Indebtedness"
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shall not include indebtedness or amounts owed (except to banks or other
financial institutions) for compensation to employees, or for goods or materials
purchased or services utilized, in the ordinary course of business of the
Company or of any other Person from whom such indebtedness or amount was assumed
or for whom such indebtedness was guaranteed.
4
"Subsidiary" of a Person on any date means any other Person of whom such
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Person owns, directly or indirectly through a Subsidiary or Subsidiaries of such
Person, Capital Stock with voting power, acting independently and under ordinary
circumstances, entitling such Person to elect a majority of the board of
directors or other governing body of such other Person. Unless otherwise stated
herein or the context otherwise requires, "Subsidiary" means a Subsidiary of the
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Company.
"Threshold Amount" means $________.
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"TIA" or "Trust Indenture Act of 1939" means the Trust Indenture Act of
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1939 (U.S. Code (S)(S) 77aaa-77bbbb) as amended and as in effect on the date of
this Indenture; provided, however, that if the TIA is amended after such date,
"TIA" or "Trust Indenture Act of 1939" means, to the extent required by any such
---- ---------------------------
amendments, the TIA as so amended.
"Trading Day" means (i) if the applicable security is listed or admitted
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for trading on a national security exchange, a day on which such exchange is
open for business, (ii) if the applicable security is quoted on the Nasdaq Stock
Market, a day on which trades may be made thereon or (iii) if the applicable
security is not so listed, admitted for trading or quoted, any Business Day.
"Trustee" means the party identified in the title of this Indenture as
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trustee until a successor replaces it in accordance with the applicable
provisions of this Indenture and, thereafter, "Trustee" means such successor.
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"Trust Officer" means any officer or corporate trust officer or assistant
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corporate trust officer of the Trustee assigned by the Trustee to administer its
corporate trust matters.
Section 1.2 Other Definitions.
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Term Defined in Section
----- ------------------
"Agent Members"......................................................... 2.7
"Bankruptcy Law"........................................................ 5.1
"Code".................................................................. 10.4
"Covenant Default"...................................................... 10.4
"Custodian"............................................................. 5.1
"Delivery of Spin-Off Securities Option"................................ 9.3
"Event of Default"...................................................... 5.1
"Exchange Consideration"................................................ 9.3
"Exchange Ratio"........................................................ 9.3
"ex-dividend date"...................................................... 9.3
"Extraordinary Dividend"................................................ 9.3
"Notice of Default"..................................................... 5.1
"Paying Agent".......................................................... 2.3
"Payment Default"....................................................... 10.4
"Register".............................................................. 2.3
5
"Registrar"............................................................. 2.3
"Reorganization Event".................................................. 9.3
"Significant Subsidiary"................................................ 5.1
"Spin-Off".............................................................. 9.3
"Spin-Off Securities"................................................... 9.3
"Transaction Value"..................................................... 9.3
Section 1.3 Incorporation by Reference of Trust Indenture Act.
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This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. Such
provisions shall apply to this Indenture at all times, notwithstanding that at
any time or from time to time this Indenture is not required to be qualified
under the TIA.
The following TIA terms used in this Indenture have the following meanings:
"commission" means the SEC;
"indenture securities" means the Notes;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the Notes means the Company and any successor obligor
on the Notes.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA and not
otherwise defined herein have the meanings so assigned to them.
Section 1.4 Rules of Construction.
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Unless the context otherwise requires or unless otherwise stated herein:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP ;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
6
(5) references to sections of or rules under the Securities
Act, the Exchange Act or the TIA shall be deemed to
include substitute, replacement or successor sections
or rules;
(6) references to Sections or Articles mean Sections or
Articles of this Indenture; and
(7) solely for purposes of this Indenture and the Notes, a
determination, approval or other action by the Board of
Directors shall not be deemed to have been made, given
or taken unless it is set forth in a written resolution
or resolutions (or comparable written instrument) duly
adopted thereby.
ARTICLE 2
THE NOTES
Section 2.1 Form and Dating.
---------------
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A which is hereby incorporated in and
expressly made a part of this Indenture. The Notes may have notations, legends
or endorsements required by law, stock exchange rule, agreements to which the
Company is subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company). Each Note shall be dated
the date of its authentication. The terms of the Notes set forth in Exhibit A
are part of the terms of this Indenture. The Notes are general unsecured
obligations of the Company limited to $150,000,000 in the aggregate principal
amount, subject to Section 2.7. The Notes shall be issuable only in registered
form without coupons and only in denominations of the Initial Price or multiples
thereof.
Section 2.2 Execution and Authentication.
----------------------------
Two Officers shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
Any Note bearing the manual or facsimile signature of an individual shall
be valid notwithstanding that such individual ceased to be an Officer prior to
authentication of the Note or ceased to hold the office of Company ascribed to
such individual on the Note.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence, and the only evidence,
that the Note has been authenticated under this Indenture.
7
The Trustee shall authenticate Notes for original issue up to the aggregate
principal amount stated in Section 2.1, upon delivery of (i) a written order of
the Company signed by an Officer directing the Trustee to authenticate the Notes
and (ii) an Officers' Certificate certifying that all conditions precedent to
the issuance of the Notes contained herein have been complied with. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount, except as provided in Section 2.7.
The Trustee may appoint an authenticating agent upon the approval and at
the expense of the Company to authenticate Notes. Unless limited by the terms
of such appointment, an authenticating agent shall be authorized to authenticate
Notes at such times and upon such conditions as the Trustee is so authorized.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent.
Section 2.3 Registrar and Paying Agent.
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The Company shall maintain in the City of New York, New York an office or
agency where Notes may be presented for registration of transfer or for exchange
(the "Registrar"), and an office or agency where Notes may be presented for
---------
payment (the "Paying Agent"). The Registrar shall keep a register of the Notes
------------
(the "Register") and of their transfer and exchange. The Company may appoint
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one or more co-registrars and one or more additional paying agents upon the
reasonable approval of the other Registrar or Registrars or Paying Agent or
Paying Agents, as the case may be, and at the expense of the Company. The term
"Registrar" includes any co-registrar or co-registrars and the term "Paying
--------- ------
Agent" includes any additional paying agent or paying agents. The Company may
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change any Paying Agent, Conversion Agent or Registrar without notice to any
Holder. The Company shall promptly notify the Trustee in writing of the name
and address of any Agent not a party to this Indenture. The Company or any
Subsidiary may act as Paying Agent (except for purposes specified in Sections
2.13 and 3.1), or Registrar. If the Company fails to appoint or maintain itself
or another Person as Registrar or Paying Agent, the Trustee shall act as such
and shall be entitled to appropriate compensation therefor pursuant to Section
6.7.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture, which shall incorporate the terms of the TIA.
The agreement shall implement the provisions of this Indenture that relate to
such Agent. The Company shall notify the Trustee of the name and address of any
such Agent.
The Company initially appoints the office of the Trustee at the Corporate
Trust Office, and through it the offices of its agent, Norwest Bank, Minnesota,
National Association, _______________New York, New York [ZIP] as the offices or
agencies for each of the purposes designated in this Section 2.3 to act as
Registrar and Paying Agent with respect to the Notes.
Section 2.4 Paying Agent to Hold Money and Common Stock in Trust.
----------------------------------------------------
The Company shall require each Paying Agent (other than the Trustee) to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all Common
8
Stock and money held by the Paying Agent for the payment of Principal of or
interest on the Notes, and will notify the Trustee of any default by the Company
in making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all Common Stock and money held by it to the
Trustee and account for any Common Stock and money disbursed by it. The Company
at any time may require a Paying Agent to pay all Common Stock and money held by
it to the Trustee and account for any Common Stock and money disbursed by it.
Upon payment over to the Trustee, the Paying Agent (if other than the Company or
a Subsidiary of the Company) shall have no further liability for the Common
Stock and money delivered to the Trustee. If the Company or an Affiliate of the
Company acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all Common Stock and money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Notes.
Section 2.5 Holder Lists.
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The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish or the
Company shall cause the Registrar to furnish to the Trustee at least ten
Business Days before each Interest Payment Date, and at such other times as the
Trustee may request in writing within five Business Days after such request, a
list in such form and as of such date as the Trustee may reasonably require, and
upon which the Trustee may conclusively rely, of the names and addresses of, and
principal amount of Notes held by, the Holders.
Section 2.6 Transfer and Exchange.
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(a) Upon surrender for registration or transfer of any Note, together with
a written instrument of transfer satisfactory to the Registrar duly executed by
the Holder or such Xxxxxx's attorney duly authorized in writing, at the office
or agency of the Registrar, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denomination or
denominations, of a like aggregate principal amount. The Company shall not
charge a service charge for any registration of transfer or exchange of Notes;
provided, that the Company may require from a Holder requesting such transfer or
exchange (other than any exchange of a temporary Note for a definitive Note not
involving any change in ownership) payment of an amount sufficient to pay all
taxes, assessments or other governmental charges that may be imposed in
connection with the transfer or exchange.
(b) Transfers of Notes may be effected only by surrender of the Notes to
the Company for registration and the issuance by the Company of one or more new
Notes. Until such surrender and registration, the Company may treat the Holders
of Notes appearing on the Register as the absolute owners of such Notes .
(c) At the option of the Holder, Notes may be exchanged for other Notes of
any authorized denomination or denominations, of a like aggregate principal
amount, upon surrender
9
of the Notes to be exchanged, together with a written instrument of exchange
satisfactory to the Registrar duly executed by the Holder or such Xxxxxx's
attorney duly authorized in writing, at the office or agency of the Registrar.
Whenever any Notes are so surrendered for exchange, the Company shall execute,
and the Trustee shall authenticate and deliver, Notes which the Holder making
the exchange is entitled to receive.
(d) All Notes issued upon any registration of transfer or exchange of
Notes shall be valid obligations of the Company, evidencing the same debt and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
(e) Prior to the due presentation for registration of transfer of any
Note, the Company, the Trustee, the Paying Agent, the Registrar or any co-
registrar may deem and treat the Person in whose name a Note is registered as
the absolute owner of such Note for the purpose of receiving payment of
Principal of and interest on such Note and for all other purposes whatsoever,
whether or not such Note is overdue, and none of the Company, the Trustee, the
Paying Agent, the Registrar or any co-registrar shall be affected by notice to
the contrary.
Section 2.7 Global Securities.
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This Section 2.7 shall apply only to any Global Security deposited with or
on behalf of the Depositary.
(a) Each Global Security authenticated under this Indenture (i) shall be
registered in the name of the Depositary for such Global Security or Global
Securities or the nominee of the Depositary and (ii) shall be delivered by the
Trustee to the Depositary or pursuant to the Depositary's instructions or held
by the Trustee as custodian for the Depositary.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of the Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Notes registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (A) such Depositary (i) has notified the Company that it is
unwilling or unable to continue as Depositary for such Global Security and the
Company thereupon fails to appoint a successor Depositary or (ii) has ceased to
be a clearing agency registered under the Exchange Act, (B) there shall have
occurred and be continuing an Event of
10
Default or any event which after notice or lapse of time or both would be an
Event of Default with respect to the Securities or (C) the Company in its sole
discretion determines that such Global Security shall be so exchangeable or
transferable.
(c) Subject to Section 2.7(b) above, upon issuance of Notes in definitive
registered certificated form, the Trustee shall register the Notes in the name
of, and cause the Notes to be delivered to, the Person or Persons (or the
nominee thereof) identified as the beneficial owners as the Depositary shall
direct.
(d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Section, Section 2.8, 2.11 or otherwise, shall
be authenticated and delivered in the form of, and shall be, a Global Security,
unless such Note is registered in the name of a Person other than the Depositary
for such Global Security or a nominee thereof.
(e) Each Note certificate evidencing the Global Securities (and all Notes
issued in exchange therefor or in substitution thereof) shall bear a legend in
substantially the following form:
"Unless this Certificate is presented by an authorized representative
of The Depository Trust Company to Southwest Securities Group, Inc. or
its agent for registration of transfer, exchange or payment, and any
Certificate issued in exchange for this Certificate or any portion
hereof is registered in the name of Cede & Co. (or in such other name
as is requested by an authorized representative of The Depository
Trust Company), any transfer, pledge or other use hereof for value or
otherwise by or to any person other than The Depository Trust company
or a nominee thereof is wrongful inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
This Note is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a depositary
or a nominee thereof. This Note may not be exchanged in whole or in
part for a Note registered, and no transfer of this Note in whole or
in part may be registered, in the name of any person other than such
Depositary or a nominee thereof, except in the limited circumstances
described in the Indenture."
(f) No Obligation of the Trustee.
----------------------------
The Trustee shall have no responsibility or obligation to any beneficial
owner of a Global Security, a member of, or a participant in the Depositary or
other Person with respect to the accuracy of the records of the Depositary or
its nominee or of any participant or member thereof, with respect to any
ownership interest in the Notes or with respect to the delivery to any
participant, member, beneficial owner or other Person (other than the
Depositary) of any notice (including any notice of redemption) or the payment of
any amount, under or with respect to such Notes. All notices and communications
to be given to the Holders and all payments to be
11
made to Holders under the Notes shall be given or made only to or upon the order
of the registered Holders (which shall be the Depositary or its nominee in the
case of a Global Security). The rights of beneficial owners in any Global
Security shall be exercised only through the Depositary subject to the
applicable rules and procedures of the Depositary. The Trustee may rely and
shall be fully protected in relying upon information furnished by the Depositary
with respect to its members, participants and any beneficial owners.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Note (including any transfers between or among the Agent Members or
beneficial owners in any Global Security) other than to require delivery of such
certificates and other documentation or evidence as are expressly required by,
and to do so if and when expressly required by, the terms of this Indenture, and
to examine the same to determine substantial compliance as to form with the
express requirements hereof.
Section 2.8 Replacement Notes.
-----------------
Upon surrender of a mutilated Note at the office or agency of the
Registrar, the Company shall execute, and the Trustee shall authenticate and
deliver, a replacement Note in the name of the Holder of such mutilated Note, of
like principal amount and dated the date of such mutilated Note.
Upon surrender of written notice by a Holder or a Holder's attorney duly
authorized in writing at the office or agency of the Registrar that a Note has
been lost, destroyed or wrongfully taken, the Company shall execute, and the
Trustee shall authenticate and deliver, a replacement Note in the name of such
Holder, of like principal amount and dated the date of such lost, destroyed or
wrongfully taken Note; provided, however, that, unless such requirement is
waived by the Company, such notice shall be accompanied by an indemnity or
indemnity bond from an acceptable issuer that is sufficient in the judgment of
the Trustee and the Company to protect the Company, the Trustee, any Agent and
any authenticating agent from any loss which any of them may suffer by reason of
such Note's replacement.
The Company may charge the Holder for its expenses in replacing a Note.
Every replacement Note shall be an obligation of the Company and shall be
entitled to all benefits of this Indenture equally and proportionately with all
other Notes duly issued hereunder.
Section 2.9 Outstanding Notes.
-----------------
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in the Global Security effected
by the Trustee hereunder and those described in this Section 2.9 as not
outstanding. Except as set forth in Section 2.10, a Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
12
If a Note is replaced pursuant to Section 2.8, it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Note is
held by a holder in due course.
If the principal amount of any Note is considered paid under Section 3.1,
it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, any Subsidiary or an Affiliate
of any thereof) segregates and holds in trust, in accordance with this
Indenture, on a redemption date or maturity date money sufficient to redeem or
pay Notes payable on that date, and is not prohibited from paying such money to
the Holders thereof pursuant to the terms of this Indenture, then on and after
such redemption date or maturity date such Notes shall be deemed to be no longer
outstanding and shall cease to accrue interest.
Section 2.10 Treasury Notes.
--------------
In determining whether the Holders of the required aggregate principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company or by any Affiliate of the Company shall be considered as though
not outstanding; provided, however, that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, waiver or
consent, only Notes as to which a Trust Officer of the Trustee knows are so
owned shall be so disregarded.
Section 2.11 Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the Company may prepare and
execute and the Trustee shall authenticate and deliver temporary Notes upon a
written order of the Company signed by an Officer and delivered to a Trust
Officer. Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Company considers appropriate for temporary
Notes. If temporary Notes are issued, the Company shall, without unreasonable
delay, prepare definitive Notes which may be exchanged for temporary Notes.
After the preparation of definitive Notes, the temporary Notes shall be
exchangeable for definitive Notes upon surrender of the temporary Notes at the
office or agency of the Registrar, without charge to Holders. Upon surrender
for cancellation of one or more temporary Notes, the Company shall execute and
the Trustee upon a written order of the Company signed by an Officer shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Notes of authorized denominations. Until so exchanged, the temporary
Notes shall in all respects be entitled to the same benefits under this
Indenture as definitive Notes.
Section 2.12 Cancellation.
------------
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee shall promptly cancel and destroy (in accordance with the standard
document destruction policies of the Trustee) all Notes so delivered
13
and certify to the Company their destruction unless by a written order signed by
an Officer, the Company shall direct that cancelled Notes be returned to it. The
Company may not issue new Notes to replace Notes that have matured or been
redeemed.
Section 2.13 Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Notes, the Company
shall pay defaulted interest (plus interest on such defaulted interest, to the
extent lawful, at the rate borne by the Notes) in any lawful manner. The
Company shall pay the defaulted interest to the Persons who are Holders on a
subsequent special record date. The Company shall fix or cause to be fixed (or
upon the Company's failure to do so the Trustee shall fix) any such special
record date and payment date to the reasonable satisfaction of the Trustee,
which specified record date shall not be less than 10 days prior to the payment
date for such defaulted interest, and shall promptly mail or cause to be mailed
to each Holder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid and
the date of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed to be
paid with respect to such defaulted interest or shall make arrangements
reasonably satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, which money when so deposited shall be held in trust for the
benefit of the Person entitled to such defaulted interest as provided in this
Section 2.13.
Section 2.14 Deposit of Moneys and Common Stock.
----------------------------------
(a) Prior to 10:00 a.m., New York City time, on each Interest Payment Date
and the Maturity Date, the Company shall deposit with the Paying Agent in
immediately available funds money sufficient to make cash payments of interest,
if any, due on such Interest Payment Date or Maturity Date, as the case may be,
in a timely manner which permits the Paying Agent to remit payment to the
Holders on such Interest Payment Date or Maturity Date, as the case may be.
(b) Prior to 10:00 a.m. on the Maturity Date, the Company shall deposit
with the Paying Agent, (i) Common Stock, money in immediately available funds or
a combination thereof sufficient to pay the Principal of the Notes on the
Maturity Date as provided in Article 9, in a timely manner which permits the
Paying Agent to remit payment to the Holders on the Maturity Date or as soon
thereafter as practicable (but in no event later than 15 days after the Maturity
Date).
ARTICLE 3
COVENANTS
Section 3.1 Payment of Notes.
----------------
The Company shall (i) pay the Principal of the Notes and (ii) pay interest
on the Notes on the dates and in the manner provided in the Notes and this
Indenture. Principal and interest shall
14
be considered paid on the date due if the Paying Agent (other than the Company
or a Subsidiary) on that date holds money in accordance with this Indenture
designated for and sufficient to pay in cash all Principal and interest then due
and the Paying Agent is not prohibited from paying such money to Holders on that
date pursuant to the terms of this Indenture.
To the extent lawful, the Company shall pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law) on (i) overdue
Principal of the Notes at the rate borne by the Notes and (ii) overdue
installments of interest at the same rate.
Interest with respect to each Note will accrue from the later of (i) the
date such Note is issued or (ii) the last Interest Payment Date from which
Interest has been paid. Notwithstanding the foregoing, if the original issue
price of any Note includes interest accruing from a prior issue date or record
date, interest on such Note will accrue from such earlier date.
Section 3.2 Stay, Extension and Usury Laws.
------------------------------
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law has been
enacted.
Section 3.3 Continued Existence.
-------------------
Subject to Article 4, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence as a
corporation and the corporate existence of the Subsidiaries and will refrain or
cause the Subsidiaries to refrain from taking any action that would cause its
corporate existence or the corporate existence of any of the Subsidiaries to
cease, including without limitation any action that would result in the
liquidation, winding up or dissolution of it or any of the Subsidiaries;
provided, however, that the Company shall not be required to preserve the
existence of any Subsidiary if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and the Subsidiaries and that the loss thereof to the Company taken
as a whole is not disadvantageous in any material respect to the Holders.
Section 3.4 Reports.
-------
(a) The Company shall file with the Trustee copies of all reports and
other information and documents that the Company is required to file with the
SEC pursuant to the Exchange Act. Each such report or other information or
document shall be filed with the Trustee within 15 days after filing of such
report or other information or document with the SEC. The Company will mail or
cause to be mailed to all Holders copies of all of (a) its annual reports to
15
stockholders and (b) quarterly reports to stockholders which are mailed to its
institutional stockholders.
(b) If the Company is at any time no longer subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will
prepare (i) for the first three quarters of each fiscal year of the Company,
quarterly financial statements substantially equivalent to the financial
statements required to be included in a report on Form 10-Q under the Exchange
Act, and (ii) annually, complete audited consolidated financial statements,
including, but not limited to, a balance sheet, a statement of operations, a
statement of stockholders' equity and all appropriate notes. All such financial
statements will be prepared in accordance with GAAP, except for changes with
which the Company's independent accountants concur and except that quarterly
financial statements may be subject to year-end adjustments. The Company will
file or cause to be filed with the Trustee and will mail or cause to be mailed
to the Holders a copy of such financial statements within 50 days after the end
of each of the first three quarters of each fiscal year of the Company and
within 95 days after the close of each fiscal year of the Company, respectively.
Notwithstanding the foregoing, if the Company is no longer subject to such
reporting requirements by reason of the acquisition of capital stock by, or
merger or consolidation of the Company with, a Person which is subject to such
reporting requirements or a Subsidiary of such a Person and such Person has
unconditionally and irrevocably guaranteed payment in full when due of all
amounts payable with respect to the Notes, then the Company need not prepare,
file or mail the financial statements described in this Section 3.4(b);
provided, however, that such Person complies with Section 3.4(a) as if
references therein to the Company were references to such Person.
Section 3.5 Taxes.
-----
The Company shall, and shall cause each of the Subsidiaries to, pay or
discharge prior to delinquency all taxes, assessments and governmental levies,
except as contested in good faith and by appropriate proceedings.
Section 3.6 Convertible or Exchangeable Debt Issued by Subsidiaries.
-------------------------------------------------------
The Company shall not permit any Subsidiary to create, incur, assume or
guarantee after the date of this Indenture any indebtedness which is (i) for
money borrowed or evidenced by a note, debenture or similar instrument and which
(ii) by its terms is convertible or exchangeable into capital stock of any
Person or any amendment, renewal, extension, modification or refunding of any
such indebtedness, unless the instruments creating or evidencing and governing
such indebtedness provide by their terms that such indebtedness ranks pari passu
with or junior to the Notes in right of payment.
Section 3.7 Compliance Certificate.
----------------------
The Company shall deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company, an Officers' Certificate stating that a review
of the activities of the Company and the Subsidiaries during the preceding
fiscal year has been made under the
16
supervision of the signing Officer with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture and further stating, as to such Officer, that to the best of his or
her knowledge the Company has kept, observed, performed and fulfilled each and
every covenant and condition contained in this Indenture and is not in default
in the performance or observance of any of the terms, provisions and conditions
hereof (or, if a Default or Event of Default shall have occurred, describing all
such Defaults or Event of Default of which he or she may have knowledge and what
action the Company is taking or proposes to take with respect thereto), and
that, to the best of his or her knowledge, no event has occurred and remains in
existence by reason of which payments on account of the Principal of or interest
on the Notes are prohibited.
Section 3.8 Further Assurance to the Trustee.
--------------------------------
The Company shall, upon reasonable request of the Trustee, execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the provisions of this
Indenture.
ARTICLE 4
SUCCESSORS
Section 4.1 When Company May Merge or Sell Assets.
-------------------------------------
The Company shall not consolidate with or merge into, or sell, lease,
convey or otherwise dispose of all or substantially all of its assets to, any
Person in a single transaction or series of related transactions, without the
consent of Holders of the majority in aggregate principal amount of Notes then
outstanding, unless:
(a) the Company is the continuing corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, lease, conveyance or other disposition of assets shall have
been made, is organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such Person (if other than the
Company) expressly assumes by supplemental indenture executed and delivered to
the Trustee and in a form reasonably satisfactory to the Trustee, all the
obligations of the Company under the Notes and this Indenture;
(b) immediately before and immediately after giving effect to the
transaction no Event of Default, and no event which, after notice or lapse of
time, or both, would become an Event of Default, shall have occurred and be
continuing;
(c) immediately after giving effect to such transaction, the Notes and
this Indenture (as supplemented by any such supplemental indenture) will be
valid and enforceable obligations of the Company or such successor; and
17
(d) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such proposed
transaction and such supplemental indenture do not conflict with the applicable
provisions of this Indenture and, with respect to such Officers' Certificate
only, that all conditions precedent herein provided for relating to such
transaction have been satisfied.
Section 4.2 Successor Substituted.
---------------------
Upon any consolidation or merger, or any sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company in
accordance with Section 5.1, the Person formed by such consolidation or into or
with which the Company is merged or to which such sale, lease, conveyance or
other disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person has been named as the Company herein;
provided, however that in the case of a sale, lease, conveyance or other
disposition the Company shall not be released from the obligation to pay the
Principal of and interest on the Notes.
ARTICLE 5
DEFAULTS AND REMEDIES
Section 5.1 Events of Default.
-----------------
The following shall constitute an "Event of Default":
----------------
(a) failure to pay any Principal of any Note when due and payable either
in cash or by delivery of Common Stock as provided in Article 9, regardless of
whether such payment is prohibited by the subordination provisions of this
Indenture;
(b) failure to pay any interest on any Note when due and payable, which
failure continues for 30 days, regardless of whether such payment is prohibited
by the subordination provisions of this Indenture;
(c) failure to perform the other covenants of the Company in this
Indenture, which failure continues for 60 days after written notice as provided
in the last paragraph of this Section 5.1;
(d) a default occurs (after giving effect to any applicable grace periods
or any extension of any maturity date) in the payment when due of Principal of,
or an acceleration of, any indebtedness for money borrowed by the Company or any
of its Subsidiaries in excess of $5.0 million, individually or in the aggregate,
if such indebtedness is not discharged, or such acceleration is not annulled,
within ten days after written notice as provided in the last paragraph of this
Section 5.1;
18
(e) the Company or any of its Significant Subsidiaries, pursuant to or
within the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property, and such Custodian is not
discharged within 30 days,
(iv) makes a general assignment for the benefit of its creditors, or
(v) admits in writing that it is generally unable to pay its debts
as the same become due;
(f) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief in an involuntary case against the Company or any
Significant Subsidiary,
(ii) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of the property of the
Company or any Significant Subsidiary, or
(iii) orders the liquidation of the Company or any Significant
Subsidiary,
and, in each case, the order or decree remains unstayed and in effect for 60
consecutive days; or
(g) any judgment or decree for the payment of money in excess of $1.0
million (to the extent not covered by insurance) is rendered against the Company
or any Significant Subsidiary and such judgment or decree shall remain
undischarged or unstayed for a period of 60 days after such judgment or decree
becomes final and non-appealable.
The term "Bankruptcy Law" means Title 11 of the U.S. Code or any similar
--------------
federal, foreign or state law for the relief of debtors. The term "Custodian"
---------
means any receiver, trustee, assignee, liquidator, examiner or similar official
under any Bankruptcy Law. The term "Significant Subsidiary" has the same
----------------------
meaning as significant subsidiary has under Regulation S-X under the Securities
Act as in effect on the date hereof.
A Default under Section 5.1(c) (other than a Default under Section 4.1,
which Default shall be an Event of Default with the notice but without the
passage of time specified in Section 5.1(c)) or Section 5.1(d) shall not be an
Event of Default until (i) the Trustee shall have notified the Company, or the
Holders of at least 25% in aggregate principal amount of the Notes then
outstanding shall have notified the Company and the Trustee, of the Default and
(ii) the Company shall have failed to cure the Default under Section 5.1(c)
within 60 days after receipt
19
of the notice or under Section 5.1(d) within 10 days after receipt of the
notice, respectively. Any such notice must specify the Default, demand that it
be remedied and state that the notice is a "Notice of Default."
-----------------
Section 5.2 Acceleration.
------------
If an Event of Default (other than an Event of Default specified in
Sections 5.1(e) and 5.1(f)) occurs and is continuing, the Trustee (by notice to
the Company), or the Holders of at least 25% in aggregate principal amount of
the Notes then outstanding (by notice to the Company and the Trustee), may
declare the unpaid Principal of and accrued interest on all the Notes then
outstanding to be due and payable. Upon any such declaration, such Principal
and accrued interest shall be due and payable immediately. If an Event of
Default specified in Section 5.1(e) or 5.1(f) occurs, such an amount shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder. The Holders of a majority in
aggregate principal amount of the Notes then outstanding by written notice to
the Trustee may rescind an acceleration and its consequences if (a) the Company
has paid or deposited with the Trustee a sum sufficient to pay (i) all overdue
interest on all Notes then outstanding and (ii) the Principal of the Notes then
outstanding which has become due otherwise than by such declaration of
acceleration and accrued interest thereon at a rate borne by the Notes and (b)
the rescission would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except nonpayment of
Principal or interest that has become due solely because of the acceleration.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
Section 5.3 Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may pursue any
remedy available under applicable law to collect the payment of Principal and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
Section 5.4 Waiver of Existing and Past Defaults.
------------------------------------
The Holders of a majority in aggregate principal amount of the Notes then
outstanding held by Persons who are not Affiliates of the Company by written
notice to the Trustee may waive an existing Default or Event of Default and its
consequences, except (i) a continuing Default or Event of Default in the payment
of the Principal of or the interest on any Note or (ii) a Default or Event of
Default with respect to a provision that under Section 8.2 cannot be amended
without the consent of each Holder affected. Upon any such waiver, such Default
shall cease to exist and any Event of Default arising therefrom shall be deemed
to have been cured for every
20
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 5.5 Control by Majority.
-------------------
Notwithstanding anything contained in Section 5.3 to the contrary, the
Holders of a majority in aggregate principal amount of the Notes 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; provided, however, that the Trustee may refuse to follow any
direction that conflicts with applicable law or this Indenture or that the
Trustee determines is unduly prejudicial to the rights of other Holders or would
involve the Trustee in personal liability; provided further, however, that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Prior to taking any action or following any direction pursuant to this
Article 5, the Trustee shall be entitled to request indemnification from the
requesting Holders satisfactory to it in its sole discretion against any loss or
expense caused by taking such action or following such direction. If the
Trustee makes such request, it shall be entitled to delay taking such action or
following such direction until it has received such indemnification.
Section 5.6 Limitation on Suits.
-------------------
A Holder may pursue a remedy with respect to this Indenture or the Notes
only if:
(a) the Holder gives to the Trustee notice of a continuing Event of
Default;
(b) the Holders of at least 25% in aggregate principal amount of the Notes
then outstanding make a written request to the Trustee to pursue the remedy;
(c) such Holder or Holders offer to the Trustee indemnity satisfactory to
the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in aggregate
principal amount of the Notes then outstanding do not give the Trustee a
direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder.
Section 5.7 Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of Principal of and interest on such Note,
on or after the respective due dates
21
expressed in the Note, or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
Section 5.8 Collection Suit by Trustee.
--------------------------
If an Event of Default specified in Section 5.1(a) or 5.1(b) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company for the whole amount of Principal of and
interest accrued on the Notes and interest on overdue Principal or repurchase
price, if any, of and accrued interest on the Notes and for such further amount
as shall be sufficient to cover the costs and, to the extent lawful, expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel.
Section 5.9 Trustee May File Proofs 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 and the
Holders allowed in any judicial proceedings relative to the Company, its
creditors or its property. Except as provided in this Indenture, nothing
contained herein shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder or to authorize the Trustee to vote with respect to the
claim of any Holder in any such proceeding.
Section 5.10 Priorities.
----------
If the Trustee collects any money and/or Common Stock pursuant to this
Article 5, it shall pay out the money and/or Common Stock in the following
order:
First: to the Trustee for amounts due under Section 5.8 or 6.7;
Second: to holders of Senior Indebtedness to the extent required by
Article 10;
Third: to Holders for amounts due and unpaid on the Notes for
Principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and
payable on the Notes for Principal and interest,
respectively; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders and, if it does so, will give prompt prior written notice thereof to the
Registrar.
22
At least 15 days before any such record date, the Trustee shall give or
cause to be given to each Holder a notice that states such record date, such
payment date and the amount to be paid.
Section 5.11 Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 5.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
5.7 or a suit by Holders of more than 10% in aggregate principal amount of the
then outstanding Notes.
ARTICLE 6
TRUSTEE
Section 6.1 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 such person's
own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties that are specifically
set forth in this Indenture or the TIA and no others; and
(ii) in the absence of negligence, willful misconduct or 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. However, the Trustee shall examine
the certificates and opinions to determine whether or not they conform
to the requirements of this Indenture, but the Trustee need not verify
the contents thereof.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this Section 6.1(c) does not limit the effect of Section 6.1(b);
23
(ii) 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; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.5.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to the provisions of the TIA and Sections 6.1(a), 6.1(b),
6.1(c) and 6.1(e).
(e) The Trustee may refuse to perform any duty or exercise any right or
power hereunder unless it receives indemnity satisfactory to it against any
loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money or Common
Stock received by it hereunder, except as the Trustee may agree in writing with
the Company. Money or Common Stock held by the Trustee in trust hereunder need
not be segregated from other funds, except to the extent required by law.
Section 6.2 Rights of Trustee.
-----------------
(a) The Trustee may conclusively 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, but the Trustee,
in its discretion, may make such further inquiry or investigation into such
facts or matters to the extent reasonably deemed necessary by it.
(b) Before the Trustee acts or refrains from acting pursuant to the terms
of this Indenture or otherwise, it may require an Officers' Certificate or an
Opinion of Counsel, or both. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such Officers' Certificate
or Opinion of Counsel.
(c) The Trustee may act through agents and attorneys and shall not be
responsible for the willful misconduct or gross negligence of any agents and
attorneys appointed with due care.
(d) Subject to the provisions of Section 6.1(c), 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 conferred by this Indenture.
Section 6.3 Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any 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 and must
comply with Sections 6.10 and 6.11.
24
Section 6.4 Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Notes, it shall not be accountable for the Company's use of the
proceeds from the Notes, and it shall not be responsible for any statement of
the Company in this Indenture or any statement in the Notes other than its
authentication.
Section 6.5 Notice of Defaults.
------------------
If a Default or Event of Default occurs and is continuing and if it is
actually known to the Trustee, the Trustee shall mail to the Company and each
Holder a notice of the Default or Event of Default within 90 days after it
occurs, unless such Default or Event of Default shall have been cured or waived.
Except in the case of a Default or Event of Default in payment on any Note under
Section 5.1(a) or 5.1(b), 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 best interests of Holders.
Section 6.6 Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 15, commencing, May 15, 2000, the Trustee
shall mail to the Company and each Holder, at the Company's expense, a brief
report dated as of such reporting date that complies with TIA (S) 313(a) (but if
no event described in TIA (S) 313(a) has occurred within the 12 months preceding
the reporting date, no report need be transmitted). The Trustee also shall
comply with TIA (S) 313(b)(2) to the extent applicable. The Trustee shall also
transmit by mail all reports as required by XXX (S) 313(c).
Provided that this Indenture shall have been qualified under the TIA, a
copy of each report at the time of its mailing to Holders shall be filed with
the SEC and each stock exchange or market on which the Notes are listed or
admitted to trading. The Company shall promptly notify the Trustee when the
Notes are listed on any stock exchange or admitted to trading on any market and
of any delisting thereof.
Section 6.7 Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee (in its capacities as Trustee, Paying
Agent and Registrar) from time to time such compensation as may be agreed in
writing between the Company and the Trustee for its services hereunder. The
Trustee's compensation shall not be (to the extent permitted by law) limited by
any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred by it in accordance with any provision of this Indenture. Such
expenses may include the reasonable compensation and out-of-pocket expenses of
the Trustee's agents and counsel, except such disbursements, advances and
expenses as may be attributable to its negligence, willful misconduct or bad
faith. Any "float" earned on any money disbursed hereunder shall be considered
additional compensation to the Trustee.
25
The Company shall indemnify the Trustee (in its capacity as Trustee, Paying
Agent and Registrar) and each of its officers, directors, employees, attorneys-
in-fact and agents for, and hold each of such Persons harmless against, any
claim, demand, expense (including, but not limited to, reasonable disbursements
and expenses of the Trustee's agents and counsel), loss or liability incurred by
any of them without negligence, willful misconduct or bad faith on such Person's
part, arising out of or in connection with the administration of this trust and
the rights or duties of the Trustee hereunder, including the reasonable costs
and expenses of such Person's defense against any claim or liability in
connection with the exercise or performance of any of the Trustee's powers or
duties hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. The Company shall
defend the claim and the Trustee shall provide reasonable cooperation at the
Company's expense in the defense. The Trustee may engage separate counsel at
its own expense and participate in the defense, provided that the Company shall
bear the reasonable expenses of such separate counsel which is reasonably
acceptable to the Company if the defendants regarding such claim include both
the Trustee and the Company and the Company and the Trustee shall have been
advised in writing by the Trustee's separate counsel that representation of the
Trustee and the Company would be inappropriate under applicable standards of
professional responsibility due to actual or potential differing interests
between them. The Company need not reimburse any expense or indemnify against
any loss or liability to the extent incurred by the Trustee through its
negligence, bad faith or willful misconduct. The Company need not pay for any
settlement made without its consent, which consent shall not be unreasonable
withheld.
The Company's payment obligations pursuant to this Section 6.7 shall
survive the discharge of this Indenture. When the Trustee incurs expenses or
renders services after an Event of Default specified in Section 5.1(e) or 5.1(f)
occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any Bankruptcy Law.
Section 6.8 Replacement of Trustee.
----------------------
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 6.8.
The Trustee may resign by so notifying the Company in writing at least 30
days prior to the date of the proposed resignation; provided, however, that no
such resignation shall be effective until a successor Trustee has accepted its
appointment pursuant to this Section 6.8. The Holders of a majority in
aggregate principal amount of the then outstanding Notes may remove the Trustee
by so notifying the Trustee and the Company. The Company shall remove the
Trustee if:
(a) the Trustee fails to comply with Section 6.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
26
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee is not appointed or does not take office within 30
days after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in aggregate principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.10, any Holder 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. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to the Holders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee upon payment of all amounts due it hereunder.
Notwithstanding the replacement of the Trustee pursuant to this Section 6.8, the
Company's obligations under Section 6.7 shall continue for the benefit of the
retiring Trustee with respect to expenses and liabilities incurred by it prior
to such replacement.
Section 6.9 Successor Trustee by Xxxxxx.
---------------------------
Except as otherwise provided in Section 6.8(a) or 6.8(d), if the Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.
Section 6.10 Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a). The Trustee shall always have a combined capital and surplus
as stated in its most recent published annual report of condition of at least
$100 million. The Trustee shall comply with TIA (S) 310(b). In the event the
Trustee shall cease to be eligible in accordance with this Section 6.10, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 6.8.
Section 6.11 Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
27
ARTICLE 7
DISCHARGE OF INDENTURE
Section 7.1 Termination of Company's Obligations.
------------------------------------
This Indenture shall cease to be of further effect (except that the
Company's obligations under Section 6.7 and 7.2 shall survive) when all
outstanding Notes theretofore authenticated and issued (other than destroyed,
lost or stolen Notes which have been replaced or paid) have been delivered to
the Trustee for cancellation and the Company has paid all sums payable hereunder
(including, without limitation, the payment of Principal in cash or by delivery
of Common Stock as provided in Article 9).
Section 7.2 Repayment to Company.
--------------------
The Trustee and the Paying Agent shall promptly pay to the Company upon
request any excess money or Common Stock held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon written
request by the Company any money or Common Stock held by them for the payment of
Principal or interest that remains unclaimed for one year after the date upon
which such payment shall have become due; provided, however, that the Company
shall have first caused notice of such payment to the Company to be mailed to
each Holder entitled thereto no less than 30 days prior to such payment. After
payment to the Company, Holders entitled to the money or Common Stock must look
to the Company for payment as general creditors unless an applicable abandoned
property law designates another Person.
ARTICLE 8
AMENDMENTS
Section 8.1 Without Consent of Holders.
--------------------------
The Company and the Trustee may amend this Indenture or the Notes without
the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency; provided such
amendment does not adversely affect the rights of any Holder;
(b) to comply with Section 4.1;
(c) to provide for uncertificated Notes in addition to or in lieu of
certificated Notes;
28
(d) to add to the covenants of the Company such further covenants,
restrictions, conditions or provisions for the protection of the Holders, and to
make the occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions, conditions or provisions an Event of Default
permitting the enforcement of all or any of the several remedies provided in
this Indenture or in the Notes as herein set forth;
(e) to make any change that does not adversely affect the rights hereunder
of any Holder; or
(f) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA; or
(g) to make administrative adjustments appropriate to provide for the
issuance of additional Notes from time to time up to the principal amount of
Notes authorized pursuant to Section 2.1;
provided, however, that, in each case, the Company has delivered to the Trustee
an Officers' Certificate stating that such amendment complies with the
provisions of this Section 8.1 and an Opinion of Counsel stating that adoption
of such amendment does not conflict with the provisions of this Section 8.1.
Section 8.2 With Consent of Holders.
-----------------------
The Company and the Trustee may amend or modify this Indenture or the Notes
with the written consent of the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes, and the Holders of a majority in
aggregate principal amount of the Notes then outstanding may waive compliance in
a particular instance by the Company with any provision of this Indenture or the
Notes; provided, however, that, without the consent of each Holder affected, an
amendment, modification or waiver under this Section 8.2 may not (with respect
to any Notes held by a non-consenting Holder):
(a) change the stated maturity of, or any installment of interest on, or
waive a default in the payment of Principal or repurchase price, if any, of or
interest on any Note;
(b) reduce the principal amount of any Note or reduce the rate or extend
the time of payment of interest on any Note;
(c) decrease the Exchange Ratio;
(d) change the place or currency of payment of Principal of or interest on
any Note;
(e) impair the right to institute suit for the enforcement of any payment
on or with respect to any Note;
29
(f) reduce the percentage of the aggregate principal amount of outstanding
Notes, the consent of the Holders of which is necessary to amend this Section
8.2, consent to a merger, consolidation or conveyance, sale, transfer or lease
of assets as described in Section 4.1 or modify or amend any other provision of
this Indenture;
(g) reduce the percentage of the aggregate principal amount of outstanding
Notes, the consent of the Holders of which is necessary for waiver of compliance
with certain provisions of this Indenture or for waiver of certain defaults;
(h) modify the provisions of this Indenture with respect to the
subordination of the Notes in a manner adverse to the Holders; or
(i) except as otherwise permitted under Article 4, consent to the
assignment or transfer by the Company of any of its rights and obligations under
this Indenture.
To secure a consent of the Holders under this Section 8.2, it shall not be
necessary for the Holders to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment or waiver under this Section 8.2 becomes effective, the
Company shall mail to Holders a notice briefly describing the amendment or
waiver. Any failure of the Company to mail such notices, or any defect therein,
shall not, however, in any way, impair or affect the validity of any such
amendment or waiver.
Section 8.3 Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to this Indenture or the Notes shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
Section 8.4 Revocation and Effect of Consents.
---------------------------------
Until an amendment, supplemental indenture or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by such Holder and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as such consenting Holder's Note, even if notation of the consent is not
made on any Note. However, prior to becoming effective, any such Holder or
subsequent Holder may revoke the consent as to its Notes or a portion thereof if
the Trustee receives written notice of revocation before the consent of Holders
of the requisite aggregate principal amount of Notes then outstanding has been
obtained and not revoked.
The Company may, but shall not be obligated to, fix a record date pursuant
to Section 11.1 for the purpose of determining the Holders entitled to consent
to any amendment or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to consent to such amendment or waiver or to revoke
any consent previously given, whether or not such Persons continue to be Holders
after
30
such record date. No consent shall be valid or effective for more than 90 days
after such record date unless consents from Holders of the principal amount of
Notes required hereunder for such amendment or waiver to be effective shall have
also been given and not revoked within such 90-day period.
After an amendment or waiver becomes effective it shall bind every Holder,
unless it is of the type described in any of Sections 8.2(a) through 8.2(j). In
such case, the amendment or waiver shall bind each Holder of a Note who has
consented to it and every subsequent Holder of a Note that evidences the same
debt as the consenting Holder's Note.
Section 8.5 Notation on or Exchange of Notes.
--------------------------------
The Trustee (in accordance with the written direction of the Company) may
(at the Company's expense) place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment or waiver. Failure to make the appropriate notation
or issue a new Note shall not affect the validity and effect of such amendment,
supplement or waiver.
Section 8.6 Trustee Protected.
-----------------
The Trustee shall sign all supplemental indentures authorized by this
Indenture, except that the Trustee need not sign any supplemental indenture that
adversely affects its rights. In signing or refusing to sign such supplemental
indenture, the Trustee shall be entitled to receive an Officers' Certificate and
Opinion of Counsel to the effect that such supplemental indenture is authorized
or permitted by this Indenture and will be valid and binding on the Company in
accordance with its terms.
ARTICLE 9
PAYMENT OF NOTES IN COMMON STOCK
Section 9.1 Payment of Principal at Maturity.
--------------------------------
(a) At Maturity, the Principal of each Note will be exchanged for
(i) shares of Common Stock at the Exchange Ratio (as defined below);
or
(ii) cash in an amount determined as set forth below
together with any accrued and unpaid interest up to Maturity. Payment of cash
instead of Common Stock will be at the Company's sole discretion, and the
Company may elect the cash payment option with respect to any or all portion of
the Notes. For each increment of principal
31
of the Notes equal to the Initial Price the "Exchange Ratio" is equal to,
subject to adjustment pursuant to Section 9.3:
(i) ____ shares of Common Stock, if the Maturity Price is greater
than or equal to the Threshold Appreciation Price;
(ii) a fractional share of Common Stock equal to the Initial Price
divided by the Maturity Price if the Maturity Price is less
than the Threshold Appreciation Price but is greater than the
Initial Price; and
(iii) one share of Common Stock if the Maturity Price is less than
or equal to the Initial Price.
If the Company elects the cash payment option, the amount of cash it will
deliver for each increment of principal of the Notes equal to the Initial Price
will be the cash equivalent value of such number of shares (or fractions
thereof) of Common Stock at the Maturity Price which the Company would otherwise
be required to deliver pursuant to this Section 9.1(a). Such number of shares of
Common Stock or amount of cash deliverable upon exchange is hereinafter referred
to as the "Exchange Consideration."
(b) On or prior to the 30th day prior to Maturity, the Company will notify
the Trustee and publish a notice in a newspaper of national circulation
published at least five days a week stating whether the principal amount of each
Note will be exchanged for shares of Common stock or cash or both. If less than
all of the outstanding Notes are to be exchanged for Common Stock, the Notes to
be exchanged will be selected by the Trustee from the outstanding Notes by lot
or pro rata (as nearly as may be) or by any other method determined by the
Trustee in its sole discretion to be equitable.
Section 9.2 No Fractional Shares.
--------------------
No fractional shares of Common Stock (and/or other securities if a Spin-Off
or a Reorganization Event has occurred prior to Maturity), will be issued if the
Company exchanges the Notes for shares of Common Stock (and/or such securities).
If more than one Note shall be surrendered for exchange at one time by the same
Holder, the number of full shares of Common Stock and/or such other securities
which will be delivered upon exchange will be computed on the basis of the
aggregate number of Notes so surrendered at Maturity. In lieu of any fractional
share or security otherwise issuable in respect of all Notes of any holder which
are exchanged at Maturity, such Holder shall be entitled to receive an amount in
cash equal to the value of such fractional share or security at the Maturity
Price (or similarly calculated average price for a security other than Common
Stock).
Section 9.3 Adjustment of Exchange Ratio.
----------------------------
(a) The Exchange Ratio will be subject to adjustment as described below to
the extent that any of the events requiring such adjustment occur during the
period commencing on the date
32
of this Indenture and ending on the Business Day prior to Maturity. No
adjustments to the Exchange Ratio will be made other than those specified below.
(i) If the Common Stock is subject to a stock split or reverse stock
split, then at the opening of business on the first Trading Day for
the Common Stock on which such stock split or reverse stock split if
effective, the Exchange Ratio will be adjusted. The new Exchange Ratio
will equal the Exchange Ratio in effect immediately prior to such
Trading Day multiplied by a fraction, the numerator of which will be
the number of shares of Common Stock that, immediately after giving
effect to such stock split or reverse stock split, the shares of
Common Stock outstanding at the close of business on the record date
for holders of Common Stock entitled to such split or reverse stock
split have come to represent and the denominator will be the number of
shares of Common Stock outstanding at the close of business on such
record date. If the record date for such a stock split or reverse
stock split is prior to the Maturity Date but the effective time of
such stock split or reverse stock split is after the Business Day
preceding the Maturity Date, it will be assumed for purposes of this
Section 9.3(a)(i) that such effective date was such Business Day
preceding the Maturity Date.
(ii) If the Common Stock is subject to a stock dividend that is given
ratably to all holders of shares of Common Stock, then at the opening
of business on the first day on which the Common Stock trades without
the right to receive such dividend (the "ex-dividend date"), the
Exchange Ratio will be adjusted by multiplying such Exchange Ratio
immediately prior to such opening of business by a fraction, the
numerator of which will be the number of shares of Common Stock
outstanding at the opening of business on such ex-dividend date plus
the number of shares constituting such stock dividend and the
denominator will be the number of shares of Common Stock outstanding
at the opening of business on such ex-dividend date. If the record
date for such stock dividend is prior to the Maturity Date but the ex-
dividend date is after the Business Day preceding the Maturity Date,
then for purposes of this Section 9.3(a)(ii) it will be assumed that
the ex-dividend date was such Business Day preceding the Maturity
Date.
(iii) If Knight/Trimark issues rights, warrants, options or
convertible or exchangeable securities to all holders of Common Stock
to subscribe for, purchase, convert into or exchange for shares of
Common Stock (other than rights to purchase shares of Common Stock
pursuant to a plan for the reinvestment of dividends or interest) at a
price per share less than the Closing Price of the Common Stock on the
record date for determining the holders of Common Stock entitled to
receive such rights, warrants, options or convertible or exchangeable
securities; then the Exchange Ratio will be adjusted on the record
date for determining the holders of Common Stock entitled to receive
such rights, warrants, options or convertible or exchangeable
securities. The adjusted Exchange Ratio will be calculated by
multiplying the Exchange Ratio in effect
33
immediately prior to such record date by a fraction, the numerator of
which will be the number of shares of Common Stock outstanding at the
close of business on such record date, plus the number of additional
shares of Common Stock issuable pursuant to such rights, warrants,
options or convertible or exchangeable securities and the denominator
or which will be the number of shares of Common Stock outstanding at
the close of business on such record date, plus the number of
additional shares of Common Stock which the aggregate consideration
(based on the Fair Market Value thereof) received or receivable upon
the conversion, exchange, purchase or subscription of all such right,
warrants, options or convertible or exchangeable securities would
purchase at the Closing Price of the Common Stock on such record date.
To the extent that any such rights, warrants, options or convertible
or exchangeable securities, the Exchange Ratio shall be readjusted to
the Exchange Ratio which would then be in effect had such adjustments
for the issuance of such rights, warrants, options or convertible or
exchangeable securities been made upon the basis of delivery of only
the number of shares of Common Stock actually delivered pursuant
thereto.
(iv) There will be no adjustments to the Exchange Ratio to reflect
cash dividends or other distributions paid with respect to Common
Stock other than Extraordinary Dividends. A dividend or other
distribution with respect to Common Stock will be deemed to be an
"Extraordinary Dividend" (i) if such dividend or other distribution is
of securities ("Spin-Off Securities") of an issuer other than
Knight/Trimark (a "Spin-Off") or (ii) if such dividend or other
distribution exceeds the immediately preceding non-Extraordinary
Dividend for Common Stock by an amount equal to at least 10% of the
Closing Price of Common Stock on the first Business Day immediately
preceding the ex-dividend date with respect to such Extraordinary
Dividend. If the record date for an Extraordinary Dividend occurs with
respect to Common Stock prior to the maturity date, the Exchange Ratio
will be adjusted at the opening of business on the ex-dividend date
(or, if the ex-dividend date is after the Business Day preceding the
Maturity Date, such Business Day) by multiplying the Exchange Ratio in
effect immediately prior to such adjustment by a fraction, the
numerator of which will be the Closing Price of Common Stock on the
Business Day immediately preceding such ex-dividend date and the
denominator will be the difference between such Closing Price and the
Extraordinary Dividend Amount. The "Extraordinary Dividend Amount"
with respect to an Extraordinary Dividend for Common Stock will equal
(i) in the case of cash dividends or other distributions that
constitute quarterly dividends, the amount per share of such
Extraordinary Dividends minus the amount per share of the immediately
preceding non-Extraordinary Dividend for Common Stock or (ii) in the
case of cash dividends or other distributions that do not constitute
quarterly dividends, the amount per share of such Extraordinary
Dividend. To the extent an Extraordinary Dividend is not paid in cash,
the value of the non-cash component will be determined by the Board of
Directors of the Company, whose determination will
34
be conclusive and described in a resolution of the Board of Directors;
provided such determination is described in an Officers Certificate
filed with the Trustee.
Notwithstanding the foregoing, in the case of a Spin-Off, the Company
may, at its option, in lieu of adjusting the Exchange Ratio as
described in the immediately preceding paragraph, adjust the Exchange
Ratio used to determine the amount payable upon exchange at Maturity
for each Note to provide that each holder of Notes will receive at
Maturity, in addition to the amount of Common Stock deliverable (or
cash in lieu thereof) for each principal amount of Notes equal to the
Initial Price, an amount of Spin-Off Securities equal to the product
of the Exchange Ratio (as otherwise in effect at Maturity) and the
amount of Spin-Off Securities issued per share of Common Stock in the
Spin-Off, so that the Maturity Price will take into account both the
value of the Spin-Off Securities and the value of the Common Stock
delivered upon exchange of the Notes (the "Delivery of Spin-Off
Securities Option"); provided, however, that the Company may, at its
option, in lieu of delivering an amount of Spin-Off Securities to the
holders of the Notes at Maturity, deliver cash in an amount equal to
the value of such amount of Spin-Off Securities Option. If the Company
elects the Delivery of Spin-Off Securities Option, the Company must
issue a press release through the PR Newswire (or another comparable
or successor service) prior to the opening of business on the ex-
dividend date with respect to such Spin-Off that it elects to deliver
Spin-Off Securities in lieu of adjusting the Exchange Ratio as
described in the immediately preceding paragraph. For purposes of
delivering cash in lieu of delivering Spin-Off Securities at Maturity,
or, if the Company elects to deliver Spin-Off Securities at Maturity,
for purposes of valuing the Spin-Off Securities delivered at Maturity,
the value of the Spin-Off Securities would be an amount equal to the
average Closing Price per share or security of such Spin-Off
Securities for the 20 Trading Days ending on the Business Day prior to
Maturity.
(v) In the event of (A) any consolidation or merger of
Knight/Trimark, or any surviving entity or subsequent surviving entity
of Knight/Trimark (a "Knight/Trimark Successor") with or into another
entity (other than a merger or consolidation in which Knight/Trimark
is the continuing corporation and in which the Common Stock
outstanding immediately prior to the merger or consolidation is not
exchanged for cash, securities or other property of Knight/Trimark or
another entity, (B) any sale, transfer, lease or conveyance to another
Person of the property of Knight/Trimark or any Knight/Trimark
Successor as an entirety or substantially as an entirety, (C) any
statutory exchange of securities of Knight/Trimark of any
Knight/Trimark Successor with another Person (other than in connection
with a merger or acquisition) or (D) any liquidation, dissolution or
winding up of Knight/Trimark or any Knight/Trimark Successor (any such
event described in clause (A), (B), (C) or (D), a "Reorganization
Event"), the Exchange Ratio used to determine the amount payable upon
exchange at Maturity for each Note will be adjusted to provide that
each holder of Notes will receive at Maturity
35
for each principal amount of the Notes equal to the Initial Price cash
in an amount equal to:
(1) __________ multiplied by the Transaction Value, if the
Transaction Value (as defined below) is greater than or
equal to the Threshold Appreciation Price,
(2) the Initial Price, if the Transaction Value is less than the
Threshold Appreciation Price but greater than the Initial
Price and
(3) the Transaction Value, if the Transaction Value is less than
or equal to the Initial Price.
"Transaction Value" means (i) for any cash received by the
Company in any such Reorganization Event, an amount equal to the
product of (A) the Exchange Ratio (applicable to such Exchange
Consideration as in effect on the Business Day prior to Maturity) and
(B) the amount of cash received per share of Common Stock, (ii) for
any property other than cash or securities received by the Company in
any such Reorganization Event, an amount equal to the product of (A)
the Exchange Ratio (applicable to such Exchange Consideration as in
effect on the Business Day prior to maturity) and (B) the then-current
market value of such property received per share of Common Stock as
determined by a nationally recognized independent investment banking
firm retained for this purpose by the Company and (iii) for any
securities received by the Company in any such Reorganization Event,
an amount equal to the product of (A) the Exchange Ratio (applicable
to such Exchange consideration as in effect on the Business Day prior
to Maturity) and (B) the average Closing Price per share of such
securities on the 20 Trading Days ending on the Business Day prior to
Maturity multiplied by the number of such securities received for each
share of Common Stock.
Notwithstanding the foregoing, the Company may, at its option, in
lieu of delivering cash as described above, deliver (a) an amount of
cash equal to (i) the Exchange Ratio (adjusted as described above)
times (ii) the amount of cash, if any, received by the Company per
share of Common Stock in such Reorganization Event plus (b) property
in an amount equal to (i) the Exchange Ratio (as so adjusted) times
(ii) the amount of property, if any, received by the Company per share
of Common Stock in such Reorganization Event plus (c) securities in a
number or amount, as applicable, equal to (i) the Exchange Ratio (as
so adjusted) times (ii) the number or amount, as applicable, of
securities, if any, received by the Company in such Reorganization
Event per share of Common Stock.
(b) No adjustments to the Exchange Ratio will be required unless such
adjustment would require a change of at least 1% in the Exchange Ratio;
provided, however, that any adjustments which by reason of the foregoing are not
required to be made shall be carried
36
forward and taken into account in any subsequent adjustment. All adjustments to
the Exchange Ratio will be calculated to the nearest 1/10,000th of a shares of
Common Stock (or if there is not a nearest 1/10,000th of a share to the next
lower 1/10,000th of a share).
(c) In the case of any such adjustments to the Exchange Ratio (other than
as provided in Section 9.3(a)(iv) above if the Company elects to deliver Spin-
Off Securities rather than to adjust the Exchange Ratio pursuant to the first
paragraph of Section 9.3(a)(iv) above, or as provided in Section 9.3(a)(v)
above, the Maturity Price shall be adjusted in the same manner. The required
adjustment to the Maturity Price shall be made at Maturity by multiplying the
Maturity Price by the cumulative number or fraction determined pursuant to the
Exchange Ratio adjustment procedure described in this Section 9.3.
(d) If as provided in this Article 9 the Company elects to deliver Common
Stock, property and/or securities at Maturity, Holders of the Notes will be
responsible for the payment of any and all brokerage and other transaction costs
upon any subsequent sale of the common Stock, property or securities.
(e) The provisions of this Section 9.3 shall similarly apply to all
successive events of the type described in this Section 9.3. If any securities
or other property are received by the Company with respect to the Common Stock
shall be subject to the adjustments as provided in this Section 9.3 in a manner
as equivalent to the Common Stock hereunder as practicable.
Section 9.4 Notice of Adjustments and Certain Other Events.
----------------------------------------------
The Company shall, within ten Business Days following the occurrence on an
event that requires an adjustment to the Exchange Ratio or the occurrence of a
Spin-Off or a Reorganization Event (or, in any case, if the Company is not aware
of such occurrence, as soon as practicable after becoming so aware), to provide
written notice to the Trustee and to the Holders of the Notes of the occurrence
of such event and a statement in reasonable detail setting forth the method by
which the adjustment to the Exchange Ratio was determined or the change in the
consideration to be received by the Holders of the Notes following a Spin-Off
(if the Company elects to exercise its Delivery of Spin-Off Securities Option)
or a Reorganization Event and setting forth the revised Exchange Ratio or
consideration. In connection with a Spin-Off, such notice shall also include a
statement by the Company as to whether it has elected to exercise its Delivery
of Spin-Off Securities Option.
Section 9.5 Payment of Certain Taxes Upon Exchange; Tax Characterization.
------------------------------------------------------------
The Company will pay any and all taxes that may be payable in respect of
the transfer and delivery of shares of Common Stock, other securities or
property on exchange of Notes pursuant hereto. The Company shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the delivery of shares of Common Stock or other securities in a name
other than that of the Holder of the Note or Notes to be exchanged, and no such
transfer or delivery shall be made unless and until the person requesting such
transfer has
37
paid to the Company the amount of any such tax, or has established, to the
satisfaction of the Company, that such tax has been paid.
The Company hereby agrees, and each Holder by such Xxxxxx's purchase of a
Note will be deemed to agree, (in the absence of an administrative determination
or judicial ruling to the contrary) to characterize the Notes for all tax
purposes as a forward purchase contract to purchase Common Stock (and Spin-Off
Securities, if any) at Maturity (including as a result of acceleration or
otherwise), under the terms of which contract (i) at the time of issuance of the
Notes the Holder deposits irrevocably with the Company a fixed amount of cash
equal to the purchase price of the Notes to assure the fulfillment of the
Holder's purchase obligation described in clause (iii) below, which deposit will
unconditionally and irrevocably be applied at Maturity to satisfy such
obligation, (ii) until Maturity the Company will be obligated to pay interest on
such deposit at a rate equal to the stated rate of interest on the Notes as
compensation to the Holder for the company's use of such cash deposit during the
term of the Note, and (iii) at Maturity such cash deposit unconditionally and
irrevocably will be applied by the Company in full satisfaction of the Holder's
obligation under the forward purchase contract, and the Company will deliver to
the Holder the number of shares of Common Stock (and Spin-Off Securities, if
any) that the Holder is entitled to receive at Maturity pursuant to the terms of
the Notes (subject to the Company's right to deliver cash in lieu of the shares
of Common Stock (and Spin-Off Securities, if any)). Consistent with the above
characterization, (i) amounts paid to the company in respect of the original
issue of the Notes will be treated as allocable in their entirety to the amount
of the cash deposit attributable to such Notes and (ii) amounts denominated as
interest that are payable with respect to the Notes will be characterized as
interest payable on the amount of such deposit, includible annually in the
income of the Holder as interest income in accordance with such Holder's method
of accounting.
Section 9.6 Shares Free and Clear.
---------------------
(a) The Company hereby represents and warrants and agrees that upon
exchange of Notes for Common Stock or other securities or property that the
Holders of the Notes shall hold good and valid title to, and become the
beneficial owners of, such Common Stock, securities or other property, free and
clear of any and all liens, claims, charges, encumbrances and equities. Except
as provided in Section 9.3(d), the Company shall pay all taxes and charges with
respect to the delivery of such Common Stock, securities or other property
delivered in exchange for Notes hereunder.
(b) The Company shall prepare and obtain and keep in force such
governmental or regulatory permits or other authorizations as may be required by
laws, and shall comply with all requirements as to registration or
qualification, in order that any shares of Common stock, securities or other
property delivered upon exchange of the Notes will be freely transferable by the
Holders and not subject to any prospectus delivery or other requirements.
Notwithstanding the foregoing, if the Maturity of the Notes occurs prior to July
8, 2000 shares of Common Stock delivered may be subject to the manner of sale
limitations provided by Rule 144 under the Securities Act.
38
ARTICLE 10
SUBORDINATION
Section 10.1 Agreement to Subordinate.
------------------------
The Company covenants and agrees, and each Holder, by such Xxxxxx's
acceptance of a Note, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article 10, the indebtedness
represented by the Notes and the payment of the Principal, of and interest on
each and all of the Notes are hereby expressly made subordinate and subject in
right of payment to the prior payment in full of all Senior Indebtedness.
No provision of this Article 10 shall prevent the occurrence of any Default
or Event of Default hereunder.
Section 10.2 Payment Over of Proceeds Upon Dissolution, Etc.
-----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to its creditors, as such, or
to its assets, or (b) any liquidation, dissolution or other winding-up of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event the holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due or to become due on or with respect to all
Senior Indebtedness, or provision shall be made for such payment in money or
money's worth, before the Holders are entitled to receive any payment on account
of Principal or repurchase price, if any, of or interest on the Notes, and to
that end the holders of Senior Indebtedness shall be entitled to receive, for
application to the payment thereof, any payment or distribution of any kind or
character, whether in cash, property or securities, which may be payable or
deliverable with respect to the Notes in any such case, proceeding, liquidation,
dissolution or other winding up or event.
In the event that, notwithstanding the foregoing provisions of this Section
10.2, the Trustee or any Holder shall have received any payment or distribution
of assets of the Company of any kind or character, whether in cash, property or
securities, before all Senior Indebtedness is paid in full or payment thereof
provided for, then and in such event such payment or distribution shall be held
in trust by such recipient and shall be paid over or delivered forthwith to the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent
or other Person making payment or distribution of assets of the Company for
application in the form received to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
39
The consolidation of the Company with, or the merger of the Company into,
another Person or the liquidation or dissolution of the Company following the
conveyance or transfer of its properties and assets substantially as an entirety
to another Person upon the terms and conditions set forth in Article 4 shall not
be deemed a dissolution, winding-up, liquidation, reorganization, assignment for
the benefit of creditors or marshalling of assets and liabilities of the Company
for the purposes of this Section 10.2 if the Person formed by such consolidation
or into which the Company is merged or the Person which acquires by conveyance
or transfer such properties and assets substantially as an entirety, as the case
may be, shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article 4.
Section 10.3 Prior Payment to Senior Indebtedness Upon Acceleration of
---------------------------------------------------------
Notes.
-----
If any Notes are declared due and payable before their stated Maturity,
then the holders of Senior Indebtedness outstanding at the time such Notes so
become due and payable shall be entitled to receive payment in full of all
amounts due or to become due on or with respect to such Senior Indebtedness, or
provision shall be made for such payment in money or money's worth, before the
Holders are entitled to receive any payment by the Company on account of the
Principal of or interest on the Notes or on account of the purchase or other
acquisition of Notes.
If, notwithstanding the foregoing, the Company shall make any payment to
the Trustee or to any Holder prohibited by the foregoing provision of this
Section 10.3, then and in such event such payment shall be held in trust by such
recipient and shall be paid over and delivered forthwith to the Company in the
form received.
The provisions of this Section 10.3 shall not apply to any payment with
respect to which Section 10.2 would be applicable.
Section 10.4 No Payment When Senior Indebtedness in Default.
----------------------------------------------
(a) In the event and during the continuation of (i) any default in the
payment of Principal of or interest on any Senior Indebtedness beyond any
applicable grace period with respect thereto (a "Payment Default"), or (ii) any
event of default with respect to any Senior Indebtedness permitting the holders
of such Senior Indebtedness (or a trustee on behalf of the holders thereof) to
declare such Senior Indebtedness due and payable prior to the date on which it
would otherwise have become due and payable (a "Covenant Default"), provided a
Representative of such Senior Indebtedness has delivered to the Company and the
Trustee written notice of such Covenant Default, then, unless and until such
event of default shall have been cured or waived or shall have ceased to exist
or the Company and the Trustee shall have received written notice from the
Representative of the Senior Indebtedness with respect to which such event of
default relates approving payment on the Notes, no payment shall be made by the
Company with respect to the Principal or repurchase price, if any, of or
interest on the Notes or to acquire any of the Notes until such Payment Default
or Covenant Default, as the case may be, is cured or waived; provided that no
such default (other than a default in the payment of Principal) will prevent any
payment on, or with respect to, the Notes for more than 120 days unless the
maturity of such Senior Indebtedness has been accelerated. If any such delay is
made
40
with respect to the Notes due to a Covenant Default, payment on the Notes may
not again be delayed due to a Covenant Default unless at least 360 days have
passed since the last payment delay period began and all scheduled payments
under the Notes that have come due since the last such delay period commenced
have been paid in full in cash.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or to any Holder prohibited by the foregoing
provision of this Section 10.4, then and in such event such payment shall be
held in trust by such recipient and shall be paid over and delivered forthwith
to the Company in the form received.
The provisions of this Section 10.4 shall not apply to any payment with
respect to which Section 10.2 would be applicable.
Section 10.5 Payment Permitted If No Default.
-------------------------------
Nothing contained in this Article 10 or elsewhere in this Indenture or in
any of the Notes shall prevent (a) the Company, at any time except when any of
the conditions described in Section 10.2, 10.3 or 10.4 exist, from making
payments at any time of Principal or repurchase price, if any, of or interest on
the Notes or (b) the application by the Trustee of any money deposited with it
hereunder to the payment of or on account of the Principal or repurchase price,
if any, of or interest on the Notes or the retention of any such payment by the
Holders, except if, at the time of the application by the Trustee, any of the
conditions described in Section 10.2, 10.3 or 10.4 exist; provided that the
Trustee shall have no responsibility to refrain from so applying such money
unless it shall have actual knowledge of the existence of such condition.
Section 10.6 Subrogation to Rights of Holders of Senior Indebtedness.
-------------------------------------------------------
Subject to the payment in full of all Senior Indebtedness, the Holders
shall be subrogated to the extent of the payments or distributions made to the
holders of such Senior Indebtedness pursuant to the provisions of this Article
10 (equally and ratably with the holders of all indebtedness of the Company
which is not Senior Indebtedness and which is entitled to like rights of
subrogation) to the rights of the holders of such Senior Indebtedness to receive
payments and distributions of cash, property and securities applicable to the
Senior Indebtedness until the Principal or repurchase price, if any, of and
interest on the Notes shall be paid in full. For purposes of such subrogation,
no payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the Holders or the Trustee would be entitled
except for the provisions of this Article, and no payments over pursuant to the
provisions of this Article to the holders of Senior Indebtedness by Holders or
the Trustee, shall, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders be deemed to be a payment or distribution by
the Company to or on account of Senior Indebtedness.
Section 10.7 Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article 10 are and are intended solely for the
purpose of defining the relative rights of the Holders on the
41
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article 10 or elsewhere in this Indenture or in the Notes is
intended to or shall: (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders, the obligation of the Company,
which is absolute and unconditional (and which, subject to the rights under this
Article 10 of the holders of Senior Indebtedness, is intended to rank equally
with all other general obligations of the Company), to pay to the Holders the
Principal or repurchase price, if any, of and interest on the Notes as and when
the same shall become due and payable in accordance with their terms; or (b)
affect the relative rights against the Company of the Holders and creditors of
the Company other than the holders of Senior Indebtedness; or (c) prevent the
Trustee or any Holder from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article 10 of the holders of Senior Indebtedness to receive cash,
property and securities otherwise payable or deliverable to the Trustee or such
Holder.
Section 10.8 Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Note by acceptance thereof authorizes and directs the
Trustee on such Xxxxxx's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article 10 and
appoints the Trustee as such Xxxxxx's attorney-in-fact for any and all such
purposes.
Section 10.9 No Waiver of Subordination Provisions.
-------------------------------------
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act by 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 any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee or the Holders, without incurring
responsibility to the Holders and without impairing or releasing the
subordination provided in this Article 10 or the obligations hereunder of the
Holders to the holders of Senior Indebtedness, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, Senior Indebtedness, or otherwise amend or
supplement in any manner Senior Indebtedness or any instrument evidencing the
same or any agreement under which Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness; (iii) release any Person liable in any
manner for the collection of Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
42
Section 10.10 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 with respect to the Notes. Notwithstanding the provisions of this
Article 10 or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee with respect to the Notes, unless and
until the Trustee shall have received written notice thereof from the Company or
a holder of Senior Indebtedness or from any Representative therefor, and, prior
to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 6.1, shall be entitled in all respects to assume that no
such facts exist; the fact that the Trustee may so rely does not relieve the
Holders of their obligations under Section 10.3 to hold in trust any payments
received in contravention of Sections 10.2, 10.3 or 10.4.
Subject to the provisions of Section 6.1, 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 therefor) to
establish that such notice has been given by a holder of Senior Indebtedness (or
a Representative therefor). 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 10, 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 to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article 10, 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 10.11 Reliance on Judicial Order or Certificate of Liquidating
--------------------------------------------------------
Agent.
-----
Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee, subject to the provisions of Section 6.1, and the
Holders shall be entitled to rely upon any order or decree entered by any court
of competent jurisdiction in which such insolvency, bankruptcy, receivership,
liquidation, reorganization, dissolution, winding-up or similar case or
proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Trustee or to
the Holders, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
Section 10.12 Trustee Not Fiduciary for Holders of Senior Indebtedness.
` --------------------------------------------------------
The Trustee shall not be deemed to owe any fiduciary duty to, or be subject
to any implied covenants or obligations in favor of, the holders of Senior
Indebtedness and shall not be
43
liable to any such holders if it shall in good faith mistakenly pay over or
distribute to Holders or to the Company or to any other Person cash, property or
securities to which any holders of Senior Indebtedness shall be entitled by
virtue of this Article 10 or otherwise.
Section 10.13 Rights of Trustee as Holder of Senior Indebtedness;
---------------------------------------------------
Presevation of Trustee's Rights.
-------------------------------
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article 10 with respect to any Senior Indebtedness which may
at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
Section 10.14 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 10 shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article 10 in addition to or in place of the Trustee; provided,
however, that Section 10.13 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
ARTICLE 11
MEETINGS OF HOLDERS
Section 11.1 Action by Holders.
-----------------
Whenever in this Indenture it is provided that the Holders of a specified
percentage in aggregate principal amount of the Notes may take any action
(including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact that at the time
of taking any such action, the Holders of such specified percentage have joined
therein may be evidenced (a) by any instrument or any number of instruments of
similar tenor executed by Holders in person or by proxy appointed in writing or
(b) by the record of the Holders voting in favor thereof at any meeting of
Holders called and held in accordance with the provisions of this Article 11.
Whenever the Company or the Trustee solicits the taking of action by the
Holders, the Company or the Trustee may fix in advance of such solicitation a
date as the record date for determining Holders entitled to take such action. If
a record date is fixed, those and only those Persons who are Holders at the
record date so fixed, or their proxies, shall be entitled to take such action
regardless of whether they are Holders at the time of such action.
44
Section 11.2 Purposes for Which Meetings May Be Called.
-----------------------------------------
A meeting of Holders may be called at any time and from time to time
pursuant to the provisions of this Article 11 for any of the following purposes:
(a) to give any notice to the Company, or the Trustee, or to give any
directions to the Trustee, or to waive or to consent to the waiving of any
Default hereunder and its consequences, or to take any other action authorized
to be taken by Holders pursuant to any of the provisions of Article 5;
(b) to remove the Trustee or to appoint a successor Trustee pursuant to
the provisions of Article 6;
(c) to consent to the execution of an indenture or indentures supplemental
hereto pursuant to Section 8.2; or
(d) to take any other action (i) authorized to be taken by or on behalf of
the Holders of any specified aggregate principal amount of the Notes under any
other provision of this Indenture, or authorized or permitted by law or (ii)
which the Trustee deems necessary or appropriate in connection with the
administration of this Indenture.
Section 11.3 Manner of Calling Meetings.
--------------------------
The Trustee may at any time call a meeting of Holders to take any action
specified in Section 11.2, to be held at such time and at such place in the City
of New York, New York or such other place as the Trustee shall determine. Notice
of every meeting of Holders, setting forth the time and place of such meeting
and in general terms the action proposed to be taken at such meeting, shall be
given by the Trustee, to the Company and to each Holder not less than 10 nor
more than 60 days prior to the date fixed for such meeting.
Any meeting of Holders shall be valid without notice if the Holders of all
Notes then outstanding are present in person or by proxy, or if notice is waived
before or after the meeting by all of the Holders and if the Company and the
Trustee are either present by duly authorized representatives or have, before or
after the meeting, waived notice.
Section 11.4 Call of Meetings by the Company or Holders.
------------------------------------------
In case at any time the Company or the Holders of not less than 10% in
aggregate principal amount of the Notes then outstanding, shall have requested
the Trustee to call a meeting of Holders to take any action specified in Section
11.2, by written request setting forth in reasonable detail the action proposed
to be taken at the meeting, and the Trustee shall not have given the notice of
such meeting within 20 days after receipt of such request, then the Company or
the Holders of Notes in the amount above specified may determine the time and
place in the City of New York, New York for such meeting and may call such
meeting for the purpose of taking such action, by giving or causing to be given
notice thereof as provided in Section 11.3.
45
Section 11.5 Who May Attend and Vote at Meetings.
-----------------------------------
To be entitled to vote at any meeting of Holders, a person shall be (a) a
Holder on the record date for such meeting or, if there is no such record date,
on the date of such meeting or (b) a Person appointed by an instrument in
writing as proxy for one or more of such Holders. The only Persons who shall be
entitled to be present or to speak at any meeting of Holders shall be the
Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
Section 11.6 Regulations May be Made by Trustee; Conduct of the Meeting;
-----------------------------------------------------------
Voting Rights; Adjournment.
--------------------------
Notwithstanding any other provision of this Indenture, the Trustee may make
such reasonable regulations as it may deem advisable for any meeting of Holders,
in regard to proof of the holding of Notes and of the appointment of proxies,
and in regard to the appointment and duties of inspectors of votes, the
submission and examination of proxies, certificates and other evidence of the
right to vote, and such other matters concerning the conduct of the meeting as
it shall deem appropriate.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders as provided in Section 11.4, in which case the Company or
the Holders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the Holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote.
At any meeting each Holder or proxy shall be entitled to one vote for each
principal amount of Notes equal to the Initial Price held or represented by such
Holder or proxy, as the case may be; provided, however, that no vote shall be
cast or counted at any meeting with respect to any Notes challenged as not
outstanding and ruled by the chairman of the meeting to be not outstanding. The
chairman of the meeting shall have no right to vote other than by virtue of
Notes held by such chairman or instruments in writing as aforesaid duly
designating such chairman as the proxy to vote on behalf of other Holders. At
any meeting of Holders, the presence (in person or by proxy) of Persons holding
or representing a majority in aggregate principal amount of the Notes then
outstanding shall be sufficient for a quorum. Any meeting of Holders duly called
pursuant to the provisions of Section 11.3 or 11.4 may be adjourned from time to
time by vote of the Holders of a majority in aggregate principal amount of the
Notes represented at the meeting and entitled to vote, and the meeting may be
held as so adjourned without further notice.
Section 11.7 Voting at the Meeting and Record to be Kept.
-------------------------------------------
The vote upon any resolution submitted to any meeting of Holders shall be
by written ballots on which shall be subscribed the signatures of the Holders or
of their representatives by proxy and the principal amount of the Notes voted by
the ballot. The permanent chairman of the
46
meeting shall appoint two inspectors of votes, who shall count all votes cast at
the meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Holders shall be prepared by the secretary of the meeting and there
shall be attached to such record the original reports of the inspectors of votes
on any vote by ballot taken thereat and affidavits by one or more Persons having
knowledge of the facts, setting forth a copy of the notice of the meeting and
showing that such notice was given as provided in Section 11.3 or 11.4. The
record shall be signed and verified by the affidavits of the permanent chairman
and the secretary of the meeting and one of the duplicates shall be delivered to
the Company and the other to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 11.8 Exercise of Rights of Trustee or Holders May Not Be
---------------------------------------------------
Hindered or Delayed by Call of Meeting.
--------------------------------------
Nothing contained in this Article 11 shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Holders or any rights
expressly or impliedly conferred hereunder to make such call, any hindrance or
delay in the exercise of any right or rights conferred upon or reserved to the
Trustee or to the Holders under any of the provisions of this Indenture or of
the Notes.
Section 11.9 Communication by Holders with Other Holders.
-------------------------------------------
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
ARTICLE 12
MISCELLANEOUS
Section 12.1 Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required or deemed to be included in this Indenture
by the TIA, the required or deemed provision shall control.
47
Section 12.2 Notices.
-------
Any notice or communication by the Company or the Trustee to the other
shall be deemed to have been duly given if given in writing and delivered in
person or mailed by first-class mail (registered or certified, return receipt
requested), telecopier or overnight air courier guaranteeing next day delivery
addressed as follows:
if to the Company:
Southwest Securities Group, Inc.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Fax No.: (000) 000-0000
Attention: President
with a copy to:
___________________
___________________
___________________
___________________
Fax No.: ( )
if to the Trustee:
___________________
___________________
___________________
___________________
Fax No. (___) ___-____
Attention: ________________
The Company or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be in writing and shall be
mailed by first class mail, certified or registered, return receipt requested,
or by overnight air courier guaranteeing next day delivery to its last address
shown on the Register. Any notice or communication shall also be so mailed to
any Person described in TIA (S) 313(c), to the extent
48
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is given in the manner provided above within
the time prescribed, it shall be deemed to have been duly given, whether or not
received by the addressee.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
Section 12.3 Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(b) at the Trustee's request, an Opinion of Counsel stating that, in the
opinion of such counsel, the proposed action does not conflict with this
Indenture.
Section 12.4 Statements Required in Certificate or Opinion of Counsel.
--------------------------------------------------------
Each Officers' Certificate or Opinion of Counsel with respect to compliance
or conflicts with a condition or covenant in this Indenture shall include:
(a) a statement that each Person executing such Officers' Certificate or
Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such Officers'
Certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of each such Person, such examination
or investigation has been made as is necessary to enable it to express an
informed opinion as to whether or not such covenant or condition has been
complied with or whether the proposed action is not in conflict with this
Indenture, as the case may be; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been complied with or such action does not conflict
with this Indenture, as the case may be; provided, however, that an Opinion of
Counsel may be based, insofar as it relates to factual matters, on a certificate
or certificates of public officials, a legal opinion of counsel employed by the
Company or a Subsidiary or a certificate of or representations by an Officer or
Officers unless counsel rendering such Opinion of Counsel actually knows that
such certificate, legal opinion or representation is erroneous.
49
Section 12.5 Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar, Paying Agent or Conversion Agent may make reasonable
rules and set reasonable requirements for its functions.
Section 12.6 Legal Holidays.
--------------
If a payment date is not a Business Day at a place of payment, payment may
be made at such place of payment on the next succeeding Business Day, and no
additional interest shall accrue for the intervening period.
Section 12.7 No Recourse Against Others.
--------------------------
A director, officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under the Notes or
this Indenture or for any claim based on, with respect to or by reason of such
obligations or their creation including with respect to any certificate
delivered thereunder or hereunder. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release contained in this Section
12.7 are part of the consideration for the Company's issuance of the Notes.
Section 12.8 Counterparts.
------------
This Indenture may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
Section 12.9 Governing Law.
-------------
The internal laws of the state of New York shall govern this indenture and
the Notes, without regard to the conflict of laws provisions thereof.
Section 12.10 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.
Section 12.11 Successors.
----------
All agreements of the Company in this Indenture and the Notes shall bind
its successors and assigns. All agreements of the Trustee in this Indenture
shall bind its successors and assigns.
Section 12.12 Severability.
------------
50
In case any provision of this Indenture or in the Notes 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 12.13 Table of Contents, Headings, Etc.
--------------------------------
The Table of Contents and headings of the Articles and Sections 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.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
executed as of the day and year first above written.
SOUTHWEST SECURITIES GROUP, INC.
By: ________________________________________
Name:
Title:
NORWEST BANK, MINNESOTA, NATIONAL ASSOCIATION
By: ________________________________________
Name:
Title:
51
EXHIBIT A
[Face of Note]
SOUTHWEST SECURITIES GROUP, INC.
EXCHANGEABLE SUBORDINATED NOTES DUE 2004
[Global Securities Legend]
Unless this Certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co., or to such other entity as is requested by an authorized
representative of DTC) any transfer, pledge or other use hereof for value or
otherwise by or to any person is wrongful inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
Transfers of this Global Security shall be limited to transfers in whole,
but not in part, to nominees of DTC or to a successor thereof or such
successor's nominee and transfers of portions of this Global Security shall be
limited to transfers made in accordance with the restrictions set forth in the
indenture referred to on the reverse hereof.
CUSIP No. ____________
No._________ $________________
Southwest Securities Group, Inc. promises to pay to_______________________
or registered assigns, the principal sum of __________________________________
Dollars on _______ 1, 2004 as provided in Section 1 below.
Interest Payment Dates: _______ 1,_______ 1,_______ 1 and _______ 1,
commencing _______ 1, 1999.
Record Dates: ________15, ________15, ________15 and ________15.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place.
SOUTHWEST SECURITIES GROUP, INC.
(SEAL) By:_____________________________
President
ATTEST:
By:______________________________
Secretary
Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
NORWEST BANK, MINNESOTA, NATIONAL ASSOCIATION
as Trustee
By:__________________________ Dated:________________________
Authorized Signature
B-1
[Reverse Side]
Capitalized terms used herein without definition shall have the meanings
ascribed to them in the Indenture dated as of _______, 1999 between Southwest
Securities Group, Inc., a Delaware corporation, and Norwest Bank Minnesota,
National Association, as trustee, as amended from time to time in accordance
with its terms (the "Indenture").
1. Payment of Principal.
--------------------
(a) At Maturity, the Principal of each Note will be exchanged for
(i) shares of Common Stock at the Exchange Ratio (as defined
below); or
(ii) cash in an amount determined as set forth below,
together with any accrued and unpaid interest up to Maturity. Payment of cash
instead of Common Stock will be at the Company's sole discretion, and the
Company may elect the cash payment option with respect to any or all portion of
the Notes. For each increment of principal of the Notes equal to the Initial
Price the "Exchange Ratio" is equal to, subject to adjustment pursuant to
Section 9.3 of the Indenture:
(i) ____ shares of Common Stock, if the Maturity Price is greater
than or equal to the Threshold Appreciation Price;
(ii) a fractional share of Common Stock equal to the Initial Price
divided by the Maturity Price if the Maturity Price is less than the
Threshold Appreciation Price but is greater than the Initial Price;
and
(iii) one share of Common Stock if the Maturity Price is less than
or equal to the Initial Price.
If the Company elects the cash payment option, the amount of cash it will
deliver for each increment of principal of the Notes equal to the Initial Price
will be the cash equivalent value of such number of shares (or fractions
thereof) of Common Stock at the Maturity Price which the Company would otherwise
be required to deliver pursuant to this Section. Such number of shares of Common
Stock or amount of cash deliverable upon exchange is hereinafter referred to as
the "Exchange Consideration."
(b) On or prior to the 30th day prior to Maturity, the Company will
notify the Trustee and publish a notice in a newspaper of national circulation
published at least five days a week stating whether the principal amount of each
Note will be exchanged for shares of Common stock or cash or both. If less than
all of the outstanding Notes are to be exchanged for Common Stock, the Notes to
be exchanged will be selected by the Trustee from the outstanding Notes by lot
or pro rata (as nearly as may be) or by any other method determined by the
Trustee in its sole discretion to be equitable.
No fractional shares of Common Stock and/or other securities if a Spin-Off
or a Reorganization Event (each as defined in Section 9.3 of the Indenture) has
occurred prior to Maturity, will be issued if the Company exchanges the Notes
for shares of Common Stock and/or such securities. If more than one Note shall
be surrendered for exchange at one time by the same Holder, the number of full
shares of Common Stock and/or such other securities which will be delivered upon
exchange will be computed on the basis of the aggregate number of Notes so
surrendered at Maturity. In lieu of any fractional share of security otherwise
issuable in respect of the Notes of any Holder which are exchanged at maturity,
such Holder shall be entitled to receive an amount in cash equal to the value of
such fractional share or security at the Maturity Price (or similarly calculated
average price for a security other than Common stock).
"Maturity Price" means the average Closing Price per share of Common Stock
for the 20 Trading Days ending the Business Day prior to Maturity.
B-2
The Exchange Ratio and Maturity Price are subject to adjustment as provided
in the Indenture. In addition, the Indenture provides that in the case of a
Reorganization Event or Spin-Off, the Company may deliver the cash, property or
securities received in such Reorganization Event, or the Spin-Off Securities
received in such Spin-Off, in lieu of Common Stock (or, at its option, may
deliver the cash equivalent thereof).
2. Interest.
--------
(a) The Company shall pay interest on the outstanding principal
amount of this Note at the rate of __% per annum from the date of original
issuance of any Notes under the Indenture until maturity. The Company will pay
interest quarterly on ________1, ________1, ________1, and ________1, of each
year commencing _________ 1, 1999, or if any such day is not a Business Day, on
the next succeeding Business Day. Interest on the Notes will accrue from the
most recent date on which interest has been paid or, if no interest has been
paid, from the date of original issuance of any Notes under the Indenture;
provided, however, that if there is no existing Default in the payment of
interest and this Note is authenticated between a record date shown on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such next succeeding Interest Payment Date. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
(b) To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on (i)
overdue Principal of the Notes at the rate borne by the Notes and (ii) overdue
installments of interest on the Notes at the rate borne by the Notes.
3. Method of Payment. The Company will pay interest (except defaulted
-----------------
interest) on the Notes to those persons who are Holders at the close of business
on the record date shown on the face hereof next preceding the applicable
Interest Payment Date (even if such Notes are cancelled after such record date
and on or before such Interest Payment Date). Defaulted interest shall be paid
to Holders as of a special record date established for purposes of determining
the Holders entitled thereto. The Notes will be payable as to Principal and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, as set forth in the Indenture,
or, at the option of the Company, payment of interest may be made by check
mailed to the Holders at their addresses set forth in the Register or by wire
transfer of immediately available funds. Cash payments shall be in the currency
of the United States of America which at the time of payment is legal tender for
payment of public and private debts.
4. Paying Agent and Registrar. Initially, the Trustee will act as
--------------------------
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company or any Subsidiary may act
in any such capacity.
5. Indenture. The Company issued the Notes under the Indenture. The
---------
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939. The Notes are
subject to all such terms, and Holders are referred to the Indenture and the
Trust Indenture Act of 1939 for a statement of such terms. The Notes are
general unsecured obligations of the Company limited to $150,000,000 in
aggregate principal amount, subject to Section 2.7 of the Indenture.
6. Mandatory Redemption. The Notes may not be redeemed or exchanged
--------------------
for Exchange Consideration prior to maturity.
7. Subordination. The Notes are subordinated to Senior Indebtedness.
-------------
To the extent provided in the Indenture, Senior Indebtedness must be paid before
the Notes may be paid. The Company agrees, and each Holder by accepting a Note
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give effect to such provisions, and each Holder
appoints the Trustee its attorney-in-fact for any and all such purposes.
8. Denominations, Transfer, Exchange. The Notes are in registered form
---------------------------------
without coupons in denominations of $____ and integral multiples of $____. A
Holder may transfer or exchange Notes as provided in the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture.
B-3
9. Persons Deemed Owners. The registered Holder of a Note may be
---------------------
treated as its owner for all purposes.
10. Amendments and Waivers. Subject to certain exceptions for which the
----------------------
consent of each Holder is required, the Indenture or the Notes may be amended
with the consent of the Holders of at least a majority in aggregate principal
amount of the Notes then outstanding and any existing Default (except a payment
default) may be waived with the consent of the Holders of at least a majority in
aggregate principal amount of the Notes then outstanding. Without the consent
of any Holder, the Company and the Trustee may amend or supplement the Indenture
or the Notes to (i) cure any ambiguity, defect or inconsistency, provided that
such amendment does not adversely affect the rights of any Holder, (ii) provide
for uncertificated Notes in addition to or in lieu of certificated Notes, (iii)
comply with Section 4.1 of the Indenture, (iv) make any change that does not
adversely affect the rights of any Holder, (v) comply with requirements of the
SEC in order to effect or maintain the qualification of the Indenture under the
TIA and (vi) add to the covenants of the Company.
11. Defaults and Remedies. Events of Default include: (a) failure to
---------------------
pay any Principal of any Note when due and payable, regardless of whether such
payment is prohibited by the subordination provisions of the Indenture; (b)
failure to pay any interest on any Note when due and payable, which failure
continues for 30 days, regardless of whether such payment is prohibited by the
subordination provisions of the Indenture; (c) failure to perform the other
covenants of the Company in the Indenture, which failure continues for 60 days
after written notice as provided in the Indenture; (d) default (after giving
effect to any applicable grace periods or any extension of any maturity date) in
payment when due of Principal of, or an acceleration of, any indebtedness for
money borrowed by the Company or any Subsidiary in excess of $5.0 million,
individually or in the aggregate, if such indebtedness is not discharged, or
such acceleration is not annulled, within ten days after written notice as
provided in the Indenture; and (e) certain events of bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary and (f) any judgment
or decree for the payment of money in excess of $1.0 million (to the extent not
covered by insurance) is rendered against the Company or any Significant
Subsidiary and such judgment or decree shall remain undischarged or unstayed for
a period of 60 days after such judgment or decree becomes final and non-
appealable. If an Event of Default shall occur and be continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes may accelerate the maturity of all Notes, except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes shall immediately so accelerate. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture or the
Notes at the request or direction of any of the Holders. Subject to certain
limitations, the Holders of a majority in aggregate principal amount of the
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. The Company must furnish an annual
compliance certificate to the Trustee.
12. Trustee Dealings with Company. The Trustee, in its individual or
-----------------------------
any other capacity, may make loans to, accept deposits from and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if were not Trustee; provided, however, that if the Trustee
acquires any conflicting interest as described in the Trust Indenture Act of
1939, it must eliminate such conflict or resign.
13. No Recourse Against Others. A director, officer, employee,
--------------------------
incorporator or stockholder of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, with respect to, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release contained in Article 12 of the Indenture are
part of the consideration for the Company's issuance of the Notes.
14. Tax Characterization. By its purchase of a Note, each Holder hereby
--------------------
agrees with the Company (in the absence of an administrative determination or
judicial ruling to the contrary) to characterize this Note for all tax purposes
as a forward purchase contract to purchase Common Stock (and Spin-Off
Securities, if any) at Maturity (including as a result of acceleration or
otherwise), under the terms of which contract (i) at the time of issuance of
this Note the Holder deposits irrevocable with the Company a fixed amount of
cash equal to the purchase price of the Note to assure the fulfillment of the
Holder's purchase obligation described in clause (iii) below, which deposit will
unconditionally and irrevocably be applied at Maturity to satisfy such
obligation, (ii) until Maturity the Company will be obligated to pay interest on
such deposit at a rate equal to the stated rate of interest on this Note as
compensation to the Holder for the Company's use of such cash deposit during the
term hereof, and (iii) at Maturity such cash deposit unconditionally and
irrevocably be applied by the Company in full satisfaction of the Holder's
obligation under the forward purchase contract, and the Company will deliver to
the Holder the number of shares of
B-4
Common Stock (and Spin-Off Securities, if any) that the Holder is entitled to
receive at Maturity pursuant to the terms of this Note (subject to the Company's
right to deliver cash in lieu of the shares of Common Stock (and Spin-Off
Securities, if any)). Consistent with the above characterization (i) amounts
paid to the Company in respect of the original issue of this Note will be
treated as allocable in their entirety to the amount of the cash deposit
attributable to such Note and (ii) amounts denominated as interest that are
payable with respect to the Note will be characterized as interest payable on
the amount of such deposit, includible annually in the income of the Holder as
interest income in accordance with such Holder's method of accounting.
13. Authentication. This Note shall not be valid until authenticated by
--------------
the manual signature of the Trustee or an authenticating agent.
14. Abbreviations. 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 (=joint tenants with right of survivorship and not as
tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
SOUTHWEST SECURITIES GROUP, INC.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: President
B-5
SCHEDULE OF EXCHANGES OF GLOBAL SECURITY
FOR DEFINITIVE SECURITIES
The following exchanges of this Global Security for Definitive Securities
have been made:
Amount of Principal Amount
decrease in Amount of increase of this Global Signature of
Principal Amount in Principal Security following authorized officer
of this Global Amount of this such decrease or of Trustee or Notes
Date of Exchange Security Global Security increase) Custodian
---------------------------------------------------------------------------------------------------------------------------
B-6
ASSIGNMENT FORM
(I) or (we) assign and transfer this Note to
_____________________________________________________________________
(Insert assignee's social security or tax I.D. no.)
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint______________________________ agent to transfer this
Note on the Register. The agent may substitute another to act for him.
Date: ___________
Signature:_____________________________________________
(exactly as your name appears on the face of this Note)
Name: _______________________________________________
Title:_______________________________________________
Address:_____________________________________________
Phone No.:___________________________________________
Date:________________________________________________
Signature Guaranteed:
By: ________________________________________
This signature shall be guaranteed by an eligible guarantor
institution (a bank or trust company having an office or
correspondent in the United States or a broker or
dealer which is a member of a registered securities
exchange or the National Association of Securities
Dealers, Inc.) with membership in an approved signature
guaranty medallion program pursuant to SEC Rule 17Ad-15.
B-7
TABLE OF CONTENTS
-----------------
Page
ARTICLE 1 - Definitions and Incorporation by Reference............................................................ 1
Section 1.1 Definitions................................................................................ 1
Section 1.2 Other Definitions.......................................................................... 5
Section 1.3 Incorporation by Reference of Trust Indenture Act.......................................... 6
Section 1.4 Rules of Construction...................................................................... 6
ARTICLE 2 - The Notes............................................................................................. 7
Section 2.1 Form and Dating............................................................................ 7
Section 2.2 Execution and Authentication............................................................... 7
Section 2.3 Registrar and Paying Agent................................................................. 8
Section 2.4 Paying Agent to Hold Money and Common Stock in Trust....................................... 8
Section 2.5 Holder Lists............................................................................... 9
Section 2.6 Transfer and Exchange...................................................................... 9
Section 2.7 Global Securities.......................................................................... 10
Section 2.8 Replacement Notes.......................................................................... 12
Section 2.9 Outstanding Notes.......................................................................... 12
Section 2.10 Treasury Notes............................................................................. 13
Section 2.11 Temporary Notes............................................................................ 13
Section 2.12 Cancellation............................................................................... 13
Section 2.13 Defaulted Interest......................................................................... 14
Section 2.14 Deposit of Moneys and Common Stock......................................................... 14
ARTICLE 3 - Covenants............................................................................................. 14
Section 3.1 Payment of Notes........................................................................... 14
Section 3.2 Stay, Extension and Usury Laws............................................................. 15
Section 3.3 Continued Existence........................................................................ 15
Section 3.4 Reports.................................................................................... 15
Section 3.5 Taxes...................................................................................... 16
Section 3.6 Convertible or Exchangeable Debt Issued by Subsidiaries.................................... 16
Section 3.7 Compliance Certificate..................................................................... 16
Section 3.8 Further Assurance to the Trustee........................................................... 17
ARTICLE 4 - Successors............................................................................................ 17
Section 4.1 When Company May Merge or Sell Assets...................................................... 17
Section 4.2 Successor Substituted...................................................................... 18
ARTICLE 5 - Defaults and Remedies................................................................................. 18
Section 5.1 Events of Default.......................................................................... 18
Section 5.2 Acceleration............................................................................... 20
Section 5.3 Other Remedies............................................................................. 20
Section 5.4 Waiver of Existing and Past Defaults....................................................... 20
Section 5.5 Control by Majority........................................................................ 21
i
Section 5.6 Limitation on Suits........................................................................ 21
Section 5.7 Rights of Holders to Receive Payment....................................................... 21
Section 5.8 Collection Suit by Trustee................................................................. 22
Section 5.9 Trustee May File Proofs of Claim........................................................... 22
Section 5.10 Priorities................................................................................. 22
Section 5.11 Undertaking for Costs...................................................................... 23
ARTICLE 6 - Trustee............................................................................................... 23
Section 6.1 Duties of Trustee.......................................................................... 23
Section 6.2 Rights of Trustee.......................................................................... 24
Section 6.3 Individual Rights of Trustee............................................................... 24
Section 6.4 Trustee's Disclaimer....................................................................... 25
Section 6.5 Notice of Defaults......................................................................... 25
Section 6.6 Reports by Trustee to Holders.............................................................. 25
Section 6.7 Compensation and Indemnity................................................................. 25
Section 6.8 Replacement of Trustee..................................................................... 26
Section 6.9 Successor Trustee by Merger................................................................ 27
Section 6.10 Eligibility; Disqualification.............................................................. 27
Section 6.11 Preferential Collection of Claims Against Company.......................................... 27
ARTICLE 7 - Discharge of Indenture................................................................................ 28
Section 7.1 Termination of Company's Obligations....................................................... 28
Section 7.2 Repayment to Company....................................................................... 28
ARTICLE 8 - Amendments............................................................................................ 28
Section 8.1 Without Consent of Holders................................................................. 28
Section 8.2 With Consent of Holders.................................................................... 29
Section 8.3 Compliance with Trust Indenture Act........................................................ 30
Section 8.4 Revocation and Effect of Consents.......................................................... 30
Section 8.5 Notation on or Exchange of Notes........................................................... 31
Section 8.6 Trustee Protected.......................................................................... 31
ARTICLE 9 - Payment of Notes in Common Stock...................................................................... 31
Section 9.1 Payment of Principal at Maturity........................................................... 31
Section 9.2 No Fractional Shares....................................................................... 32
Section 9.3 Adjustment of Exchange Ratio............................................................... 32
Section 9.4 Notice of Adjustments and Certain Other Events............................................. 37
Section 9.5 Payment of Certain Taxes Upon Exchange; Tax Characterization............................... 37
Section 9.6 Shares Free and Clear...................................................................... 38
ARTICLE 10 - Subordination ...................................................................................... 39
Section 10.1 Agreement to Subordinate................................................................... 39
Section 10.2 Payment Over of Proceeds Upon Dissolution, Etc............................................. 39
Section 10.3 Prior Payment to Senior Indebtedness Upon Acceleration of Notes............................ 40
Section 10.4 No Payment When Senior Indebtedness in Default............................................. 40
Section 10.5 Payment Permitted If No Default............................................................ 41
ii
Section 10.6 Subrogation to Rights of Holders of Senior Indebtedness.................................... 41
Section 10.7 Provisions Solely to Define Relative Rights................................................ 41
Section 10.8 Trustee to Effectuate Subordination........................................................ 42
Section 10.9 No Waiver of Subordination Provisions...................................................... 42
Section 10.10 Notice to Trustee.......................................................................... 43
Section 10.11 Reliance on Judicial Order or Certificate of Liquidating Agent............................. 43
Section 10.12 Trustee Not Fiduciary for Holders of Senior Indebtedness................................... 43
Section 10.13 Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights....... 44
Section 10.14 Article Applicable to Paying Agents........................................................ 44
ARTICLE 11 - Meetings of Holders.................................................................................. 44
Section 11.1 Action by Holders.......................................................................... 44
Section 11.2 Purposes for Which Meetings May Be Called.................................................. 45
Section 11.3 Manner of Calling Meetings................................................................. 45
Section 11.4 Call of Meetings by the Company or Holders................................................. 45
Section 11.5 Who May Attend and Vote at Meetings........................................................ 46
Section 11.6 Regulations May be Made by Trustee; Conduct of the Meeting; Voting Rights; Adjournment..... 46
Section 11.7 Voting at the Meeting and Record to be Kept................................................ 46
Section 11.8 Exercise of Rights of Trustee or Holders May Not Be Hindered or Delayed by Call of Meeting. 47
Section 11.9 Communication by Holders with Other Holders................................................ 47
ARTICLE 12 - Miscellaneous........................................................................................ 47
Section 12.1 Trust Indenture Act Controls............................................................... 47
Section 12.2 Notices.................................................................................... 48
Section 12.3 Certificate and Opinion as to Conditions Precedent......................................... 49
Section 12.4 Statements Required in Certificate or Opinion of Counsel................................... 49
Section 12.5 Rules by Trustee and Agents................................................................ 50
Section 12.6 Legal Holidays............................................................................. 50
Section 12.7 No Recourse Against Others................................................................. 50
Section 12.8 Counterparts............................................................................... 50
Section 12.9 Governing Law.............................................................................. 50
Section 12.10 No Adverse Interpretation of Other Agreements.............................................. 50
Section 12.11 Successors................................................................................. 50
Section 12.12 Severability............................................................................... 50
Section 12.13 Table of Contents, Headings, Etc........................................................... 51
EXHIBITS
Exhibit A - Form of Note
