===============================================================================
PIONEER FINANCIAL SERVICES, INC.
and
THE FIRST NATIONAL BANK OF CHICAGO, AS TRUSTEE
Indenture
Dated as of ________, 1996
$65,000,000*
____% Convertible Subordinated Notes due 2003
===============================================================================
*Subject to increase up to $74,750,000.
CROSS-REFERENCE TABLE*
---------------------
Trust Indenture
Act Section Indenture Section
--------------- -----------------
310(a)(1)............................................. 7.10
(a)(2)............................................. 7.10
(a)(3)............................................. N.A.
(a)(4)............................................. N.A.
(b)................................................ 7.8; 7.10
(c)................................................ N.A.
311(a)................................................ 7.11
(b)................................................ 7.11
(c)................................................ N.A.
312(a)................................................ 2.5
(b)................................................ 12.3
(c)................................................ 12.3
313(a)................................................ 7.6
(b)(1)............................................. N.A.
(b)(2)............................................. 7.6
(c)................................................ 7.6; 12.2
(d)................................................ 7.6
314(a)................................................ 4.2; 12.2
(b)................................................ N.A.
(c)(1)............................................. 12.4
(c)(2)............................................. 12.4
(c)(3)............................................. N.A.
(d)................................................ N.A.
(e)................................................ 12.5
(f)................................................ N.A.
315(a)................................................ 7.1(b)
(b)................................................ 7.5; 12.2
(c)................................................ 7.1(a)
(d)................................................ 7.1(c)
(e)................................................ 6.11
316(a)(last sentence)................................. 2.9
(a)(1)(A).......................................... 6.5
(a)(1)(B).......................................... 6.4
(a)(2)............................................. N.A.
(b)................................................ 6.7
(c)................................................ 9.4
317(a)(1)............................................. 6.8
(a)(2)............................................. 6.9
(b)................................................ 2.4
318(a)................................................ 12.1
N.A. Means Not applicable.
-----------
* This Cross-Reference Table is not part of the Indenture.
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND INCORPORATION
BY REFERENCE.................................................... 1
Section 1.1 Definitions............................................. 1
Section 1.2 Other Definitions....................................... 6
Section 1.3 Incorporation by Reference of
Trust Indenture Act..................................... 7
Section 1.4 Rules of Construction................................... 7
ARTICLE 2 THE SECURITIES.................................................. 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
in Trust................................................ 9
Section 2.5 Holder Lists............................................ 9
Section 2.6 Transfer and Exchange................................... 10
Section 2.7 Replacement Securities.................................. 10
Section 2.8 Outstanding Securities.................................. 11
Section 2.9 Treasury Securities..................................... 12
Section 2.10 Temporary Securities.................................... 11
Section 2.11 Cancellation............................................ 12
Section 2.12 Defaulted Interest...................................... 12
ARTICLE 3 REDEMPTION...................................................... 13
Section 3.1 Notices to Trustee...................................... 13
Section 3.2 Selection of Securities
to Be Redeemed.......................................... 13
Section 3.3 Notice of Redemption.................................... 14
Section 3.4 Effect of Notice of Redemption.......................... 15
Section 3.5 Deposit of Redemption Price............................. 15
Section 3.6 Securities Redeemed in Part............................. 16
Section 3.7 Optional Redemption..................................... 16
Section 3.8 Mandatory Redemption.................................... 16
ARTICLE 4 COVENANTS....................................................... 17
Section 4.1 Payment of Securities................................... 17
Section 4.2 Maintenance of Office or Agency......................... 17
Section 4.3 Compliance Certificate.................................. 17
Section 4.4 Stay, Extension and Usury Laws.......................... 18
Section 4.5 Continued Existence..................................... 18
Section 4.6 Offer of Repurchase Upon Change
of Control.............................................. 19
i
Section 4.7 Limitation on Dividend and
Other Payment Restrictions
Affecting Subsidiaries.................................. 21
Section 4.8 Taxes................................................... 22
Section 4.9 Commission Reports; Reports to
Securityholders......................................... 22
Section 4.10 Insurance............................................... 23
ARTICLE 5 SUCCESSORS...................................................... 24
Section 5.1 When Company May Merge, etc............................. 24
Section 5.2 Successor Corporation Substituted....................... 24
ARTICLE 6 DEFAULTS AND REMEDIES........................................... 25
Section 6.1 Events of Default....................................... 25
Section 6.2 Acceleration............................................ 28
Section 6.3 Other Remedies.......................................... 29
Section 6.4 Waiver of Past Defaults................................. 29
Section 6.5 Control by Majority..................................... 29
Section 6.6 Limitation on Suits..................................... 29
Section 6.7 Rights of Holders to Receive
Payment................................................. 30
Section 6.8 Collection Suit by Trustee.............................. 30
Section 6.9 Trustee May File Proofs of Claim........................ 31
Section 6.10 Priorities.............................................. 31
Section 6.11 Undertaking for Costs................................... 31
ARTICLE 7 TRUSTEE......................................................... 32
Section 7.1 Duties of Trustee....................................... 32
Section 7.2 Rights of Trustee....................................... 33
Section 7.3 Individual Rights of Trustee............................ 34
Section 7.4 Trustee's Disclaimer.................................... 34
Section 7.5 Notice of Defaults...................................... 34
Section 7.6 Reports by Trustee to Holders........................... 34
Section 7.7 Compensation and Indemnity.............................. 35
Section 7.8 Replacement of Trustee.................................. 36
Section 7.9 Successor Trustee by Merger, etc........................ 37
Section 7.10 Eligibility; Disqualification........................... 37
Section 7.11 Preferential Collection of Claims
Against Company......................................... 37
ARTICLE 8 DISCHARGE OF INDENTURE.......................................... 38
Section 8.1 Termination of Company's
Obligations............................................. 38
Section 8.2 Application of Trust Money.............................. 39
Section 8.3 Repayment to Company.................................... 39
Section 8.4 Reinstatement........................................... 40
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ARTICLE 9 AMENDMENTS...................................................... 40
Section 9.1 Without Consent of Holders.............................. 40
Section 9.2 With Consent of Holders................................. 41
Section 9.3 Compliance with Trust
Indenture Act........................................... 42
Section 9.4 Revocation and Effect of
Consents................................................ 42
Section 9.5 Notation on or Exchange of
Securities.............................................. 43
Section 9.6 Trustee Protected....................................... 43
ARTICLE 10 CONVERSION...................................................... 43
Section 10.1 Conversion Privilege.................................... 43
Section 10.2 Conversion Procedure.................................... 44
Section 10.3 Fractional Shares....................................... 45
Section 10.4 Taxes on Conversion..................................... 45
Section 10.5 Company to Reserve Stock................................ 46
Section 10.6 Adjustment of Conversion Price.......................... 46
Section 10.7 Notice of Adjustment.................................... 53
Section 10.8 Notice of Certain Transactions.......................... 53
Section 10.9 Reorganization of Company............................... 54
Section 10.10 Company Determination Final............................. 55
Section 10.11 Trustee's Disclaimer.................................... 55
ARTICLE 11 SUBORDINATION................................................... 55
Section 11.1 Agreement to Subordinate................................ 55
Section 11.2 Certain Definitions..................................... 55
Section 11.3 Liquidation; Dissolution;
Bankruptcy.............................................. 57
Section 11.4 Default on Senior Indebtedness.......................... 57
Section 11.5 When Distribution Must Be
Paid Over............................................... 59
Section 11.6 Notice by Company....................................... 59
Section 11.7 Subrogation............................................. 59
Section 11.8 Relative Rights......................................... 60
Section 11.9 Subordination May Not Be
Impaired by Company..................................... 60
Section 11.10 Distribution or Notice to
Representative.......................................... 61
Section 11.11 Rights of Trustee and
Paying Agent............................................ 61
Section 11.12 Authorization to Effect
Subordination........................................... 61
Section 11.13 Conversions Not Deemed Payment.......................... 62
Section 11.14 Amendments.............................................. 62
ARTICLE 12 MISCELLANEOUS................................................... 62
iii
Section 12.1 Trust Indenture Act Controls............................ 62
Section 12.2 Notices................................................. 62
Section 12.3 Communication by Holders with
Other Holders........................................... 63
Section 12.4 Certificate and Opinion as to
Conditions Precedent.................................... 64
Section 12.5 Statements Required in
Certificate or Opinion.................................. 64
Section 12.6 Rules by Trustee and Agents............................. 64
Section 12.7 Legal Holidays.......................................... 64
Section 12.8 No Recourse Against Others.............................. 65
Section 12.9 Counterparts............................................ 65
Section 12.10 Variable Provisions..................................... 65
Section 12.11 Governing Law........................................... 66
Section 12.12 No Adverse Interpretation of
Other Agreements........................................ 66
Section 12.13 Successors.............................................. 66
Section 12.14 Severability............................................ 66
Section 12.15 Table of Contents,
Headings, etc........................................... 66
iv
INDENTURE dated as of March __, 1996 between Pioneer Financial
Services, Inc., a Delaware corporation (the "Company"), and The First National
Bank of Chicago, a national banking association duly organized and existing
under the laws of the United States, as Trustee (the "Trustee").
The Company and the Trustee mutually covenant and agree for the equal
and ratable benefit of the respective holders from time to time of the ___%
Convertible Subordinated Notes Due 2003 (the "Securities") as follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
Section 1.1 Definitions.
"Acquisition Price" means the weighted average per share price paid
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) in acquiring the Voting Stock.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Registrar or Paying Agent.
"Board of Directors" means either the Board of Directors of the
Company or any committee of such Board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means a day which in the Borough of Manhattan, City of
New York (or in any of the cities, if more than one), where amounts are payable
in respect of the Securities, as specified on the face of the form of Security,
is neither a legal holiday nor a day on which banking institutions are
authorized by law or regulation to close.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
corporate stock or any and all equivalent ownership interests in a Person (other
than a corporation) whether now outstanding or issued after the date hereof.
"Change of Control" means an event or series of events in which (i)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) acquires "beneficial ownership" (as determined in accordance
with Rule 13d-3 under the Exchange Act), directly or indirectly, of more than
50% of the total Voting Stock of the Company at an Acquisition Price less than
105% of the conversion price then in effect with respect to the Notes; and (ii)
the holders of the Common Stock receive consideration which is not all or
substantially all common stock that is (or upon consummation of or immediately
following such event or events will be) listed on a United States national
securities exchange or approved for quotation on the Nasdaq National Market or
any similar United States system of automated dissemination of quotations of
securities prices; provided, however, that any such person or group shall not be
deemed to be the beneficial owner of, or to beneficially own, any Voting Stock
tendered in a tender offer until such tendered Voting Stock is accepted for
purchase under the tender offer.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, the body
performing such duties at such time.
"Common Stock" includes any stock of any class of the Company which
has no preference in respect of
2
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Company and which is not subject
to redemption by the Company. However, subject to the provisions of Section
10.9, shares issuable on conversion of Securities shall include only shares of
the class designated as Common Stock of the Company at the date of the initial
issuance of Securities by the Company or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which are not subject to redemption by the Company; provided that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.
"Company" means Pioneer Financial Services, Inc., a Delaware
corporation, and, subject to Article 5, its successors and assigns.
"Corporate Trust Office" means the office of the Trustee at the
address of the Trustee specified in Section 12.10 or such other address as to
which the Trustee may give notice to the Company.
"Daily Market Price" when used with reference to the Common Stock or
another security means the price of a share of Common Stock or such other
security on the relevant date, determined on the basis of the last reported sale
price regular way of the Common Stock or such other security as reported on the
composite tape, or similar reporting system, for issues listed on the New York
Stock Exchange (or if the Common Stock or such other security is not then listed
on that Exchange, for issues listed on such other national securities exchange
upon which the Common Stock or such other security is listed as may be
designated by the Board of Directors from time to time for the purposes hereof)
or, if there is no such reported sale on the day in question, on the basis of
the average of the closing bid and asked quotations regular way as so reported,
or, if the Common Stock or such other
3
security is not listed on any national securities exchange, on the basis of the
average of the high bid and low asked quotations regular way on the day in
question in the over-the-counter market as reported by the National Association
of Securities Dealers Automated Quotation System, or if not so quoted, as
reported by National Quotation Bureau, Incorporated, or a similar organization.
"Default" means any event which is, or after notice or passage of time
would be, an Event of Default.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder," "Securityholder" or other similar terms means a Person in
whose name a Security is registered.
"Indenture" means this instrument as originally executed and delivered
or, if amended or supplemented as herein provided, as so amended or
supplemented.
"Insurance Subsidiary" means any Subsidiary of the Company which is
engaged in the insurance business or which is qualified as an insurer or
insurance broker/agent.
"Officer" means the Chairman of the Board, the President, the Chief
Financial Officer, the Treasurer, any assistant Treasurer, Controller, Secretary
or any Vice President of the Company.
"Officers' Certificate" means a certificate signed by two Officers,
one of whom must be the principal executive officer, principal financial officer
or principal accounting officer of the Company.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel who may be an employee of or counsel to the Company or who may be other
counsel reasonably satisfactory to the Trustee.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated association or
any other
4
entity or organization or government or political subdivision or any agency or
instrumentality thereof.
"principal," wherever used with reference to the Securities or any
Security or any portion thereof, shall be deemed to include "and premium, if
any."
"Responsible Officer" when used with respect to the Trustee means any
officer of the Trustee assigned by the Trustee to administer its corporate trust
matters.
"Security" or "Securities" means the __% Convertible Subordinated
Notes due 2003, as amended or supplemented from time to time, authenticated and
delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means any corporation, association or other business
entity of which more than 50% of the total voting power of shares of Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as in force at the date as of which this Indenture was originally
executed.
"Trustee" means the entity identified as "Trustee" in the first
paragraph hereof and, subject to the provisions of Article 5, shall also include
any successor trustee.
"Voting Stock" means stock of the class or classes pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
a corporation (irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
5
Section 1.2 Other Definitions.
Defined in
Term Section
"Bankruptcy Law".................. 6.1
"Change of Control Offer"......... 4.6
"Change of Control Payment"....... 4.6
"Change of Control Payment Date".. 4.6
"Conversion Price"................ 10.1
"Credit Agreement"................ 4.7
"Custodian"....................... 6.1
"Event of Default"................ 6.1
"Expiration Time"................. 10.6
"Offer"........................... 10.6
"Paying Agent".................... 2.3
"Payment Default"................. 6.1
"Purchased Shares"................ 10.6
"Registrar"....................... 2.3
"Representative".................. 11.2
"Senior Indebtedness"............. 11.2
"U.S. Government Obligations"..... 8.1
Section 1.3 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the Trust Indenture
Act, the provision is incorporated by reference in and made a part of this
Indenture.
The following Trust Indenture Act terms used in this Indenture have
the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder of a Security;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Securities means the Company and any successor
obligor upon the Trust Indenture Act.
6
All other terms used in this Indenture that are defined by the Trust
Indenture Act, defined by Trust Indenture Act reference to another statute or
defined by Commission rule under the Trust Indenture Act have the meanings so
assigned to them.
Section 1.4 Rules of Construction.
Unless the context otherwise requires:
(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 generally accepted accounting principles;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE SECURITIES
--------------
Section 2.1 Form and Dating. The Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A to
this Indenture. The Securities may have notations, legends or endorsements
required by law, stock exchange rules or usage. Each Security shall be dated
the date of its authentication. The Securities shall be in denominations of
$1,000 and integral multiples thereof.
The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture and to
the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions
and to be bound thereby.
Section 2.2 Execution and Authentication. Two Officers shall
sign the Securities for the Company by manual or facsimile signature. The
Company's seal shall
7
be reproduced on the Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds
that office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that the Security has been authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue up
to the aggregate principal amount stated in paragraph 4 of the Securities,
upon receipt of a written order of the Company signed by an Officer and may
rely upon an Opinion of Counsel as to the legality and form of the
Securities. The aggregate principal amount of Securities outstanding at
any time may not exceed such amount except as provided in Section 2.7
hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may
authenticate Securities whenever the Trustee may do so. Each reference in
this Indenture to authentication by the Trustee includes authentication by
such agent. An authenticating agent has the same rights as an Agent to
deal with the Company or an Affiliate of the Company.
Section 2.3 Registrar and Paying Agent. The Company shall
maintain in the Borough of Manhattan, City of New York, and in such other
locations as it shall determine, an office or agency where (i) Securities
may be presented for registration of transfer or for exchange
("Registrar"), (ii) Securities may be presented for payment or conversion
("Paying Agent") and (iii) notices and demands to or upon the Company in
respect of Securities and this Indenture may be served. The Company may
also from time to time designate one or more other offices or agencies
where the Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve
the Company of its obligations to maintain an office or agency in the
Borough of Manhattan, City of
8
New York, for such purposes. The Company or any of its Subsidiaries may
act as Registrar or Paying Agent except that for purposes of Article 8 and
Section 4.6, neither the Company nor any Subsidiary shall act as Paying
Agent. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company may appoint one or more co-registrars
and one or more additional paying agents. The term "Registrar" includes
any co-registrar and the term "Paying Agent" includes any additional paying
agent. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which agreement
shall implement the provisions of this Indenture that relate to such Agent.
The Company shall notify the Trustee, in advance, of the name and address
of such Agent. If the Company fails to maintain a Registrar or Paying
Agent, the Trustee shall act as such.
The Company initially appoints the Trustee to act as Registrar,
Paying Agent and Agent for service of notices and demands in connection
with the Securities.
Section 2.4 Paying Agent to Hold Money 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 money held by the Paying Agent for the payment of principal or
interest on the Securities, 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 money held by it to the
Trustee. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee. 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 money. If the Company or a
Subsidiary of the Company acts as Paying Agent, it shall segregate and hold
in a separate trust fund for the benefit of the Holders all money held by
it as Paying Agent.
Section 2.5 Holder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Holders and shall otherwise comply with
Trust Indenture Act (S) 312(a). If the Trustee is not the
9
Registrar, the Company shall furnish to the Trustee at least seven Business
Days before each interest payment date and, at such other times as the
Trustee may request in writing, a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of Holders,
and the Company shall otherwise comply with Trust Indenture Act (S) 312(a).
Section 2.6 Transfer and Exchange. Where Securities are
presented to the Registrar or a co-registrar with a request to register a
transfer or to exchange them for an equal principal amount of Securities of
other denominations, the Registrar shall register the transfer or make the
exchange if its requirements for such transactions are met. To permit
registrations of transfer and exchanges, the Company shall issue and the
Trustee shall authenticate Securities at the Registrar's request. No
service charge shall be made for any registration of transfer or exchange
(except as otherwise expressly permitted herein), but the Company may
require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer tax or similar governmental charge payable upon exchanges pursuant
to Section 2.10, 3.6, 9.5 or 10.2).
The Company shall not be required (i) to issue, register the
transfer of or exchange Securities during a period beginning at the opening
of business 15 days before the day of any selection of Securities for
redemption under Section 3.2 and ending at the close of business on the day
of selection, or (ii) to register the transfer or exchange of any Security
so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
Section 2.7 Replacement Securities. If any mutilated Security
is surrendered to the Trustee, or the Company and the Trustee receive
evidence to their satisfaction of the destruction, loss or theft of any
Security, the Company shall issue and the Trustee, upon the written order
of the Company signed by an Officer in accordance with Section 2.2, shall
authenticate a replacement Security if the Trustee's requirements are met.
If required by the Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee
and the Company to protect
10
the Company, the Trustee, any Agent or any authenticating agent from any loss
which any of them may suffer if a Security is replaced. The Company may charge
for its expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company
and shall be entitled to all benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
Section 2.8 Outstanding Securities. The Securities outstanding at any
time are all the Securities authenticated by the Trustee except for those
cancelled by it, those delivered to it for cancellation and those described in
this Section as not outstanding.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser, in which case, such replacement security shall
not be deemed to be outstanding. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section 2.7.
If the principal amount of any Security is considered paid under
Section 4.1, it ceases to be outstanding and interest on it ceases to accrue.
Except as set forth in Section 2.9, a Security does not cease to be
outstanding because the Company or an Affiliate holds the Security.
Section 2.9 Treasury Securities. In determining whether the Holders of
the required principal amount of Securities have concurred in any direction,
waiver or consent, Securities owned by the Company, any Subsidiary of the
Company or by any Affiliate of the Company shall be considered as though not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which a Trustee has been advised in writing by the Company or the
Holder are so owned shall be so disregarded.
11
Section 2.10 Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary securities upon a written order of the Company signed by an Officer
and delivered or caused to be delivered to the Trustee. Temporary Securities
shall be substantially in the form of definitive Securities but may have
variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate in accordance with Section 2.2 definitive Securities in exchange
for temporary Securities.
Holders of temporary Securities shall be entitled to all benefits of
this Indenture.
Section 2.11 Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and Paying Agent shall
forward to the Trustee any Securities surrendered to them for registration of
transfer, exchange, payment or conversion. The Trustee and no one else shall
cancel all Securities surrendered for registration of transfer, exchange,
payment, replacement, cancellation or conversion, and certification of their
destruction shall be delivered to the Company unless, by a written order, signed
by an Officer, the Company shall direct that cancelled Securities be returned to
it. The Company may not issue new Securities to replace Securities that it has
paid (purchased on the open market or otherwise) or otherwise acquired or that
have been delivered to the Trustee for cancellation or that any Securityholder
has converted pursuant to Article 10.
Section 2.12 Defaulted Interest. If the Company defaults in a payment
of interest on the Securities, it shall pay the defaulted interest in any lawful
manner plus, to the extent lawful, interest payable on the defaulted interest,
to the Persons who are Holders on a subsequent special record date, in each case
at the rate provided in the Securities and in Section 4.1 hereof. The Company
shall, with the consent of the Trustee, fix each such special record date and
payment date. At least 15 days before the record date, the Company (or the
Trustee, in the name of and at the expense of the Company) shall mail to Holders
a notice that states the spe-
12
cial record date, the related payment date and the amount of such interest to be
paid.
ARTICLE 3
REDEMPTION
----------
Section 3.1 Notices to Trustee. If the Company elects to redeem
Securities pursuant to the optional redemption provisions of Section 3.7 hereof,
it shall furnish to the Trustee an Officers' Certificate setting forth (i) the
Section of this Indenture pursuant to which the redemption shall occur, (ii) the
redemption date, (iii) the principal amount of Securities to be redeemed and
(iv) the redemption price, at least 45 days but not more than 60 days before a
redemption date, unless a shorter period is acceptable to the Trustee.
Section 3.2 Selection of Securities to Be Redeemed. If less than all
of the Securities are to be redeemed, the Trustee shall select the Securities to
be redeemed among the Holders of the Securities on a pro rata basis or in
accordance with any other method the Trustee considers fair and appropriate (and
in such manner as complies with applicable legal and stock exchange
requirements, if any), provided that no Securities of $1,000 or less shall be
redeemed in part. In the event of partial redemption, the particular Securities
to be redeemed shall be selected, unless otherwise provided herein, not less
than 30 days nor more than 60 days prior to the redemption date by the Trustee
from the outstanding Securities not previously called for redemption.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. In the event of
partial redemption, the Company and the Trustee may treat as outstanding any
Securities surrendered for conversion during the period of 15 days next
preceding the mailing of the notice of redemption set forth in Section 3.3.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected for
partial redemp-
13
tion, the principal amount thereof to be redeemed. Securities and portions of
them selected shall be in amounts of $1,000 or whole multiples of $1,000; except
that if all of the Securities of a Holder are to be redeemed, the entire
outstanding amount of Securities held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption.
Section 3.3 Notice of Redemption. At least 30 days but not more than
60 days before a redemption date, the Trustee in the name and at the expense of
the Company shall publish a notice in the Wall Street Journal and the Company
shall mail or cause to be mailed, by first-class mail, a notice of redemption to
each Holder whose Securities are to be redeemed at its registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion shall be
issued;
(4) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities estimated
to be outstanding after such partial redemption;
(5) the Conversion Price, the date on which the right to convert the
principal of the Securities to be redeemed will terminate and the place or
places where such Securities may be surrendered for conversion;
(6) the name and address of the Paying Agent;
14
(7) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(8) that, unless the Company defaults in making such redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the redemption date; and
(9) the paragraph of the Securities and/or Section of this Indenture
pursuant to which the Securities called for redemption are being redeemed;
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
Section 3.4 Effect of Notice of Redemption. Once notice of redemption
is published and mailed in accordance with Section 3.3 hereof, Securities so
called for redemption become due and payable on the redemption date at the
redemption price, plus accrued interest, if any.
Section 3.5 Deposit of Redemption Price. On or before the redemption
date, the Company shall deposit with the Trustee or with the Paying Agent (or,
if the Company is its own Paying Agent, the Company shall segregate and hold in
trust) money sufficient to pay the redemption price of and accrued interest on
all Securities to be redeemed on that date, other than any Securities called for
redemption on that date which have been converted prior to the date of such
deposit. The Trustee or the Paying Agent shall promptly return to the Company
any money deposited with the Trustee or the Paying Agent by the Company in
excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Securities to be redeemed.
If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent and held in trust for the
redemption of such Security shall (subject to any right of the Holder of such
Security or any predecessor security to receive interest as provided in the last
paragraph of Section 4.1) be paid to the Company upon request or, if then held
by the Company, shall be discharged from such trust.
15
On and after the redemption date, interest shall cease to accrue on
the Securities or the portions of Securities called for redemption and any
conversion rights shall terminate. If a Security is redeemed on or after an
interest record date but on or prior to the related interest payment date, then
any accrued and unpaid interest shall be paid to the Person in whose name such
Security was registered at the close of business on such record date. If any
Security called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, and such Security
shall remain convertible from the redemption date until such principal is paid,
and to the extent lawful on any interest not paid on such unpaid principal, in
each case at the rate provided in the Securities and in Section 4.1 hereof.
Section 3.6 Securities Redeemed in Part. Upon surrender of a Security
that is redeemed in part, the Company shall issue and the Trustee shall
authenticate for the Holder of the Securities at the expense of the Company a
new Security equal in principal amount to the unredeemed portion of the Security
surrendered.
Section 3.7 Optional Redemption. The Company shall not have the option
to redeem the Securities prior to ______, 1999. Thereafter, the Company shall
have the option to redeem the Securities, in whole or in part, upon not less
than 30 nor more than 60 days' notice as set forth in Section 3.3, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest thereon to the applicable redemption date if
redeemed during the twelve-month period beginning:
Redemption
Date Price
---- ----------
________ __, 1999.................... __________%
________ __, 2000.................... __________%
________ __, 2001.................... __________%
________ __, 2002.................... 100%
Section 3.8 Mandatory Redemption. Except as set forth under Section
4.6 of this Indenture, the Compa-
16
ny shall not be required to make mandatory redemption payments with respect to
the Securities. There are no sinking fund payments with respect to the
Securities.
ARTICLE 4
COVENANTS
---------
Section 4.1 Payment of Securities. The Company shall pay the principal
of and interest on the Securities on the dates and in the manner provided in the
Securities. Principal and interest shall be considered paid on the date due if
the Paying Agent (other than the Company or a Subsidiary of the Company) holds
on that date money designated for and sufficient to pay all principal and
interest then due; provided, however, that money held by the Paying Agent for
the benefit of holders of Senior Indebtedness pursuant to the provisions of
Article 11 hereof shall not be considered paid within the meaning of this
Section 4.1.
To the extent lawful, the Company shall pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law) on (i) overdue
principal, at the rate borne by the Securities, compounded semiannually, and
(ii) overdue installments of interest (without regard to any applicable grace
period) at the same rate, compounded semiannually.
Section 4.2 Maintenance of Office or Agency. The Company will
maintain in the Borough of Manhattan, The City of New York, State of New York,
the office or agency required under Section 2.3. The Company will give prior
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company fails to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee as set forth in Section 12.10.
Section 4.3 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
its Subsidiaries during the preceding fiscal year has been made under the
supervision
17
of the signing Officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his knowledge the Company has kept, observed, performed and fulfilled
each and every covenant 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 Events of Default shall have occurred, describing all such
Defaults or Events of Default of which he may have knowledge) and that to the
best of his knowledge no event has occurred and remains in existence by reason
of which payments on account of the principal of or interest, if any, on the
Securities are prohibited. See Section 12.10.
The Company will, so long as any of the Securities are outstanding,
deliver to the Trustee, forthwith upon becoming aware of (i) any Default, Event
of Default or default in the performance of any covenant, agreement or condition
in this Indenture or (ii) any event of default or event which, with notice or
lapse of time, or both, could result in a default under Section 6.1(4), an
Officers' Certificate specifying such Default, Event of Default, default or
event.
Section 4.4 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
enforce, 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 4.5 Continued Existence. Subject to Article 5 hereof, the
Company shall do or cause to be done all things necessary to preserve and keep
in full force and effect (i) its corporate existence, and the corporate,
partnership or other existence of any Subsid-
18
iary of the Company, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries 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 its Subsidiaries,
taken as a whole, and that the loss thereof is not materially adverse to the
Holders of the Securities.
Section 4.6 Offer of Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of
Securities shall have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's
Securities pursuant to the offer described below (the "Change of Control Offer")
at a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (the "Change of
Control Payment"). Within 10 days following any Change of Control, the Company
shall publish a notice in the Wall Street Journal, notify the Trustee and give
written notice of such Change of Control to each Holder by first-class mail
stating: (i) that the Change of Control Offer is being made pursuant to this
Section and that all Securities tendered will be accepted for payment; (ii) the
purchase price and the purchase date, which shall be a business day no earlier
than 30 days nor later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"); (iii) that any Security not tendered will
continue to accrue interest; (iv) that, unless the Company defaults in the
payment of the Change of Control Payment, all Securities accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date; (v) that Holders electing to have any Securities
purchased pursuant to a Change of Control Offer will be required to surrender
the Securities, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the Securities completed, to the Paying Agent at the address
specified in the notice prior to the
19
close of business on the third Business Day preceding the Change of Control
Payment Date; (vi) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Securities delivered for purchase, and a statement that such
Holder is withdrawing his election to have such Securities purchased; and (vii)
that Holders whose Securities are being purchased only in part will be issued
new Securities equal in principal amount to the unpurchased portion of the
Securities surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof. The Company shall comply with
the requirements of Rule 13c-4 and 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Securities
in connection with a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to
the extent lawful, (i) accept for payment Securities or portions thereof
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all
Securities or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof tendered to the Company.
The Paying Agent shall promptly mail to each Holder of Securities so accepted
payment in an amount equal to the purchase price of such Securities, and the
Trustee shall promptly authenticate and mail to each Holder a new Security equal
in principal amount to any unpurchased portion of the Securities surrendered, if
any; provided, that each such new Security shall be in a principal amount of
$1,000 or an integral multiple thereof. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
(c) Except as described above with respect to a Change of
Control, the Company shall not be required to repurchase or redeem the
Securities from the
20
Holders of the Securities in the event of a takeover, recapitalization or
similar transaction.
Section 4.7 Limitation on Dividend and Other Payment Restrictions
Affecting Insurance Subsidiaries. The Company will not, and will not permit any
of its Insurance Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Insurance Subsidiary to (i) pay dividends or
make any other distribution on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits, or pay any
indebtedness owed to, the Company or a Subsidiary of the Company, (ii) make
loans or advances to the Company or any Subsidiary of the Company, or (iii)
transfer any of its properties or assets to the Company, except for such
encumbrances or restrictions existing under or by reason of (q) the Term Loan
dated August 30, 1995 between the Company and American National Bank and Trust
Company of Chicago, Firstar Bank Milwaukee, Bank One, Rockford and LaSalle
National Bank as in effect on the execution date of this Indenture (the "August
Term Loan"); (r) the Term Loan dated March 22, 1995 between the Company and
American National Bank and Trust Company of Chicago, Firstar Bank Milwaukee and
Bank One, Rockford as in effect on the execution date of this Indenture (the
"March Term Loan"); (s) the Credit Facility dated March 22, 1995 between the
Company and American National Bank and Trust Company of Chicago, Firstar Bank
Milwaukee, Bank One, Rockford and Fleet National Bank of Connecticut (the
"Credit Facility"); (t) any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings of the
agreements described in clauses (q), (r) and (s) hereof, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive with respect to
such dividend and other payment restrictions than those contained in such
agreements as in effect on the execution date of this indenture; (u) bank credit
facilities of any Insurance Subsidiary of the Company, as in effect from time to
time; (v) any instrument governing indebtedness of any Insurance Subsidiary of
the Company evidenced by industrial revenue bonds (provided that such
encumbrances or restrictions set forth in the agreements or instruments
described in clauses (u) and (v) hereof are no more restrictive with
21
respect to such dividend and other payment restrictions than those contained in
the agreements described in clauses (q), (r) and (s) hereof as in effect on the
execution date of this Indenture); (w) customary provisions restricting the
transfer of property or assets contained in any conditional sales contract or
capitalized lease of any Insurance Subsidiary of the Company; (x) applicable
law; (y) customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of the Company or any Insurance Subsidiary of the
Company which lease was entered into in the ordinary course of business and
consistent with past practice; (z) arrangements relating to the sale of agent
debit balances by the Company or its Subsidiaries; or (aa) any instrument
governing indebtedness of a person acquired by the Company or any insurance
subsidiary of the Company at the time of such acquisition, which encumbrance or
restriction is not applicable to any person, or the properties or assets of any
person, other than the person, or the property or assets of the person, so
acquired.
Section 4.8 Taxes. The Company shall pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon the Company
or its Subsidiaries or upon the income, profits or property of the Company or
any such Subsidiary, and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any such Subsidiary; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which disputed
amounts adequate reserves have been made.
Section 4.9 Commission Reports; Reports to Securityholders.
(a) The Company shall file with the Trustee within 15 days after it
files them with the Commission copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules
22
and regulations prescribe) which the Company is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act. The Company
also shall comply with the other provisions of the Trust Indenture Act (S)
314(a). If the Company is not subject to the requirements of the Exchange Act,
it shall file with the Trustee, within 15 days after it would have been required
to file with the Commission, financial statements, including any notes thereto
(and with respect to annual reports, an auditors' report by a nationally
recognized firm of independent certified public accountants), and a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," both comparable to that which the Company would have been required
to include in such annual reports, information, documents or other reports if it
were subject to the requirements of Section 13 or 15(d) of the Exchange Act.
(b) So long as the Securities remain outstanding, the Company shall
cause its annual reports to stockholders and any quarterly or other financial
reports furnished by it to stockholders to be mailed to the Holders (no later
than the date such materials are mailed to the Company's stockholders) at their
addresses appearing in the register of Securities maintained by the Registrar.
If the Company is not required to furnish annual or quarterly reports to its
stockholders pursuant to the Exchange Act, it shall cause its financial
statements referred to in Section 4.9(a) above, including any notes thereto (and
with respect to annual reports, an auditors' report by a nationally recognized
firm of independent certified public accountants), and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations," to be
so mailed to the Holders within 120 days after the end of each of the Company's
fiscal years and within 60 days after the end of each of its first three fiscal
quarters.
Section 4.10 Insurance. The Company shall provide, or cause to be
provided, for itself and its Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily insured against
by corporations similarly situated and owning like properties, including, but
not limited to, products liability insurance and public liability insurance,
with reputable insurers or with the government of the United States of America
or an agency or instrumen-
23
tality thereof, in such amounts with such deductibles and by such methods as
shall be determined in good faith by the Board of Directors to be appropriate.
ARTICLE 5
SUCCESSORS
----------
Section 5.1 When Company May Merge, etc. The Company, in a single
transaction or through a series of related transactions, shall not consolidate
with or merge with or into, or sell, lease, convey or otherwise dispose of all
or substantially all of its assets to, any Person unless:
(1) 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 shall have been made, is a corporation
organized and existing under the laws of the United States, any state
thereof or the District of Columbia;
(2) the corporation formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale, lease,
conveyance or other disposition shall have been made, assumes by
supplemental indenture all the obligations of the Company under the
Securities and this Indenture, except that it need not assume the
obligations of the Company as to conversion of Securities if, pursuant to
Section 10.9, the Company or another Person enters into a supplemental
indenture obligating it to deliver the securities, cash or other assets
deliverable upon conversion of Securities; and
(3) immediately after the transaction no Default or Event of Default
exists.
The Company shall deliver to the Trustee prior to the consummation of
the proposed transaction an Officers' Certificate to the foregoing effect and an
Opinion of Counsel stating that the proposed transaction and such supplemental
indenture comply with this Indenture.
Section 5.2 Successor Corporation Substituted. Upon any
consolidation or merger, or any sale, lease,
24
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.1, the successor corporation 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 the predecessor Company in the
case of a sale, lease, conveyance or other disposition shall not be released
from the obligation to pay the principal of and interest on the Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
---------------------
Section 6.1 Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any Security
when the same becomes due and payable and the Default continues for a
period of 30 days (whether or not prohibited by Article 11 hereof);
(2) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at maturity, upon redemption
or otherwise, including failure by the Company to repurchase the Securities
when required pursuant to Section 4.6 hereof (whether or not prohibited by
Article 11 hereof);
(3) the Company fails to comply with any of its other agreements or
covenants in, or provisions of, the Securities or this Indenture and the
Default continues for the period and after the notice specified below;
(4) an event of default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured
or evidenced any indebtedness for money borrowed by the Company or any of
its Subsidiaries (or the payment
25
of which is guaranteed by the Company or any of its Subsidiaries), whether
such indebtedness or guarantee now exists or shall be created after the
date hereof, which default (i) is caused by a failure to pay principal or
interest on such indebtedness prior to the expiration of the grace period
provided in such indebtedness (a "Payment Default") or (ii) results in the
acceleration of such indebtedness prior to its expressed maturity and, in
each case, the principal amount of such indebtedness, together with the
principal amount of any other such indebtedness under which there has been
a Payment Default or the maturity of which has been so accelerated,
aggregates $10 million or more;
(5) final judgments or decrees shall be entered by a court of
competent jurisdiction against the Company or any Subsidiary involving
liabilities of $10 million or more (singly or in the aggregate) (after
deducting the portion of such liabilities accepted by a reputable insurance
company) and such final judgments or decrees shall not have been vacated,
discharged, satisfied or stayed pending appeal within 60 days from the
entry thereof;
(6) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding,
(ii) consents to, or acquiesces in, the institution of a
bankruptcy or an insolvency proceeding against it or the entry of a
judgment, decree or order for relief against it in an involuntary case or
proceeding,
(iii) applies for, consents to or acquiesces in the appointment
of or taking possession by a Custodian of it or any Subsidiary or for all
or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors,
26
(v) generally is unable to pay its debts as the same become
due;
(vi) admits in writing its inability to pay its debts
generally as they become due,
(vii) becomes insolvent, or
(viii) takes any corporate action in furtherance of or to
facilitate, conditionally or otherwise, any of the foregoing;
(7) a court of competent jurisdiction enters any judgment, order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company or any Subsidiary in an
involuntary case,
(ii) appoints a Custodian of the Company or any Subsidiary or
for all or substantially all of its property, or
(iii) orders the winding-up or liquidation of the Company or
any Subsidiary,
and the order or decree remains unstayed and in effect for 60 days or any
bankruptcy or insolvency petition or application is filed, or any bankruptcy
case or insolvency proceeding is commenced, against the Company or any
Subsidiary and such petition, application, case or preceding is not dismissed
within 60 days.
The term "Bankruptcy Law" means title 11, U.S. Code or any similar
Federal or State Law for the relief, supervision, conservation, reorganization
or liquidation of debtors or for the benefit of creditors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law. The term "Significant Subsidiary" means any Subsidiary which (a)
has assets in excess of $10 million, or (b) in its last completed fiscal year
generated revenue in excess of $5 million.
A Default under clause (3) (other than Defaults under Section 5.1 or
10.1 which Defaults shall be Events of Default without the notice or passage of
time specified in this paragraph) is not an Event of Default until the Trustee
or the Holders of at least 25% in principal
27
amount of the then outstanding Securities notify the Company of the Default and
the Company does not cure the Default within 60 days after receipt of the
notice. The notice must specify the Default, demand that it be remedied and
state that the notice is a "Notice of Default." Such notice shall be given by
the Trustee if requested by the Holders of at least 25% in principal amount of
the Security then outstanding.
In the case of any Event of Default pursuant to the provisions of this
Section 6.1 occurring by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding payment
of the premium which the Company would have had to pay if the Company then had
elected to redeem the Securities pursuant to Paragraph 5 of the Securities, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law, anything in this Indenture or in the Securities
contained to the contrary notwithstanding.
Section 6.2 Acceleration. If an Event of Default (other than an
Event of Default specified in clauses (6) and (7) of Section 6.1 with respect to
the Company) occurs and is continuing, the Trustee or the Holders of at least
25% in principal amount of the then outstanding Securities by notice to the
Company (and to the Trustee if such notice is given by the Holders), may declare
the unpaid principal of and accrued interest on all the Securities to be due and
payable. Upon such declaration the principal and interest shall be due and
payable. In the event of a declaration of acceleration under the Indenture
because an Event of Default set forth in Section 6.1(4) has occurred and is
continuing, such declaration of acceleration shall be automatically annulled if
the holders of the indebtedness which is the subject of such Event of Default
have rescinded their declaration of acceleration in respect of such indebtedness
within 30 days thereof and no other Event of Default has occurred during
such 30-day period which has not been cured or waived. If an Event of Default
specified in clause (6) or (7) of Section 6.1 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
principal amount of the then outstanding Securities by notice to the Trustee may
rescind an acceleration and its
28
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration.
Section 6.3 Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal or interest on the Securities or to enforce the performance of any
provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any holder of Securities in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 6.4 Waiver of Past Defaults. The Holders of a majority in
principal amount of the then outstanding Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences except a
continuing Default or Event of Default in the payment of the principal of or
interest on any Security or a Default or Event of Default under Article 10.
Section 6.5 Control by Majority. The Holders of a majority in
principal amount of the then outstanding Securities may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on it. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture, is
unduly prejudicial to the rights of other Holders, or would involve the Trustee
in personal liability.
Section 6.6 Limitation on Suits. A Holder may pursue a remedy with
respect to this Indenture or the Securities only if:
29
(1) the Holder gives to the Trustee notice of a continuing Event of
Default;
(2) the Holders of at least 25% in principal amount of the then
outstanding Securities make a request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Securities 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 6.7 Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder of a Security to
receive payment of principal and interest on the Security, on or after the
respective due dates expressed in the Security, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to bring suit for the enforcement of the right to
convert the Security shall not be impaired or affected without the consent of
the Holder.
Section 6.8 Collection Suit by Trustee. If an Event of Default
specified in Section 6.1(1) or (2) 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 and interest remaining unpaid on the
Securities and interest on overdue principal and interest and such further
amount
30
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 counsel and any other amounts due the
Trustee under Section 7.7.
Section 6.9 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 Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property. Nothing contained herein shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
Section 6.10 Priorities. If the Trustee collects any money pursuant
to this Article, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.7;
Second: to holders of Senior Indebtedness to the extent required by
Article 11;
Third: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Securities for principal and interest,
respectively; and
Fourth: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders.
Section 6.11 Undertaking for Costs. In any suit for the enforcement
of any right or remedy under
31
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.7, a suit by a holder for the enforcement of the
right to convert any Security in accordance with Article 10 or a suit by Holders
of more than 10% in principal amount of the then outstanding Securities.
ARTICLE 7
TRUSTEE
-------
Section 7.1 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 man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
32
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own wilful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 7.2 Rights of Trustee.
Except as otherwise provided in Section 7.1:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an 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
33
faith in reliance on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers.
Section 7.3 Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or an Affiliate with the same rights it
would have if it were not Trustee. However, in the event that the Trustee
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue as Trustee or resign.
Any Agent may do the same with like rights. However, the Trustee is subject to
Sections 7.10 and 7.11.
Section 7.4 Trustee's Disclaimer. The Trustee makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Company in the Indenture or any statement in the Securities other than its
authentication.
Section 7.5 Notice of Defaults. If a Default or Event of Default
occurs and is continuing and if it is known to the Trustee, the Trustee shall
mail to Securityholders a notice of the Default or Event of Default within 90
days after it occurs. Except in the case of a Default or Event of Default in
payment on any Security (including any failure to make any mandatory repurchase
payment required hereunder), the Trustee may withhold the notice if and so long
as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Securityholders.
Section 7.6 Reports by Trustee to Holders. Within 60 days after the
reporting date stated in Section
34
12.10, the Trustee shall mail to Securityholders a brief report dated as of such
reporting date that complies with Trust Indenture Act (S) 313(a) (but if no
event described in Trust Indenture Act (S) 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The Trustee
also shall comply with Trust Indenture Act (S) 313(b)(2). The Trustee shall also
transmit by mail all reports as required by Trust Indenture Act (S) 313(c).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the Commission and each stock exchange on which the
Securities are listed. The Company shall notify the Trustee when the Securities
are listed on any stock exchange.
Section 7.7 Compensation and Indemnity. The Company shall pay to the
Trustee from time to time reasonable compensation for its services hereunder.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred by it. Such expenses
may include the reasonable compensation and out-of-pocket expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any loss or liability
incurred by it including, to the extent provided herein, the costs and expenses
of defending itself against any claims or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
If the Company defends against any such claim, the Trustee shall cooperate in
the defense. The Trustee may have separate counsel, selected by it, at the
Company's expense for such counsel's reasonable fees and expenses before the
Company assumes the defense of such claim, and at the Trustee's expense after
the Company has assumed such defense. If, however, the counsel selected by the
Trustee advises the Company and the Trustee as to such claim that the posture of
the Company is or may be inconsistent with the posture of the Trustee, then the
Trustee may resume the defense of such claim with its counsel and the Company
shall pay the reasonable fees and expenses of such counsel incurred after that
time. The Company need
35
not pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or bad faith. If
negligence or bad faith of the Trustee is established, the Trustee shall be
responsible for its own counsel fees.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.8 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.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the then outstanding Securities may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) 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;
(3) a Custodian or public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason,
36
the Company shall promptly appoint a successor Trustee. Within one year after
the successor Trustee takes office, the Holders of a majority in principal
amount of the then outstanding Securities may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
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 Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.7. Notwithstanding the replacement of the Trustee
pursuant to this Section 7.8, the Company's obligations under Section 7.7 hereof
shall continue for the benefit of the retiring Trustee with respect to expenses
and liabilities incurred by it prior to such replacement.
Section 7.9 Successor Trustee by Merger, etc. 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 7.10 Eligibility; Disqualification. This Indenture shall
always have a Trustee who satisfies the requirements of Trust Indenture Act (S)
310(a)(1), (2) and (5). The Trustee shall always have a combined capital and
surplus as stated in Section 12.10. The Trustee
37
is subject to and shall comply with Trust Indenture Act (S) 310(b).
Section 7.11 Preferential Collection of Claims Against Company. The
Trustee is subject to and shall comply with Trust Indenture Act (S) 311(a),
excluding any creditor relationship listed in Trust Indenture Act (S) 311(b). A
Trustee who has resigned or been removed shall be subject to Trust Indenture Act
(S) 311(a) to the extent indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
----------------------
Section 8.1 Termination of Company's Obligations. This Indenture
shall cease to be of further effect (except that the Company's obligations under
Section 7.7 and 8.3 shall survive) when all outstanding Securities theretofore
authenticated and issued have been delivered to the Trustee for cancellation and
the Company has paid all sums payable hereunder. In addition, the Company may
terminate all of its obligations under this Indenture (except the Company's
obligations under Sections 7.7 and 8.3) if:
(1) the Securities mature within one year or all of them are to be
called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption; and
(2) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations sufficient to pay principal and interest in
such amounts (and at such times as are sufficient in the opinion of a
nationally recognized firm of independent certified public accountants
expressed in a written certification thereof delivered to the Trustee),
without consideration of any reinvestment of such interest, to pay
principal of and interest on the Securities to maturity or redemption, as
the case may be, and to pay all other sums payable by it hereunder. The
Company may make the deposit only during the one-year period and only if
Article 11 permits it.
38
and in either case the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions precedent
provided for herein relating to the discharge of this Indenture have been
complied with.
However, the Company's obligations in Sections 2.3, 2.4, 2.5, 2.6,
2.7, 4.1, 4.4, 4.5, 7.7, 7.8, 8.3 and 8.4 and in Article 10, shall survive until
the Securities are no longer outstanding. Thereafter, only the Company's
obligations in Sections 7.7 and 8.3 shall survive.
After a deposit made pursuant to this Section 8.1, the Trustee upon
request shall acknowledge in writing the discharge of the Company's obligations
under this Indenture except for those surviving obligations specified above.
"U.S. Government Obligations" means direct obligations of the United
States of America for the timely payment of which the full faith and credit of
the United States of America is pledged. In order to have money available on a
payment date to pay principal or interest on the Securities, the U.S. Government
Obligations shall be payable as to principal or interest on or before such
payment date in such amounts as will provide the necessary money. U.S.
Government Obligations shall not be callable at the issuer's option.
Section 8.2 Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to Section
8.1. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal and interest on the Securities. Money and securities
so held in trust are not subject to Article 11.
Section 8.3 Repayment to Company. The Trustee and the Paying Agent
shall promptly pay to the Company upon request any excess money or securities
held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon request
any money held by them for the
39
payment of principal or interest that remains unclaimed for two years 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 Securityholder entitled thereto no less than 30 days prior to
such payment. After payment to the Company, Securityholders entitled to the
money must look to the Company for payment as general creditors unless an
applicable abandoned property law designates another Person.
Section 8.4 Reinstatement. If (i) the Trustee or Paying Agent is
unable to apply any money in accordance with Section 8.2 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application and (ii) the Holders of at least a
majority in principal amount of the then outstanding Securities so request by
written notice to the Trustee, the Company's obligations under this Indenture
and the Securities shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.1 until such time as the Trustee or Paying Agent
is permitted to apply all such money in accordance with Section 8.2; provided,
however, that if the Company makes any payment of interest on or principal of
any Security following the reinstatement of its obligations, the Company shall
be subrogated to the rights of the Holders of such Securities to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
----------
Section 9.1 Without Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without the consent of any
Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Sections 5.1 and 10.9;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
40
(4) to make any change that would provide additional rights or
benefits to Securityholders or that does not adversely affect the legal
rights hereunder of any Securityholder; or
(5) to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
Section 9.2 With Consent of Holders. Subject to Section 6.7, the
Company and the Trustee may amend this Indenture or the Securities with the
written consent of the Holders of at least a majority in principal amount of the
then outstanding Securities. Subject to Sections 6.4 and 6.7, the Holders of a
majority in principal amount of the Securities then outstanding may also waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Securities. However, without the consent of each
Securityholder affected, an amendment or waiver under this Section may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment or waiver;
(2) reduce the rate of or change the time for payment of interest on
any Security;
(3) reduce the principal of or change the fixed maturity of any
Security or alter the redemption provisions with respect thereto;
(4) make any Security payable in money other than that stated in the
Security;
(5) make any change in Section 6.4, 6.7 or 9.2 (this sentence);
(6) except as otherwise provided in Article 10, increase the
Conversion Price or otherwise modify or affect in any manner adverse to the
Securityholders the terms and conditions of Article 10;
(7) make any change in Article 11 that adversely affects the rights of
any Securityholder; or
41
(8) waive a default in the payment of the principal of, or interest
on, any Security (except a rescission of acceleration of the Securities by
the Holders of at least a majority in aggregate principal amount of the
Securities and a waiver of the payment default that resulted from such
acceleration) or any Default under Article 10.
To secure a consent of the Holders under this Section, 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 becomes effective, the
Company shall mail to Securityholders a notice briefly describing the amendment
or waiver. If any Securityholder fails to receive any such notice, or if such
notice contains a defect, such failure or defect shall not impair or affect the
validity of any such supplement on waiver.
Section 9.3 Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Securities shall be set forth in a supplemental indenture
that complies with the Trust Indenture Act as then in effect.
Section 9.4 Revocation and Effect of Consents. Until an amendment or
waiver becomes effective, a consent to it by a Holder of a Security is a
continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any Security. However,
any such Holder or subsequent Holder may revoke the consent as to his Security
or portion of a Security if the Trustee receives the notice of revocation before
the date on which the Trustee receives an Officer's Certificate certifying that
the Holders of the requisite principal amount of Securities have consented to
the amendment or waiver.
The Company may fix a record date for the purpose of determining the
Holders entitled to consent to any amendment or waiver. If the Company fixes a
record date, the record date shall be fixed at (i) the later of 30 days prior to
the first solicitation of such consent
42
or the date of the most recent list of Holders furnished to the Trustee prior to
such solicitation pursuant to Section 2.5 or (ii) such other date as the Company
shall designate. If a record date is fixed, then notwithstanding the foregoing,
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 such record date.
After an amendment or waiver becomes effective it shall bind every
Securityholder, unless it is of the type described in any of clauses (1) through
(8) of Section 9.2. In such case, the amendment or waiver shall bind each
Holder of a Security who has consented to it and every subsequent Holder of a
Security that evidences the same debt as the consenting Holder's Security.
Section 9.5 Notation on or Exchange of Securities. The Trustee may
place an appropriate notation about an amendment or waiver on any Security
thereafter authenticated. The Company in exchange for all Securities may issue
and the Trustee shall authenticate new Securities that reflect the amendment or
waiver.
Section 9.6 Trustee Protected. The Trustee shall sign all supplemental
indentures, except that the Trustee need not sign any supplemental indenture
that adversely affects its rights.
ARTICLE 10
CONVERSION
----------
Section 10.1 Conversion Privilege. A Holder of a Security may convert
it into Common Stock at any time during the period stated in paragraph 6 of the
Securities. The number of shares issuable upon conversion of a Security is
determined as follows: Divide the aggregate principal amount of the Securities
to be converted by the Conversion Price (rounded to three decimal places) in
effect on the conversion date. Round the result to the nearest 1/100th of a
share.
43
The initial conversion price is stated in paragraph 6 of the
Securities (the "Conversion Price"). The conversion price is subject to
adjustment.
A Holder may convert a portion of a Security if the portion is $1,000
or an integral multiple of $1,000. Provisions of this Indenture that apply to
conversion of all of a Security also apply to conversion of a portion of it.
If a Security or portion thereof is called for redemption, such
conversion right in respect of the Security or portion thereof so called shall
expire at the close of business on the date prior to the date fixed for such
redemption unless the Company defaults in making the payment due upon
redemption, in which case such right of conversion shall be reinstated.
Section 10.2 Conversion Procedure. To convert a Security a Holder
must satisfy the requirements in paragraph 6 of the Securities. The date on
which the Holder satisfies all those requirements is the conversion date. As
soon as practical, the Company shall deliver a certificate for the number of
full shares of Common Stock issuable upon the conversion and a check for any
fractional share. The person in whose name the certificate is registered shall
be treated as a stockholder of record on and after the conversion date.
Securities surrendered for conversion during the period from the close
of business on any record date next preceding any interest payment date to the
opening of business on such interest payment date shall (except in the case of
Securities or portions thereof which have been called for redemption within such
period) be accompanied by payment in New York Clearing House funds or other
funds acceptable to the Company of an amount equal to the interest payable on
such interest payment date on the principal amount of Securities being
surrendered for conversion. Subject to the provisions of Section 4.1 relating to
the payment of defaulted interest by the Company, the interest payment with
respect to a Security called for redemption on a redemption date during the
period from the close of business on any record date next preceding any interest
payment date to the opening of business on such interest payment date shall be
payable on such interest payment date to the Holder of such
44
Security at the close of business on such record date (notwithstanding the
conversion of such Security after such record date and prior to such interest
payment date), and the Holder converting such Security need not include a
payment of such interest payment amount upon surrender of such Security for
conversion. Holders on a Record Date who convert Securities on or after the
corresponding interest payment date will receive the interest payable by the
Company on that date and need not include payment in the amount of such interest
payable by the Company on that date and need not include payment in the amount
of such interest upon surrender of those securities for conversion. Except as
provided above, no payment or adjustment shall be made upon any conversion on
account of any interest accrued on the Securities surrendered for conversion or
on account of any dividends on the Common Stock issued upon conversion which
were declared for payment to holders of Common Stock of record as of a date
prior to the conversion date.
If a Holder converts more than one Security at the same time, the
number of full shares issuable upon the conversion shall be based on the total
principal amount of the Securities converted.
Upon a surrender of a Security that is converted in part, the Company
shall issue and the Trustee shall authenticate for the Holder a new Security
equal in principal amount to the unconverted portion of the Security
surrendered.
If the last day on which a Security may be converted is a Legal
Holiday, the Security may be surrendered on the next succeeding day that is not
a Legal Holiday.
Section 10.3 Fractional Shares. The Company will not issue a
fractional share of Common Stock upon conversion of a Security. Any fractional
interest in a share of Common Stock which would otherwise be issuable upon
conversion of any Security or Securities (or specified portions thereof), shall
be paid in cash (computed to the nearest cent) in an amount equal to the Daily
Market Price thereof at the close of business on the Business Day next preceding
the day of conversion multiplied by the fractional interest (expressed as a
percent-
45
age) that otherwise would have been deliverable upon conversion of the
Securities.
Section 10.4 Taxes on Conversion. If a Holder of a Security converts
it, the Company shall pay any documentary, stamp or similar issue or transfer
tax due on the issue of shares of Common Stock upon the conversion. However, the
Holder shall pay any such tax which is due because the shares are issued in a
name other than the Holder's name, and no such issue or delivery shall be made
unless and until the person or entity requesting such issue or delivery has paid
to the Company the amount of any such tax or has established, to the
satisfaction of the Company, that such tax has been paid.
Section 10.5 Company to Reserve Stock. The Company has reserved and
shall continue to reserve out of its authorized but unissued Common Stock or its
Common Stock held in treasury enough shares of Common Stock to permit the
conversion of the Securities in full.
All shares of Common Stock which may be issued upon conversion of the
Securities shall be fully paid and non-assessable, free of all liens and charges
and not subject to any preemptive rights.
The Company will comply with all securities laws regulating the offer
and delivery of shares of Common Stock upon conversion of Securities and will
endeavor to list such shares on each national securities exchange on which the
Common Stock is listed.
Section 10.6 Adjustment of Conversion Price.
(a) In case the Company shall pay or make a dividend or other
distribution on any class of Capital Stock of the Company in Common Stock, the
Conversion Price in effect at the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Conversion
Price by a fraction the numerator of which shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination and the denominator of which shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such reduction to
46
become effective immediately after the opening of business on the date following
the date fixed for such determination. For the purposes of this paragraph (a),
the number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company. The Company will not pay any
dividend or make any distribution on shares of Common Stock held in the treasury
of the Company.
(b) In case the Company shall issue rights, warrants or other
securities convertible into Common Stock to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock (or
securities convertible into Common Stock) at a price per share less than the
current market price per share (determined as provided in paragraph (h) of this
Section) of the Common Stock on the date fixed for the determination of
stockholders entitled to receive such rights, warrants or convertible
securities, the Conversion Price in effect at the opening of business on the day
following the date fixed for such determination shall be reduced by multiplying
such Conversion Price by a fraction the numerator of which shall be the number
of shares of Common Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock so
offered for subscription or purchase (or the aggregate conversion price of
convertible securities so offered for subscription or purchase) would purchase
at such current market price and the denominator of which shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination plus the additional number of shares of Common Stock so
offered for subscription or purchase (or into which the convertible securities
so offered for subscription or purchase are convertible), such reduction to
become effective immediately after the opening of business on the date following
the date fixed for such determination. If at the end of the period during which
such warrants or rights are exercisable or such securities are convertible, not
all warrants or rights shall have been exercised or not all securities shall
have been converted, the Conversion Price shall be readjusted to such price as
would have been obtained had the adjustment made on their issuance been made
upon the basis of the issuance of only the number of such warrants, rights or
securities as were
47
actually exercised with respect to, or converted into, Common Stock.
Notwithstanding the foregoing (i) if the rights, warrants or other securities
described in this paragraph are exercisable only upon the occurrence of a
specified event or events ("Trigger Event"), then the Conversion Price will not
be adjusted until the occurrence of the earliest Trigger Event and (ii) the
distribution to holders of Common Stock of separate certificates representing
rights to purchase Common Stock or Preferred Stock will not require an
adjustment in the Conversion Price until such rights become exercisable upon the
occurrence of the earliest Trigger Event. For the purposes of this paragraph
(b), the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Company. The Company will not issue
any rights, warrants or convertible securities in respect of shares of Common
Stock held in the treasury of the Company.
(c) In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion Price
in effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, in case the outstanding shares of Common Stock shall each be
combined into a smaller number of shares of Common Stock, the Conversion Price
in effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately after
the opening of business on the day following the day upon which such subdivision
or combination becomes effective.
(d) In case the Company or any Subsidiary of the Company shall,
by dividend or otherwise, distribute to all holders of its Common Stock (i)
evidences of its indebtedness and/or (ii) cash or other assets (including
securities, but excluding any rights or warrants referred to in paragraph (b) of
this Section, any dividend paid out of current or retained earnings payable
solely in cash that may from time to time be fixed by the Board of Directors and
any dividend or distribution referred to in paragraph (a) of this Section), then
in such case the Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying
48
the Conversion Price in effect immediately prior to the close of business on
such record date by a fraction of which the numerator shall be the current
market price per share (determined as provided in paragraph (h) of this Section)
of the Common Stock on such record date less the then fair market value as
determined by the Board of Directors (whose determination shall be conclusive
and shall be described in a Board Resolution filed with the Trustee) of the
portion of the cash or other assets or evidences of indebtedness so distributed
(and for which an adjustment to the Conversion Price has not previously been
made pursuant to the terms of this Section 10.6) applicable to one share of
Common Stock and the denominator shall be such current market price per share of
the Common Stock, such adjustment to become effective immediately prior to the
opening of business on the day following such record date.
(e) The reclassification of Common Stock into securities,
including securities other than Common Stock (other than any reclassification
upon a consolidation or merger to which Section 10.9 applies), shall be deemed
to involve (a) a distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of stockholders entitled
to receive such distribution" and the "date fixed for such determination" within
the meaning of paragraph (b) of this Section), and (b) a subdivision or
combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of shares
of Common Stock outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (c) of this Section).
(f) In case the Company shall issue to an Affiliate shares of
its Common Stock at a price per share less than the current market price per
share (determined as provided in paragraph (h) of this Section) on the date the
Company fixes the offering price of such additional shares, the Conversion Price
shall be reduced immediately thereafter so that it shall equal the price
determined by
49
multiplying such Conversion Price in effect immediately prior thereto by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such additional shares plus the
number of shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock so offered would purchase at the current market
price and the denominator shall be the number of shares of Common Stock that
would be outstanding immediately after the issuance of such additional shares.
Such adjustment shall be made successively whenever such an issuance is made.
For the purpose of this paragraph (f), the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of the
Company. The Company will not pay any dividend or make any distribution on
shares of Common Stock held in the treasury of the Company. This paragraph (f)
shall not apply to Common Stock issued to any Affiliate under bona-fide benefits
plans adopted by the Board of Directors for the benefit of the Company's
directors, employees and advisers.
(g) In case a tender or exchange offer made by the Company or
any Subsidiary of the Company for all or any portion of the Company's Common
Stock (any such tender or exchange offer being referred to as an "Offer") shall
expire and such Offer shall involve an aggregate consideration having a fair
market value as of the expiration of such Offer (the "Expiration Time") that,
together with (i) the fair market value of consideration payable in respect of
any other Offer, as of the expiration of such other Offer, concluded within the
12 months preceding the expiration of such Offer and in respect for which no
conversion price adjustment pursuant to this paragraph (g) has been made and
(ii) the aggregate amount of dividends paid out of current or retained earnings
referred to in clause (d) above to all holders of Common Stock within the 12
months preceding the expiration of such Offer and in respect of which no
conversion price adjustment pursuant to paragraph (d) has been made, exceeds 15%
of the product of the current market price per share (determined as provided in
paragraph (h) of this Section) of the Common Stock on the Expiration Time times
the number of shares of Common Stock outstanding (including any tendered shares)
on the Expiration Time, the Conversion Price shall be reduced by multiplying
such Conversion Price in effect immediately prior to
50
the Expiration Time by a fraction of which the numerator shall be (i) the
product of the current market price per share (determined as provided in
paragraph (h) of this Section) of the Common Stock on the Expiration Time times
the number of shares of Common Stock outstanding (including any tendered shares)
on the Expiration Time minus (ii) the fair market value of the aggregate
consideration payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares validly
tendered and not withdrawn as of the Expiration Time (the shares deemed so
accepted being referred to as the "Purchased Shares") and the denominator shall
be the product of (i) such current market price per share of the Expiration Time
times (ii) such number of outstanding shares on the Expiration Time less the
number of Purchased Shares, such reduction to become effective immediately prior
to the opening of business on the day following the Expiration Time.
For purposes of this paragraph (g), the fair market value of any
consideration with respect to an Offer shall be determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution filed with the Trustee.
(h) For the purpose of any computation under paragraphs (b),
(d), (f) and (g) of this Section, the current market price per share of Common
Stock on any day shall be deemed to be the average of the Daily Market Prices
for the 30 consecutive Business Days ending on the last full trading day on the
exchange or market referred to in determining such Daily Market Prices prior to
the day in question.
(i) The Company from time to time may to the extent permitted by
law reduce the Conversion Price by any amount for any period of time if the
period is at least 20 Business Days, if the Board of Directors has made a
determination that such a decrease would be in the best interests of the
Company, which determination shall be conclusive and if the reduction is
irrevocable during the period.
Whenever the Conversion Price is reduced, the Company shall mail to
Securityholders a notice of the reduction. The Company shall mail the notice at
least 15 days before the date the reduced conversion price takes
51
effect. The notice shall state the reduced conversion price and the period it
will be in effect.
(j) No adjustment in the Conversion Price shall be required
unless such adjustment (plus any adjustments not previously made by reason of
this paragraph (i)) would require an increase or decrease of at least 1% in such
price; provided, however, that adjustments which by reason of this paragraph (j)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment and provided, further, that adjustments shall be
required and made in accordance with the provisions of this Section 10.6 (other
than this paragraph (j)) not later than such time as may be required in order to
preserve the tax free nature of a distribution to the holders of shares of
common stock. Adjustments to the conversion price shall be to the nearest cent.
Anything in this paragraph (j) to the contrary notwithstanding, the Company
shall be entitled to make such reductions in the Conversion Price, in addition
to those required by this Section 10.6, as it in its discretion shall determine
to be advisable in order that any stock dividend, subdivision or combination of
shares, distribution of capital stock, or rights or warrants, or to purchase
stock or securities, or distribution of evidences of indebtedness or assets
(other than cash dividends or distributions paid from retained earnings)
hereafter made by the Company to its stockholders shall be a tax free
distribution for federal income tax purposes.
(k) Notwithstanding any other provision of this Section 10.6, no
adjustment to the Conversion Price shall reduce the Conversion Price below the
then par value per share of the Common Stock, and any such purported adjustment
shall instead reduce the Conversion Price to such par value. The Company hereby
covenants not to take any action (i) to increase the par value per share of the
Common Stock or (ii) that would or does result in any adjustment in the
conversion price that, if made without giving effect to the previous sentence,
would cause the Conversion Price to be less than the par value per share of the
Common Stock.
(l) Notwithstanding the foregoing, in the event of a
distribution to holders of Common Stock generally of shares of capital stock or
rights to acquire
52
capital stock (in either case, other than Common Stock), the Company may,
instead of making any adjustment in the Conversion Price, make proper provisions
so that each holder of a Note who converts such Note (or any portion thereof)
after the record date for such distribution (and prior to the expiration or
redemption of such rights, if applicable) shall be entitled to receive upon such
conversion, in addition to the shares of Common Stock issuable upon such
conversion, the kind and amount of such shares of capital stock or rights which
the holder would have been entitled to receive had such Note (or portion
thereof) been converted immediately prior to such record date.
Section 10.7 Notice of Adjustment. Whenever the conversion price is
adjusted, the Company shall promptly mail to Securityholders a notice of the
adjustment. The Company shall file with the Trustee a certificate from the
Company's independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence that the adjustment is correct.
Section 10.8 Notice of Certain Transactions.
If:
(a) the Company takes any action that would require an
adjustment in the conversion price pursuant to Section 10.6;
(b) of any consolidation, merger or share exchange to which the
Company is a party and for which approval of stockholders is required or of the
conveyance or transfer of all or substantially all of the assets of the Company;
(c) the Company takes any action that would require a
supplemental indenture pursuant to Section 10.9; or
(d) there is a liquidation or dissolution (voluntary or
involuntary) or winding up of the Company,
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Securities pursuant to Section 2.2 and shall cause
to be
53
mailed to all Holders at least 20 days prior to the applicable record, effective
or expiration date hereinabove specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution or
granting of rights, warrants or convertible securities, or, if a record is not
to be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, rights, warrants or convertible
securities are to be determined, or (y) the date on which any reclassification,
consolidation, merger, share exchange, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, share exchange,
conveyance, transfer, dissolution, liquidation or winding up, or (z) the date on
which any tender offer commenced, the date on which such tender offer is
scheduled to expire unless extended, the consideration offered and the other
material terms thereof (or the material terms of any amendment thereto).
Section 10.9 Reorganization of Company. If the Company is a party to
a transaction subject to Section 5.1, or a merger which reclassifies or changes
its outstanding Common Stock, upon consummation of such transaction the
Securities shall automatically become convertible into the kind and amount of
securities, cash or other assets which the Holder of a Security would have owned
immediately after the consolidation, merger, transfer or lease if the Holder had
converted the Security immediately before the effective date of the transaction.
Concurrently with the consummation of such transaction, the Person obligated to
issue securities or deliver cash or other assets upon conversion of the
Securities shall enter into a supplemental indenture so providing and further
providing for adjustments which shall be as nearly equivalent as may be
practical to the adjustments provided for in this Article. The successor
Company shall mail to Securityholders a notice describing the supplemental
indenture.
If securities deliverable upon conversion of Securities, as provided
above, are themselves convertible into the securities of an Affiliate of the
formed, sur-
54
viving, transferee or lessee corporation, that issuer shall join in the
supplemental indenture which shall so provide.
If this Section applies, Section 10.6(e) does not apply.
Section 10.10 Company Determination Final. Any determination that
the Company or the Board of Directors must make pursuant to Section 10.6 is
conclusive.
Section 10.11 Trustee's Disclaimer. The Trustee has no duty to
determine when an adjustment under this Article should be made, how it should be
made or what it should be. The Trustee has no duty to determine whether any
provisions of a supplemental indenture under Section 10.9 are correct. The
Trustee makes no representation as to the validity or value of any securities or
assets issued upon conversion of Securities. The Trustee shall not be
responsible for the company's failure to comply with this Article.
ARTICLE 11
SUBORDINATION
-------------
Section 11.1 Agreement to Subordinate. The Company agrees, and each
Securityholder by accepting a Security agrees, that the indebtedness evidenced
by the Security is subordinated in right of payment, to the extent and in the
manner provided in this Article, to the prior payment in full of all Senior
Indebtedness and that the subordination is for the benefit of the holders of
Senior Indebtedness.
Section 11.2 Certain Definitions.
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Indebtedness.
"Senior Indebtedness" with respect to the Securities means the
principal of, premium, if any, and interest on, and any fees, costs, expenses
and any other amounts (including indemnity payments) related to the following,
whether outstanding on the date hereof or
55
hereafter incurred or created: (a) indebtedness, matured or unmatured, whether
or not contingent, of the Company for money borrowed, (b) any interest rate
contract, interest rate swap agreement or other similar agreement or arrangement
designed to protect the Company or any of its Subsidiaries against fluctuations
in interest rates, (c) indebtedness, matured or unmatured, whether or not
contingent, of the Company evidenced by notes, debentures, bonds or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof), (d) obligations of the Company as lessee under capitalized leases and
under capitalized leases of property made as part of any sale and leaseback
transactions, (e) indebtedness of others of any of the kinds described in the
preceding clauses (a) through (d) assumed or guaranteed by the Company and (f)
renewals, extensions, modifications, amendments, and refundings of, and
indebtedness and obligations of a successor Person issued in exchange for or in
replacement of, indebtedness or obligations of the kinds described in the
preceding clauses (a) through (e), unless the agreement pursuant to which any
such indebtedness described in clauses (a) through (e) is created, issued,
assumed or guaranteed expressly provides that such indebtedness is not senior or
superior in right of payment to the Securities; provided, however, that the
following shall not constitute Senior Indebtedness: (i) any indebtedness or
obligation of the Company in respect of the Securities, (ii) the Company's 8%
Convertible Subordinated Debentures due 2000; (iii) any indebtedness of the
Company to any of its Subsidiaries or other Affiliates; (iv) any indebtedness of
the Company that is subordinated or junior in any respect to any other
indebtedness of the Company other than Senior Indebtedness; (v) any indebtedness
of the Company incurred for the purchase of goods or materials in the ordinary
course of business and (vi) indebtedness of the Company that by its terms is
pari passu with or subordinate or subject in right of payment to the Securities.
For the purposes of this Indenture, Senior Indebtedness shall not be
deemed to have been paid in full until the holders of the Senior Indebtedness
shall have indefeasibly received payment in full in cash of all Senior
Indebtedness; provided that if any holder of Senior Indebtedness agrees to
accept payment in full of such Senior Indebtedness for consideration other than
cash, such holder shall be deemed to have indefeasibly
56
received payment in full of such Senior Indebtedness. The provisions of this
Article shall continue to be effective or be reinstated, as the case may be, if
at any time any payment of any of the Senior Indebtedness is rescinded or must
otherwise be returned by any holder of Senior Indebtedness upon the insolvency,
bankruptcy or organization of the Company or otherwise, all as though such
payment had not been made.
A distribution may consist of cash, securities or other property, by
set-off or otherwise.
Section 11.3 Liquidation; Dissolution; Bankruptcy. Upon any
distribution to creditors of the Company in a liquidation or dissolution of the
Company or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property, in an assignment for the
benefit of creditors or any marshalling of the Company's assets and liabilities:
(1) holders of Senior Indebtedness shall be entitled to receive
payment in full of all such Senior Indebtedness (including interest after
the commencement of any such proceeding at the rate specified in the
applicable Senior Indebtedness) before Securityholders shall be entitled to
receive any payment with respect to the Securities (except that
Securityholders may receive securities that are subordinated to at least
the same extent as the Securities to (i) Senior Indebtedness and (ii) any
securities issued in exchange for Senior Indebtedness); and
(2) until all Senior Indebtedness (as provided in subsection (1)
above) is paid in full, any distribution to which Securityholders would be
entitled but for this Article shall be made to holders of Senior
Indebtedness (except that Securityholders may receive securities that are
subordinated to at least the same extent as the Securities to (a) Senior
Indebtedness and (b) any securities issued in exchange for Senior
Indebtedness), as their interests may appear.
Section 11.4 Default on Senior Indebtedness. The Company may not
make any payment or distribution to the Trustee or any Securityholder in respect
of principal
57
of or interest on the Securities and may not acquire from the Trustee or any
Securityholder any Securities for cash or property (other than securities that
are subordinated to at least the same extent as the Securities to (i) Senior
Indebtedness and (ii) any securities issued in exchange for Senior Indebtedness)
until all Senior Indebtedness has been paid in full if:
(1) a default in the payment of any principal of, premium, if any, or
interest on Senior Indebtedness occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other document
governing such Senior Indebtedness; or
(2) a default, other than a default referred to in subsection (1)
above (a "Nonpayment Default"), on Senior Indebtedness occurs and is
continuing that then permits holders of the Senior Indebtedness to
accelerate its maturity and the Trustee receives a notice of the default
from the Representative or Representatives of holders of at least a
majority in principal amount of Senior Indebtedness then outstanding, or if
none is outstanding, of at least a majority in principal amount of the
commitments therefor. If the Trustee receives any such notice of a
Nonpayment Default, a subsequent notice received within 360 days thereafter
shall not be effective for purposes of this Section. No Nonpayment Default
that existed or was continuing on the date of delivery of any such notice
to the Trustee shall be, or be made, the basis for a subsequent notice
unless such default shall have been cured or waived for a period of not
less than 180 days.
The Company may and shall resume payments on and distributions in
respect of the Securities and may acquire them upon the earlier of:
(i) the date upon which the default is cured or waived, or
(ii) in the case of a default referred to in Section 11.4(2)
hereof, 179 days after the date on which the notice is received if the
maturity of such Senior Indebtedness has not been accelerated,
58
if this Article otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Section 11.5 When Distribution Must Be Paid Over. In the event that
the Trustee (or Paying Agent if other than the Trustee) or any Securityholder
receives any payment of principal or interest with respect to the Securities at
a time when such payment is prohibited by Section 11.3 or 11.4 hereof, such
payment shall be held by the Trustee (or Paying Agent if other than the Trustee)
or such Securityholder, in trust for the benefit of, and immediately shall be
paid over and delivered, upon written request, to, the holders of Senior
Indebtedness as their interests may appear or their Representative under the
indenture or other agreement (if any) pursuant to which Senior Indebtedness may
have been issued, as their respective interests may appear, for application to
the payment of all Senior Indebtedness remaining unpaid to the extent necessary
to pay all Senior Indebtedness in full in accordance with its terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 11, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Securityholders or the Company or any other Person money or assets to
which any holders of Senior Indebtedness shall be entitled by virtue of this
Article 11, except if such payment is made as a result of the willful misconduct
or gross negligence of the Trustee.
Section 11.6 Notice by Company. The Company shall promptly notify
the Trustee and the Paying Agent of any facts known to the Company that would
cause a payment of any principal or interest with respect to the Securities to
violate this Article, but failure to give such notice shall not affect the
subordination of the Securi-
59
ties to the Senior Indebtedness as provided in this Article.
Section 11.7 Subrogation. After all Senior Indebtedness is paid in
full and until the Securities are paid in full, Securityholders shall be
subrogated (equally and ratably with all other Indebtedness pari passu with the
Securities) to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness to the extent that distributions
otherwise payable to the Securityholders have been applied to the payment of
Senior Indebtedness. A distribution made under this Article to holders of Senior
Indebtedness that otherwise would have been made to Securityholders is not, as
between the Company and Securityholders, a payment by the Company on the
Securities.
Section 11.8 Relative Rights. This Article defines the relative
rights of Securityholders and holders of Senior Indebtedness. Nothing in this
Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their terms;
(2) affect the relative rights of Securityholders and creditors of
the Company other than their rights in relation to holders of Senior
Indebtedness; or
(3) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Indebtedness to receive
distributions and payments otherwise payable to Securityholders.
If the Company fails because of this Article to pay principal of or
interest on a Security on the due date, the failure is still a Default or Event
of Default.
Section 11.9 Subordination May Not Be Impaired by Company. No right
of any holder of Senior Indebtedness to enforce the subordination of the
indebtedness
60
evidenced by the Securities shall be impaired by any act or failure to act by
the Company or any Holder or by the failure of the Company or any Holder to
comply with this Indenture.
Section 11.10 Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 11, the Trustee and the Securityholders shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the
Securityholders for the purpose of ascertaining the Persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 11.
Section 11.11 Rights of Trustee and Paying Agent. Notwithstanding
the provisions of this Article 11 or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts that
would prohibit the making of any payment or distribution by the Trustee, and the
Trustee and the Paying Agent may continue to make payments on the Securities,
unless the Trustee shall have received at its Corporate Trust Office at least
three Business Days prior to the date of such payment written notice of facts
that would cause the payment of any principal and interest with respect to the
Securities to violate this Article. Only the Company or a Representative may
give the notice. Nothing in this Article 11 shall impair the claims of, or
payments to, the Trustee under or pursuant to Section 7.7 hereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
61
Section 11.12 Authorization to Effect Subordination. Each holder of
a Security by the Holder's acceptance thereof authorizes and directs the Trustee
on the Holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article 11, and appoints the
Trustee to act as the Holder's attorney-in-fact for any and all such purposes.
Without limiting the foregoing, each Representative is hereby irrevocably
authorized and empowered (in its own name or in the name of the Securityholders
or the Trustee or otherwise), but shall have no obligation, to demand, xxx for,
collect and receive every payment or distribution referred to in Section 11.3
above and give acquittance therefor and to file claims and proofs of claim and
take such other action as it may deem necessary or advisable for the exercise or
enforcement of any of the rights or interests of the holders or owners of the
Senior Indebtedness hereunder; provided that for purposes of this Section 11.12
holders or owners of Senior Indebtedness may act only through such
Representative.
Section 11.13 Conversions Not Deemed Payment. For the purposes of
this Article only, the issuance and delivery of Common Stock upon conversion of
Securities in accordance with Article 10 shall not be deemed to constitute a
payment or distribution on account of the principal of or interest on the
Securities or on account of the purchase or other acquisition of Securities.
Nothing contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Company, its creditors
other than holders of Senior Indebtedness and the Holders, the right, which is
absolute and unconditional, of the Holder of any Security to convert such
Security in accordance with Article 10.
Section 11.14 Amendments. The provisions of this Article 11 shall
not be amended or modified without the written consent of the Holders of Senior
Indebtedness.
62
ARTICLE 12
MISCELLANEOUS
-------------
Section 12.1 Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies, or conflicts with the duties imposed by Trust
Indenture Act (S) 318(c), the imposed duties shall control.
Section 12.2 Notices. Any notice or communication by the Company or
the Trustee to the other is duly given if 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 to the
other's address stated in Section 12.10. The Company or the Trustee by notice
to the other may designate additional or different address for subsequent
notices or communications.
All notices and communications (other than those sent to holders of
Securities) 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 of a Security shall be mailed
by first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice of communication shall also be
so mailed to any Person described in Trust Indenture Act (S) 313(c) to the
extent required by the Trust Indenture Act. Failure to mail a notice or
communication to a Holder of a Security or any defect in it shall not affect its
sufficiency with respect to other Holders of Securities.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Securityholders, it
shall mail a copy to the Trustee and each Agent at the same time.
63
All other notices or communications shall be in writing.
Section 12.3 Communication by Holders with Other Holders.
Securityholders may communicate pursuant to Trust Indenture Act (S) 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of Trust Indenture Act (S) 312(c).
Section 12.4 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:
(1) an Officer's 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
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 12.5 Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
64
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been satisfied.
Section 12.6 Rules by Trustee and Agents. The Trustee may make
reasonable rules for action by or a meeting of Securityholders. The Registrar
or Paying Agent may make reasonable rules and set reasonable requirements for
its functions.
Section 12.7 Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open.
If a date of maturity of interest on or principal of the Notes or the date
fixed for redemption is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal
Holiday with the same force and effect as if made on the date of maturity
or date fixed for redemption, and no interest shall accrue for the
intervening period.
Section 12.8 No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Securityholder by accepting a Security
waives and releases all such liability. The waiver and release are part of
the consideration for the issue of the Securities.
Section 12.9 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 12.10 Variable Provisions. The first certificate pursuant to
Section 4.3 shall be for the fiscal year ending on _______ __, 199__.
The reporting date for Section 7.6 is ______ of each year. The first
reporting date is ___________.
65
The Trustee shall always have a combined capital and surplus of at
least $___________ as set forth in its most recent published annual report
of condition.
The Company's address is:
0000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: President, with copy to
General Counsel
Telephone: (000) 000-0000
The Trustee's address is:
The First National Bank of Chicago
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Corporate Trust Services
Division
Fax: (000) 000-0000
Section 12.11 Governing Law. The internal laws of the State of New
York shall govern this Indenture and the Securities, without regard to the
conflicts of laws provisions thereof.
Section 12.12 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 12.13 Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
Section 12.14 Severability. In case any provision in this Indenture
or in the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
66
Section 12.15 Table of Contents, Headings, etc. The Table of
Contents, Cross-Reference Table, and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
67
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
PIONEER FINANCIAL SERVICES, INC.
By:
--------------------------------------
Attest
------------------------------
Secretary
THE FIRST NATIONAL BANK OF CHICAGO,
Trustee
By:
--------------------------------------
Attest
------------------------------
68
EXHIBIT A
---------
[FORM OF FACE OF SECURITY]
__% Convertible Subordinated Note
due 2003
CUSIP # _______
No. $________
PIONEER FINANCIAL SERVICES, INC.
promises to pay to
or registered assigns,
the principal sum of
_________________________________________ Dollars
on _________, 2003.
Interest Payment Dates: __________ and __________
Record Dates: ___________ and ____________
A-1
Dated:___________________________
PIONEER FINANCIAL SERVICES, INC.
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
(SEAL)
This is one of the Securities referred
to in the within mentioned Indenture:
The First National Bank of Chicago,
as Trustee
By:_______________________________
Authorized Officer
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[FORM OF REVERSE SECURITY]
__% Convertible Subordinated Note due 2003
Capitalized terms used herein shall have the meanings ascribed to them
in the Indenture unless otherwise indicated.
1. Interest. Pioneer Financial Services, Inc., a Delaware
Corporation (the "Company"), promises to pay interest on the principal amount of
this Security at __% per annum from _______, 1996 until maturity. The Company
will pay interest semi-annually on ________ and ________ of each year,
commencing _________, or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from _________, 1996. To the extent lawful the
Company shall pay interest on (i) overdue principal and premium, if any, at the
same rate per annum on the Securities then in effect and (ii) on overdue
installments of interest (without regard to any applicable grace period) at the
same rate, compounded semiannually. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payments. The Company will pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on the __________ and __________ next
preceding the Interest Payment Date, even if such Securities are cancelled after
such record date and on or before such Interest Payment Date. The Holder hereof
must surrender this Security to a Paying Agent to collect principal payments.
The Securities will be payable both as to principal and interest at the office
or agency of the Company maintained for such purpose within the City and State
of New York, or, at the option of the Company, payment of interest may be made
by check mailed to the Holders of the Securities at their addresses set forth in
the register of Holders of Securities.
3. Paying Agent and Registrar. Initially, The First National Bank of
Chicago, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. Subject to certain limitations set forth in the Indenture, the
Company or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Securities under an Indenture
dated as of __________, 1996 ("Indenture") between the Company and the Trustee.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Securities
A-3
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms and in the event that there shall be any
inconsistency between such terms and this Security, the terms of the Indenture
shall govern. The Securities are general unsecured obligations of the Company
limited to $74,750,000 in aggregate principal amount (including $9,750,000
aggregate principal amount of Securities that may be sold by the Company
pursuant to the over-allotment option granted pursuant to the Underwriting
Agreement dated ___________, 1996 among the Company, Bear, Xxxxxxx & Co. Inc.,
EVEREN Securities, Inc. and Xxxxxxxxxxx & Co., Inc.), plus amounts, if any,
sufficient to pay interest and premium, if any, on outstanding Securities as set
forth in Paragraph 2.
5. Subordination. The Company's payment of the principal of,
premium, if any, and interest on the Securities is subordinated to the prior
payment in full of the Company's Senior Indebtedness. Each Holder of Securities
by his or her acceptance hereof covenants and agrees that all payments of the
principal of, premium, if any, and interest on the Securities by the Company
shall be subordinated in accordance with the provisions of Article 11 of the
Indenture, and each Holder accepts and agrees to be bound by such provisions.
6. Conversion Rights. Subject to and upon compliance with the
provisions of the Indenture, the Holder of this Security is entitled, at his
option, at any time on or before the close of business on __________, 2003 or in
case this Security or a portion hereof is called for redemption, then in respect
of this Security or such portion hereof until and including, but (unless the
Company defaults in making the payment due upon redemption) not after, the close
of business on the date prior to the date fixed for redemption, to convert this
Security (or any portion of the principal amount hereof which is $1,000 or an
integral multiple thereof), at the principal amount hereof, or of such portion,
into that number of fully paid and non-assessable shares (calculated as to each
conversion to the nearest 1/100 of a share) of Common Stock of the Company
obtained by dividing the principal amount of the Securities or portion thereof
surrendered for conversion by a conversion price equal to $________ (or at the
current adjusted conversion price if an adjustment has been made as provided in
the Indenture) (the "Conversion Price") by surrender of this Security, duly
endorsed or assigned to the Company or in blank, to the Company at the Corporate
Trust Office or at another office or agency in the Borough of Manhattan, City of
New York, New York accompanied by written notice to the Company that the Holder
hereof elects to convert this Security, or if less than the entire principal
amount hereof is to be converted, the portion hereof to be converted, and, in
case such surrender shall be made during the period from the close of business
on any record date next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date (unless this Security or the portion
thereof being converted has been called for redemption on a redemption date
within such period), also accompanied by payment in New York Clearing House, or
other funds acceptable to the Company, of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of this
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