As filed with the Securities and Exchange Commission on June 25, 1996
Registration Statement No. 333-1994
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 4
TO
FORM S-11
Registration Statement
Under the
Securities Act of 1933
East Coast Capital Company, LLC
(Name of Registrant as Specified in Its Governing Instruments)
New York 6162 13-3874234
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation Code Number)
or Organization)
110 East 59th Street, 6th Floor, New York, New York 10022
(Address of Principal Place of Business or Intended Principal Place of Business)
Norman Dansker, 110 East 59th Street, 6th Floor New York, New York 10022
- -------------------------------------------------------------------------
(Name, Address and Telephone Number of Agent For Service)
Approximate Date of Proposed Sale to the Public: As soon as practicable after
the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ___
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________________
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933,
check the following box [x].
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CALCULATION OF REGISTRATION FEE
Title of Each Dollar Amount to Proposed Maximum Proposed Maximum
Class of be Registered Offering Price Aggregate
Securities to be Per Unit(1) Offering Price
Registered
Debentures $10,000,000 $5,000 $10,000,000
Amount of Registration Fee $3,448.28
1. Estimated solely for the purpose of calculating the registration fee.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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EAST COAST CAPITAL COMPANY, LCC
Cross Reference Sheet
Item Caption
1. Forepart of Registration Statement Outside Front Cover Page
and Outside Front Cover Page of and Outside
Prospectus
2. Inside Front and Outside Back Cover Inside Front and
Outside Pages of Prospectus Back Cover Pages
3. Summary Information, Risk Factors Prospectus Summary;
and Ratio of Earnings to Fixed Charges Risk Factors
4. Determination of Offering Price The Offering
5. Dilution Not Applicable
6. Selling Security Holders Not Applicable
7. Plan of Distribution The Offering
8. Use of Proceeds Use of Proceeds
9. Selected Financial Data Summary of Consolidated
Financial Information;
Financial Statements
10. Management's Discussion and Analysis Management's
of Financial Condition and Results Discussion and Analysis
of Operations of Financial
Condition and Results
of Operation
11. General Information as to Registrant Business; Risk
Factors; Financial
statements; Selected
Financial Data;
Prospectus Summary;
Use of Proceeds
12. Policy with Respect to Certain Business; Description of
Activities Debentures
13. Investment Policies of Registrant Business; Description of
Debentures
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14. Description of Real Estate Business--Facilities
15. Operating Data Business; Risk
Factors; Financial
Statements; Selected
Financial Data;
Prospectus Summary;
Use of Proceeds;
Description of Debentures
16. Tax Treatment of Registrant and Description of Debentures
its Security Holders
17. Market Price of and Dividends on the Market Information;
Registrant's Common Equity and Related Prospectus Summary
Stockholder Matters
18. Description of Registrant's Securities Description of
Securities
19. Legal Proceedings Not Applicable
20. Security Ownership of Certain Principal Owners
Beneficial Owners and Management
21. Directors and Executive Officers Management
22. Executive Compensation Executive Compensation
23. Certain Relationships and Related Certain Transactions
Transactions
24. Selection, Management and Custody Business, Description of
of Registrant's Investment Debentures
25. Policies With Respect to Certain Business; Certain Transactions;
Transactions Description of Debentures
26. Limitation of Liability Description of Debentures
27. Financial Statements and Information Financial Statements
28. Interest of Named Experts and Counsel Legal Matters; Experts
29. Disclosure of Commission Position on Business - Indemnification
Indemnification for Securities
Act Liabilities
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Subject to Completion June 25, 1996
EAST COAST CAPITAL COMPANY, LLC
(a New York Limited Liability Company)
$10,000,000
Series A Registered
Subordinated Debentures
$4,000,000 due 10/31/98
$6,000,000 due 6/30/01
Minimum Investment of $5,000 At Par
Minimum Offering: $1,000,000
EAST COAST CAPITAL COMPANY, LLC (the "Company") is a
recently formed New York Limited Liability Company which was
formed for the principal purpose of making real estate
mortgage loans and purchasing real estate mortgages. The
Company has had no business operations to date. See
"Business."
For information concerning special risks by reason of the fact that the
Manager of the Company was previously management of Coronet Capital Company, a
similar company that filed for protection under the bankruptcy laws and that the
Manager, Norman Dansker is currently involved in related litigation and
litigation involving the Federal Deposit Insurance Corporation ("FDIC") that may
result in substantial monetary penalties.
The Company is offering, through its Executives and Manager and
participating broker/dealers on an "all or none" basis as to $1,000,000 (Minimum
Offering") and on a "best efforts" basis, $9,000,000 aggregate principal amount
of its Series A Registered Subordinated Debentures (the "Debentures"). The
maximum offering is $10,000,000 ("Maximum Offering"). As more fully described
under "Description of Debentures", the Debentures will be issued in two
maturities: $4,000,000 due October 31, 1998 (the "1998 Debentures"): and
$6,000,000 due June 30, 2001 (the "2001 Debentures"). Interest on the Debentures
will be payable quarterly within five (5) business days following the end of
each calendar quarter from the date of issue of the Debentures, as set forth in
the following table:
1998 Debentures 2001 Debentures
Due Date Due Date
Maturity: ____ ____
Interest Rate: 9% 11%
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The Debentures are unsecured debt obligations of the Company and will
be subordinated to all Senior Indebtedness (as hereinafter defined). There is no
limit to the amount of Senior Indebtedness to which the Debentures may be
subordinated. As of the date hereof there is no senior indebtedness to which the
Debentures are currently subordinated. The Debentures will be issued in fully
registered form only in denominations of $1,000 (with an initial minimum
purchase of $5,000) and in multiples thereof. Management of the Company reserves
the right to purchase with personal funds up to 25% ($250,000) of the Debentures
in order to meet the Minimum Offering. If Management exercises this option the
purchase of such Debentures will be for investment purposes only and not for
resale. All subscriptions shall be non-revocable. See "Description of
Debentures."
Prospective investors will not have the opportunity to evaluate any
mortgages to be the subject of loans by the Company because the Company has not
identified any specific property it intends to make loans to and does not have
an operating history. See "Risk Factors".
Prior to this Offering, there has been no public market for the
Debentures and no active trading market for the Debentures is expected to
develop. To the extent that there is limited trading, the Debentures may sell at
a substantial discount. The Debentures offered herein will not be rated. For
information regarding the factors considered in determining the initial public
offering price of the Debentures see "The Offering". See "Risk Factors", page 8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE DEBENTURES DESCRIBED HEREIN INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS", PAGE 8
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
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Price to Public Discounts and Proceeds to
Commissions(1) Company(3)
Per 1998 Debenture $ 5,000.00 $ 250.00 $ 4,750.00
Total 1998 Debentures(2) $ 4,000,000.00 $ 200,000.00 $ 3,800,000.00
Per 2001 Debenture $ 5,000.00 $ 400.00 $ 4,600.00
Total 20001 Debenture(2) $ 6,000,000.00 $ 480,000.00 $ 5,520,000.00
Total Offering(2) $10,000,000.00 $ 680,000.00 $ 9,320,000.00
(1) The Company will pay brokers a commission on the purchase
price of each Debenture sold up to 5 % of the 1998 Debentures
sold by them and 8% of the 2001 Debentures sold by them. The
registrant currently has no broker-dealers committed to sell
the Debentures. No commissions will be paid to employees and
Manager of the Company. See "Plan of Offering."
(2) The minimum amount of Debentures required to be sold prior to the
Termination Date is $1,000,000 in the aggregate, which may consist of
any of the Debentures or part thereof. The amount shown assumes all
Debentures offered will be sold.
(3) Before deducting the maximum commission of $680,000 referred
to in Note (1) above, and approximately $150,000 for certain
printing and other costs and expenses. If only the minimum
amount is sold the commission will be up to $80,000 and the
printing and other costs and expenses will be approximately
$140,000. See "Use of Proceeds."
, 1996
The Company intends to furnish annual reports to Debenture Holders
containing audited financial statements certified by independent certified
public accountants. The Company maintains offices at 110 East 59th Street, New
York, New York.
This Offering will terminate on , 1996, unless extended for an
additional six month period by the Company, with notice to subscribers to
_____________ 1997 (the "Termination Date"). Once the minimum Debentures have
been sold, no minimum number of Debentures must be purchased in order for a
closing under
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this Offering to occur. If the minimum number of Debentures is not sold by the
Termination Date, all investor funds will be returned promptly with interest.
The Company may close this Offering from time to time after the minimum has been
sold with respect to unsold Debentures and until the Termination Date. Until the
minimum is sold, all payments received will be held in escrow in an
interest-bearing account established by the Company through its attorneys
McLaughlin & Stern, LLP, as Escrow Agent with Chase Manhattan Bank, N.A., an
unaffiliated commercial bank. Interest earned, if any, on payments from
purchasers accepted by the Company will be remitted to such purchasers following
the closing with respect to the Debentures purchased by them. Interest earned,
if any, on payments from purchasers whose subscriptions are rejected will be
remitted to such purchasers promptly along with a refund of their payment. It is
expected that a purchaser will be issued the Debentures subscribed for within
five business days following the acceptance of a subscription by the Company. It
shall be a condition to the remittance of interest earned, if any, to a
subscriber that the subscriber furnish a completed and executed Form W-9 so that
any interest earned can be distributed to such subscriber may be properly
reported.
RISK FACTORS
The securities offered hereby are speculative in nature and involve a
high degree of risk. Prospective investors should thoroughly consider the
following factors, in addition to the other information contained in the
Prospectus.
Prior Bankruptcy and Litigation Affecting the Manager. Norman Dansker,
the Manager of the Company was previously a co-general partner of Coronet
Capital Company ("Coronet"), a company which was engaged in the mortgage finance
business, which filed for protection under the Federal bankruptcy laws and was
subsequently discharged in the bankruptcy proceeding. Mr. Dansker is currently
one of several parties involved in litigation related to Coronet as well as with
the Federal Deposit Insurance Corporation ("FDIC").
(I) Coronet Litigation. On November 2, 1992, Coronet's
bankruptcy Trustee commenced an adversary proceeding in the United States
Bankruptcy Court for the Southern District of New York styled Arnold Haber, as
Chapter 7 Trustee, of Coronet Capital Company v. Norman Dansker, et al.
Adversary Proceeding N. 92-1078A (FGC)(the "Trustee`s Action"). The Trustee's
complaint alleged eight fraudulent conveyance claims seeking the avoidance of
$8,605,198 in pre-petition cash distributions made by Coronet to its general and
limited partners in 1989 and 1990 and seeking to recover these amounts from
their respective recipients; one count
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each of common law fraud, waste and mismanagement against Norman Dansker and
three others (the "Dansker Defendants") seeking to recover an amount exceeding
$30 million on each claim for the losses sustained by Coronet beginning in 1989;
and all direct and indirect compensation paid by Coronet to the Dansker
Defendants in 1989 and 1990 in the amounts of $582,500 and $74,000,
respectively, or $656,500 in the aggregate. On August 25, 1993, the Trustee
filed an amended complaint asserting four additional fraudulent conveyance
claims against two of the Dansker Defendants, although not against Norman
Dansker, seeking the avoidance of the post- bankruptcy petition cancellation of
a promissory note by these defendants.
On February 4, 1993, five of Coronet's limited partners (the "Naporano
Defendants") jointly filed an answer to the Trustee's Complaint and asserted
cross-claims against the Dansker Defendants for fraud, breach of fiduciary duty
and indemnification and contribution. All five of these limited partners
subsequently voluntarily dismissed their claims against the Dansker Defendants.
Also, on February 4, 1993, another group of nineteen of Coronet's
limited partners (the "Beir Defendants") jointly filed an answer to the
Trustee's Complaint and asserted cross-claims against the Dansker Defendants for
indemnification, fraud, waste and mismanagement and breach of contract. On
February 24, 1993, the Beir Defendants filed amended cross-claims against the
Dansker Defendants, by which three limited partners were dropped as cross- claim
plaintiffs and three other limited partners were added as cross-claim
plaintiffs. As discussed below, the cross-claims of four of the Beir Defendants
were dismissed in June 1996, and a motion to dismiss the remaining cross-claims
is pending.
Pursuant to a stipulation of settlement entered into on March 30, 1993,
the Trustee settled all claims against the Beir Defendants, for which the Beir
Defendants paid the Trustee $1,006,542 in the aggregate.
Pursuant to a stipulation of settlement entered into on September 17,
1993, the Trustee settled all claims against the Dansker Defendants, for which
the Dansker Defendants paid the Trustee $2,650,000 in the aggregate.
Pursuant to a stipulation of settlement entered into on April 7, 1994,
the Trustee settled all claims against the Naporano Defendants.
On November 30, 1994, upon the Trustee's application, the Bankruptcy
Court issued an order dismissing all claims asserted by the Trustee in the
Trustee's Action and severing them from the remaining cross-claims against the
Dansker Defendants.
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On March 21, 1995, the United States District Court for the Southern
District of New York withdrew the reference of the remaining cross-claims from
the Bankruptcy Court and, on May 19, 1995, assigned them to the District Court
as Case No. 95 Civ. 3691 (DAB).
On February 21, 1996, fifteen of the Beir Defendants, plus an
additional limited partner of Coronet, filed amended cross-claims against the
Dansker Defendants and others. On May 9, 1996, the Dansker Defendants filed a
motion to dismiss these amended cross- claims, which is pending before the
District Court.
Also, on May 9, 1996, the Dansker Defendants filed a motion to dismiss
the cross-claims of (1) the only one of the Naporano Defendants remaining and
(2) the four Beir Defendants who did not join in the February 21, 1996 amended
cross-claims, which cross- claims were dismissed by the District Court on May
22, 1996 and in June 1996, respectively.
(ii) FDIC Litigation. In January 1996 the FDIC, as receiver of
First New York Bank for Business, commenced an action in the United States
District Court, Southern District of New York 95 Civ. 9529, Southern District of
New York against certain former directors, including Norman Dansker, the Manager
of the Company, as a director, alleging, among other things, breach of fiduciary
duty, gross negligence, and other wrongful and improper conduct which resulted
in significant losses to First New York Bank for Business. The Complaint alleges
that the defendants breached their fiduciary duty in connection with certain
loans approved by the directors for the benefit of insiders and their related
interests. FDIC claims this conduct, which it claims continued despite regulator
warnings, gave rise to losses exceeding $25,000,000. The complaint includes
allegations that improper loans were made to entities related to Mr. Dansker,
including Coronet, Coronet Properties Co. and others. Each count seeks in excess
of twenty-five million dollars. The time for defendants to answer or respond to
the complaint has not yet expired.
Lack of Operating History. The Company was formed in February, 1996.
The Company was funded by a $250,000 cash investment and a $4,000 receivable
from its Members. Substantially all its capital, together with the net proceeds
of this Offering, will be used to make real estate loans and to acquire existing
mortgages. Accordingly, the Company has no operating history on the basis of
which operating results can be predicted. There can be no assurance that the
Company will be capable of generating sufficient revenues to meet its debt
service requirements under the Indenture. See "Use of Proceeds."
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Lack of Operating Procedures. The Company does not have any formalized
operating procedures with respect to its business which could affect the way the
Company does business. Such lack of procedures could result in the Company
making loans that do not have adequate cash flow which could cause the Company
to have inadequate funds to meet its obligations under the Indenture and
possible bankruptcy if the Company cannot meet its obligations.
See "Business - Coronet Capital Distinguished".
Event Risks. There are certain economic risks associated with investing
in the Debentures, including the risk of default by the borrower on Mortgage
Loans resulting in foreclosure or other uncertainties regarding the availability
of financing therefor. Moreover, there are risks associated with debt
instruments as well as the risks of cross-default on the obligations of the
Issuer resulting from an indenture default. See "Desciption of Debentures".
Management and Control of Company. The Company is dependent on the
services of Norman Dansker, its Manager. The loss of his services could have a
material adverse effect upon the Company. The Company's success is also
dependent on its ability to recruit and retain additional experienced personnel
of which there can be no assurance. Mr. Dansker, as Manager of the Company, may
not be removed except for cause upon unanimous consent of all members of the
Company. The time required to defend the lawsuits to which Mr. Dansker is
subject could interfere with the time available to him to manage the affairs of
the Company. See "Management".
General Risks of Financing on Real Estate. All Mortgage Loans are
subject to some degree of risk, including the risk of a default by the borrower
on the Mortgage Loans and the added responsibility on the part of the Company of
operating the property and/or foreclosing in order to protect its investment.
The borrower's ability to make payments due under a Mortgage Loan and the amount
the Company may realize after a default will be dependent upon the risks
generally associated with real estate investments, which are beyond the control
of the Company, including, without limitation, general or local economic
conditions, neighborhood values, interest rates, real estate tax rates, other
operating expenses, the supply of and demand for properties of the type
involved, the inability of the borrower to obtain or maintain full occupancy of
the property, zoning laws, rent control laws, environmental laws and
regulations, other governmental rules and fiscal policies and acts of God. See
"Business".
Proceeds Not Committed to Specific Investments. None of the
net proceeds of the Offering have yet been committed to specific
investments by the Company. Rather, the Company intends to use the
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proceeds to make Mortgage Loans and to acquire Mortgage Loans in conformity with
its mortgage investment policies. All determinations concerning the use and
investment of the proceeds will be made by management of the Company. The
specific characteristics of any such investments are presently unknown and there
is a greater degree of uncertainty concerning the return on any such investments
than would be the case if specific investments were identified. The holders of
Debentures will not have the opportunity to evaluate any mortgages that may be
acquired with the proceeds. See "Use of Proceeds."
Risks of Non-Recourse Mortgages. Certain of the mortgages that may be
made or acquired by the Company with the proceeds of this Offering (and those it
expects to acquire or make in the future) may be either non-recourse or limited
recourse. Under the terms of a non-recourse mortgage, the Company must look
solely to its interest in the real property in the event of a default, and the
owner of the property subject to the mortgage has no personal obligation to pay
the debt which the mortgage secures. Thus, upon default, the Company's ability
to recover its investment is dependent solely upon the value of the property
which it sells upon foreclosure of its mortgage and the amount of Senior
Mortgages and liens, if any, which must be paid from the net proceeds. See
"Business".
Risks of Junior Mortgages and Wraparound Mortgages. Certain of the
mortgages that may be originated or acquired by the Company may be Junior
Mortgages, including Wraparound Mortgages, which will be subordinate to the
liens of First Mortgages. If the owner of a mortgaged property fails to make a
payment due on a First Mortgage where the Company is the owner of the Junior
Mortgage, the holder of the First Mortgage may commence foreclosure proceedings.
There can be no assurance that the Company will have funds available to cure a
default on the First Mortgage in order to prevent foreclosure on such First
Mortgage. In the event of a foreclosure on the First Mortgage, the Company as
the owner of the Junior Mortgage will only be entitled to share in the proceeds
after satisfaction of the amounts due to senior lienholders. The proceeds
realized on such foreclosure may be insufficient to pay all sums due on the
First Mortgage, other senior liens and on the Junior Mortgage held by the
Company. It is also possible that in some cases the "due-on-sale" clause
included in the First Mortgage, which accelerates the amount due under the First
Mortgage in case of the sale of the property, may be deemed to apply to the sale
of the property upon foreclosure by the Company of its Junior Mortgage, and may
accordingly increase the risks to the Company in the event of a default by the
borrower on its Junior Mortgages.
Certain of the mortgages to be made or acquired by the Company
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may be Wraparound Mortgages, under which the outstanding principal balance of
the Wraparound Mortgage includes the outstanding principal balance of one or
more mortgages owed to another party with the Company required to make any
payments due on such other mortgages from the payments received on the
Wraparound Mortgage. Wraparound Mortgages may entail greater risk than if they
were First Mortgages. If the owner of the mortgaged property fails to make a
payment on the Wraparound Mortgage owned by the Company with the result that the
Company in turn fails to make the corresponding payment due on the First
Mortgage, the holder of the First Mortgage may commence foreclosure proceedings.
In such event, if the proceeds realized on such foreclosure are insufficient to
pay all sums due on the Senior Mortgages and on the Wraparound Mortgage held by
the Company, the Company could lose part or all of its investment. See
"Business".
Risks of Balloon Payments. Certain of the mortgages that may be
acquired by the Company or Mortgage Loans made by the Company may have balloon
payments due at the time of their maturity. Volatile interest rates and/or
erratic credit conditions and supply of mortgage funds at the time such balloon
payments are due may cause refinancing by the borrowers to be difficult or
impossible, regardless of the market value of the collateral at that time. In
the event that the borrowers are unable to pay such balloon payments (by
refinancing or otherwise), the holders of any First Mortgages can foreclose. See
"Business".
Economic Conditions. The real estate industry in general and the kinds
of investments which will be made by the Company in particular may be affected
by prevailing interest rates, the availability of funds and the generally
prevailing economic environment. During the past few years, there have been wide
fluctuations in money market conditions and interest rates charged on loans,
including real estate loans. Because of the high interest rates and tight money
conditions in the early 1980's, returns on mortgage loans were substantially
higher than they are now. The potential returns available on the types of
investments to be made by the Company are lower during periods such as the
present one when funds are more readily available for financing. However, the
direction of future interest rates is difficult to predict. The properties
underlying the Company's mortgage loans will also be affected by prevailing
economic conditions and the same factors noted in "Risks of Ownership of Real
Property" below which may affect the borrower's ability to repay. The Company is
unable to predict what effect, if any, the prevailing economic conditions will
have on its ability to make Mortgage Loans or on the operations of the
properties subject to its investments or its own real property.See "Business".
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Reliance on Management: Unspecified Investments. All decisions with
respect to the management of the Company will be made exclusively by the
Executives and Manager of the Company. Holders of the Debentures have no right
or power to take part in the management of the Company. Accordingly, no person
should purchase Debentures unless one is willing to entrust all aspects of the
management of the Company to its Executives and Manager. The Executives and
Manager of the Company will have complete discretion in making investments. Even
though the Company intends to make loans based on an income stream as opposed to
the market value of assets, there is nothing in the governing instruments which
prohibit the Company from investing in mortgages based on market asset
value.Prospective investors will, therefore, be entirely reliant on the
Executives and Manager of the Company and will not be able to evaluate for
themselves the merits of proposed mortgage investments. See "Management."
Absence of Public Market. Prior to this Offering, there has been no
public market for the Company's Debentures. It is not expected, that an active
trading market for such securities will develop. The Debentures will not be
rated. Investors must anticipate that they may have an ill-liquid investment for
the term of the Debentures. See "Plan of Offering".
Concentration of Risks. The mortgages the Company intends to make or
purchase with the proceeds of this Offering will likely be concentrated in the
New York metropolitan area. The relative lack of diversification of the
Company's expected loan portfolio could have a serious detrimental effect on the
value of such portfolio in the event of a downturn in this area's market causing
the properties underlying the Mortgages not to have sufficient value to provide
for repayment of the Mortgage Loans upon a foreclosure. See "Business".
Competition. In connection with the making of investments, the Company
may experience significant competition from banks, insurance companies, savings
and loan associations, mortgage bankers, pension funds, real estate investment
trusts, limited partnerships and other lenders, mortgage brokers and investors
engaged in purchasing mortgages or making real property investments with
investment objectives similar in whole or in part to those of the Company
including competition with certain related entities. Many of these competitors
have substantially greater resources than the Company and some have
substantially greater experience than the Company and their affiliates. An
increase in the general availability of funds may increase competition in the
making of investments in mortgages and real property and may reduce the yields
available therefrom. See "Business".
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Conflicts of Interest. To the extent that there are conflicts of
interest inherent in dealings between the Company, its Management and its
Affiliates, such conflicts will not be resolved by arm's-length bargaining. At
the present time the Company does not intend to engage in transactions with
affiliates. If it should do so the Company shall engage in such activities on a
competitive basis in accordance with industry standards. No assurance can be
given that such conflicts, if any, will be resolved in the manner most favorable
to the Company or that the Company will pursue any rights or remedies which it
may have against its Management or such Affiliate. See "Certain Transactions."
The Management of the Company may not be spending full time, in
connection with the Company activities and they may be actively engaged in other
business , some which may be in competition with the Company. Management will
devote such time as it determines will be necessary for the operation of the
Company's business. It is anticipated that each of the Key Executives will
devote the following percentage of their time to the operation of the Company's
business: Norman Dansker - 50%, Barry M. Bloom - 90%, and Mitchell H. Gordon -
30%. See "Management."
In connection with the origination and purchase and/or servicing of the
mortgages, the Company may be paying customary brokerage and mortgage servicing
fees to Affiliates of the Company.
See "Certain Transactions."
Subordination. The indebtedness evidenced by the Debentures is
unsecured and is subordinate to the prior payment when due of the principal of,
and premium, if any, and interest on, all Senior Indebtedness (as defined in the
Debentures), whether outstanding prior to their issuance or thereafter incurred
or created. There is no limitation on the Company's ability to incur Senior
Indebtedness. Upon any distribution of assets of the Company in any dissolution,
winding up, liquidation or reorganization of the Company, payment of the
principal of and interest on the Debentures will be subordinated to the prior
payment in full of all Senior Indebtedness. By reason of such subordination, in
the event of the Company's insolvency, holders of Senior Indebtedness may
receive more, ratably, and holders of the Debentures may receive less, ratably,
than the other creditors of the Company. See "Description of Debentures --
Subordination."
Risk of Renovation Lending . The Company may make loans relating to
properties that will be renovated. In connection with such properties, the
Company may advance on a secured basis a portion or all of the costs of
renovations and will be dependent upon the owner of the property to fulfill its
obligations, including the completion of the renovations. Such owner's ability
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to carry out its obligations may be affected by financial and other conditions
beyond the control of the Company, in which case it is possible that all or part
of the funds advanced by the Company to the owner would be lost.
Risks of Joint Ventures. Instead of making loans directly, the Company
may, as a co-venturer or partner with other persons or entities, contribute
funds to a joint venture or partnership which makes loans. Such investments may
under certain circumstances involve risks not otherwise present, including the
possibility that the Company's co-venturers or partners in a loan might die or
become insolvent or bankrupt, that such co-venturers or partners may from time
to time have economic or business interests or goals which are inconsistent with
the business interests or goals of the Company, or that such co-venturers or
partners may be in a position to take action contrary to the instructions or the
requests of the Company or contrary to the Company's objectives. See "Business".
Risks of Leverage. The Company intends to borrow to leverage its
investments, either on a recourse or non-recourse basis, with such debt to be
senior to the Debentures. The Company intends to do so by entering into and
drawing down upon bank lines of credit, short-term and/or long-term loans and,
if feasible, in the future may do so through the issuance of additional debt
securities of the Company. No bank lines currently exist. There can, however, be
no assurance as to the terms or availability of credit. As a general pattern,
the Company intends to borrow funds on a short-term variable rate basis. Such
short-term interest rates, which are subject to great fluctuation, are a cost of
borrowing over which the Company has no control, and any increase therein could
materially adversely affect the Company's earnings or increase losses and thus
affect the Company's ability to meet its obligations under the Debentures as
they become due. As of the date hereof the Company does not have any
understandings or arrangements for borrowing. No assurance can be given that the
Company will be able to borrow any funds. THE EFFECT OF BORROWING BY THE COMPANY
IN GENERAL WILL BE TO INCREASE THE COMPANY'S EXPOSURE TO RISK OF LOSS.
See "Business".
Default by Mortgagor and Foreclosure. In the event of a default under
the mortgagor's obligation to the Company, the Company may experience delays in
enforcing its rights as mortgagee and may incur substantial costs associated
with protecting its investment or may renew or extend a loan if the Company
decides it is in its best interest. The Company may be required to acquire title
to or reacquire possession of a property and thereafter to make substantial
improvements or repairs in order to maximize the property's value. In such
circumstances, the Company may not ultimately be able to recover its investment.
See "Business".
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Usury Laws. In many states, loans (including mortgage loans) are
subject to statutory restrictions limiting interest charges which, if such
statutory restrictions are exceeded, may impose penalties in amounts
substantially in excess of interest received and, in some cases, may affect
enforceability of the obligation to pay principal and interest and/or constitute
a criminal offense. Such laws may prevent the Company from collecting on loans
at rates as high as the rate the mortgagor agreed to pay. See "Business".
Risks of Ownership of Real Property. The Company will also be subject
to the risks inherent in the ownership of interests in any commercial,
industrial, retail and residential properties which it acquires in the
foreclosure process, including, without limitation, fluctuations in occupancy
rates and operating expenses, variations in rental schedules, the character of
the tenancy and the possible effect on the cash flow from a property if its
tenants incur financial difficulties. Such events may, in turn, be adversely
affected by general and local economic conditions, the supply of and demand for
properties of the type in which the Company invests, zoning laws, federal and
local rent controls, federal and local environmental protection laws, including,
without limitation, laws relating to the use and maintenance of asbestos and
lead paint, other laws and regulations, real property tax rates and water and
sewer charges. Certain expenditures associated with real estate equity
investments (principally real estate taxes and maintenance and operating costs)
are not necessarily decreased by events adversely affecting the Company's income
from such investments. Thus, the cost of operating a real property may exceed
the rental income earned thereon, and the Company may have to advance funds in
order to protect its investment or may be required to dispose of the real
property at a loss. The Company's ability to meet its debt and other obligations
will depend in part on these factors, and for these and other reasons, there is
no assurance that the Company will be able to meet its obligations under the
Debentures as they become due. See "Business".
Hazardous Waste and Environmental Liens. Federal and state statutes
impose liability on property owners or operators for the clean-up or removal of
hazardous substances found on their property. Courts have extended this
liability in some cases to lenders who have obtained title to such properties
through foreclosure. Additionally, such statutes allow the government to place
liens for such liability against affected properties which liens will be senior
in priority to other liens, including mortgages against the properties. Although
courts have yet to assess direct liability against lenders prior to foreclosure
for environmental hazards and present federal law expressly exempts such
assessment, state laws in this area are constantly evolving, and legislation
imposing direct liability against lenders could
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possibly be enacted in the future. The Company intends to monitor such laws and
take commercially reasonable steps to protect itself from the impact thereof
including conducting environmental tests and other due diligence requirements;
however, there can be no assurance that the Company will be fully protected from
the impact of such laws. See "Business".
Percentage of Funds Invested in Mortgages. The success of the Company,
in large part, will depend on its ability to keep its assets invested in
mortgages. The Company may be unable to keep the optimum percentage of its
assets so invested, which may result in lower income from the investment of its
assets in other investments and thus diminish its ability to meet its
commitments on the Debentures. See "Use of Proceeds".
Reserves. Initially the Company proposes to reserve 1% of the loans
originated. To the extent that reserves maintained by the Company are not
sufficient to defray expenses and carrying costs which exceed the income of the
Company, it will be necessary to attempt to borrow such amounts. In the event
financing is not available on acceptable terms, the Company may be forced to
liquidate certain investments on terms which may not be favorable to it. In
either event it may diminish the Company's ability to meet its obligations under
the Debentures as they become due. See "Business".
Best Efforts Offering. No commitment exists on the part of any
person to purchase all or any part of the Debentures offered hereby
and, therefore, no assurance can be given that any such Debentures
will be sold. If at least $1,000,000 of Debentures are not sold by
the Termination Date, all subscription funds will be promptly
refunded to subscribers, with interest in proportion to the amount
paid and without regard to the date paid. See "Plan of Offering."
No Sinking Fund or Security. There is no sinking fund for retirement of
the Debentures at or prior to their maturity. The Company anticipates that it
will redeem the Debentures at maturity, at par, from the Company's working
capital, or from the proceeds of a refinancing of the Debentures, but no
assurance can be given that the Company will have sufficient available funds to
make such redemption. Debenture holders may not look to profit distributions to
members of the Company if any are made in prior years as a source for redemption
of Debentures unless the Company can be shown to have been insolvent at the time
of such prior distributions. The Debentures are unsecured obligations of the
Company. See "Description of Debentures".
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Financial Statements (including the Notes thereto) appearing
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety.
The Company
East Coast Capital Company, LLC (the "Company") is a New York Limited
Liability Company formed on February 1, 1996 for the principal purpose of making
real estate loans and purchasing real estate mortgages. The Company has had no
operations to date. The Company maintains its office at 110 East 59th Street,
New York, New York 10022, and its telephone number is (212) 909-0500.
In general, the loans that the Company will acquire or make will be
short-term bridge loans of one to three years secured primarily by mortgages on
income producing multi-family residential or income producing commercial
properties. The Company's mortgage loans may include: (i) wraparound mortgage
loans; (ii) junior mortgage loans; and (iii) first mortgage loans.
The Company's investments in Mortgages are selected by the management
of the Company ("Management"). The Company has not adopted any formal policy
regarding the percentage of the Company's assets which may be invested in any
single mortgage, or type of mortgage, or regarding the geographic location of
properties which constitute security for the mortgages. The Company will
determine the suitability of the making or acquisition of a particular loan
after reviewing, on a loan-by-loan basis, such factors as the loan-to-value
ratio, the loan's expected yield and the borrower's experience and financial
ability. See "Business."
The initial mortgages the Company intends to make or purchase on income
producing properties with the net proceeds of this Offering will likely be
concentrated in the New York metropolitan area. In the future, the Company may
attempt to diversify its mortgage portfolio by expanding into additional
geographical areas and markets, but there can be no assurance that the Company
will be successful in this objective.
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The Company intends to leverage its investments by borrowing additional
funds. It is contemplated that such borrowing will be under lines of credit that
the Company will seek to obtain from banks. The Company has not yet established
any line of credit with any banks at this time and the Company cannot anticipate
what the terms of such credit lines will be. See "Business."
There are certain economic risks associated with investing in the
Debentures, including the risk of default by the borrower on certain Mortgage
Loans resulting in foreclosure, or other uncertainties regarding the
availability of financing therefor. Moreover, there are risks associated with
debt instruments as well as the risks of cross-default on the obligations of the
Issuer resulting from an indenture default. See "Risk Factors."
Securities Offered
The Company is offering, through its Executives and Manager and
participating broker/dealers on an "all or none" basis as to $1,000,000 and on a
"best efforts" basis, $9,000,000 aggregate principal amount of its Series A
Registered Subordinated Debentures (the "Debentures"). As more fully described
under "Description of Debentures," the Debentures will be issued in two
maturities: $4,000,000 due October 31, 1998 (the "1998 Debentures") and
$6,000,000 due June 30, 2001 (the "2001 Debentures"). Interest on the Debentures
will be payable quarterly within five (5) business days following the end of
each calendar quarter from the date of issue of the Debentures, at the rate set
forth in the following table:
1998 Debentures 2001 Debentures
Due Date Due Date
Maturity: _____ _____
Interest Rate: 9% 11%
The Debentures are unsecured debt obligations of the Company
and will be subordinated to all Senior Indebtedness (as hereinafter
defined). There is no limit to the amount of Senior Indebtedness to
which the Debentures may be subordinated. The Debentures will be
issued in fully registered form only in denominations of $1,000 and
in multiples thereof. See "Description of Debentures."
Debentures outstanding prior to Offering....... -0-
Debentures to be outstanding after Offering.... $10,000,000
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Reservation of Debentures to Meet Minimum
Management of the Company has reserved the right to purchase from
personal funds up to 25% ($250,000) of the Debentures in order to meet the
Minimum Offering. If Management exercises this option such purchases will be for
investment purposes only and not for resale.
Use of Proceeds
The Company intends to apply the net proceeds of this Offering
to make short-term mortgage loans and to purchase existing
mortgages. See "Use of Proceeds."
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Summary Financial Information
The summary financial information set forth below is derived from the
Company's Financial Statements appearing elsewhere in this Prospectus. This
information should be read in conjunction with such financial statements,
including the notes thereto.
BALANCE SHEET
FEBRUARY 28, May 31,
1996 1996
(unaudited)
ASSETS
Cash $ 220,947 $152,611
Organization costs 13,053 24,553
Offering costs 25,000 86,273
---------- --------
$ 259,000 $263,437
LIABILITIES AND
MEMBERS' EQUITY
Liabilities
Accounts payable and
accrued expenses $ 9,000 $13,437
----------
Members' equity
Total members' equity 254,000 254,000
Less - Receivable
from members 4,000 4,000
---------- -------
250,000 250,000
$ 259,000 $263,437
The accompanying notes are an integral part of this balance sheet.
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USE OF PROCEEDS
Minimum Percentage Maximum Percentage
Offering of Proceeds Offering of Proceeds
GROSS PROCEEDS FROM
SALE OF Debentures $ 1,000,000 100% $10,000,000 100%
LESS:
(i) Commissions 80,000 8% 680,000 6.8%
(ii) Costs and Expenses 140,000 14% 150,000 1.45%
-------- ----------
Of Offering
NET PROCEEDS FROM
SALE OF DEBENTURES $ 780,000 78% $9,170,000 91.75%
No allocation can be made between amounts allocated for Mortgage Loans
and purchasing of exiting mortgages as that will be in the sole discretion of
the Management.
Pending investment of the net proceeds as specified above, the Company
plans to invest such proceeds which are not invested in Mortgage Loans, in
highly liquid sources, such as interest-bearing bank accounts, bank certificates
of deposit or other short term money market instruments. It is presently
anticipated that such short term investments would be for a period not in excess
of six months, although such time could be extended if appropriate mortgages are
not identified for investment.
In the event that any mortgage is subsequently refinanced, any proceeds
received therefrom will become part of the working capital of the Company and
will be available for reinvestment.
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of
February 28, 1996, and as adjusted to reflect the sale by the Company of the
$10,000,000 principal amount of Debentures being offered hereby.
February 28, 1996
Actual As Adjusted
Long-term debt - Outstanding debentures $ - $ 1,000,000(1)
Members' equity, net of $4,000
receivable from Members 250,000 250,000
--------- ----------
Total capitalization $ 250,000 $ 1,250,000
========== ===========
- -----------------------
(1) Assumes only the minimum Offering of Debentures offered hereby are
sold. See "Description of Debentures" for the terms hereof.
DIVIDEND POLICY
No distributions (dividends) have been declared by the Company to date
and the Manager has no current intention to declare or pay dividends in the
foreseeable future. Management intends to reinvest earnings, if any, in the
development and expansion of the Company's business. Any future declaration of
cash distributions (dividends) will be at the discretion of the Manager and will
depend upon the earnings, capital requirements and financial position of the
Company, general economic conditions and other pertinent factors. Dividends or
distributions, if any, will have no effect on Debentures or Debenture Holders.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Operations
The Company has not as yet had any operations and will be dependent
upon proceeds realized from the sale of Debentures to carry on any activity. The
Company intends to apply the net proceeds of this offering to make short-term
mortgage loans and to purchase existing mortgages.
Liquidity and Capital Resources
The success of the Company will depend on its ability to keep its
assets invested in mortgages. To the extent that the income from the investments
of the Company is unable to satisfy the cash requirements of the Company, it is
anticipated that additional funds may be borrowed.
BUSINESS
General
The Company is a recently formed Limited Liability Company under the
laws of the State of New York, which was formed for the principal purpose of
making real estate mortgage loans and purchasing real estate mortgages. The
Company proposes to take advantage of the market opportunity to make primarily
small balance (generally below $1 million) short-term bridge loans secured by
mortgages on income producing multi-family residential and income producing
commercial properties in the New York metropolitan area. Although the Company
presently anticipates that its average loan will be in the $500,000 range, it
may commit to make loans in excess of that amount. The Company may originate
loans in excess of $1 million and fund all or a portion of such loans if
Management believes that participations in such loans to the extent deemed
advantageous, can be sold. The Company has not yet commenced its business
operations. The Company has not conducted any market research or feasibility
studies concerning its proposed business activities. The Company believes
however that there is a market for its proposed business based on inquiries it
has received from individuals and companies seeking short-term financing.
The Company intends to purchase mortgages and make Mortgage Loans on
income producing properties using the net proceeds of this Offering, the
proceeds of institutional borrowing, internally generated funds and existing
capital.
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Policy with Respect to Certain Activities
The Company shall have the right to issue additional securities senior
to the Debentures as set forth in the Indenture.
The Company proposes to borrow based upon bank lines of credit as such
lines may be established in the future. No bank lines currently exist and no
assurance can be given that the Company will be able to borrow or borrow on
commercially feasible terms. The Company estimates that such future lines of
credit will be based on the amount of money raised through the sale of the
Debentures. No assurance can be given that the Company will be able to borrow
any funds.
The Company expects to make only mortgage loans as set forth herein,
See "Types of Loans", and does not expect to invest in securities of other
issuers for the purpose of exercising control or to underwrite the securities of
other issuers. Additionally, the Company does not expect to offer securities in
exchange for property or to engage in the purchase and sale or turnover of
investments, except as such would be incidental to selling, originating, or
liquidating the Mortgage Loans made by the Company.
Except as provided in the Indenture with respect to redemption, the
Company does not intend to repurchase or otherwise reacquire the Debentures
offered herein. The Company intends to furnish annual reports to Debenture
Holders containing audited financial statements certified by independent
certified public accountants.
The Company has the right to change its policies with respect to the
foregoing activities without a vote of the Debenture Holders except as provided
in the Indenture.
Types of Loans
In general, the loans that the Company will acquire or make will be
short-term bridge loans of one to three years secured primarily by mortgages on
income producing multi-family residential or income producing commercial
properties. The Company may make loans to co-op properties if there is adequate
collateral and/or income to support such loans. The Company's Mortgage Loans
will include: (i) wraparound mortgage loans; (ii) junior mortgage loans; and
(iii) first mortgage loans.
Typical bridge loan borrowers are owners and purchasers of residential
and commercial income producing properties who cannot qualify for institutional
funding within the time necessary to
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close a transaction; who may not come within the credit or current income
guidelines for institutional financing; or who need funds for temporary business
or property improvements before refinancing with an institutional lender.
Nature of Loans
The Company's Mortgage Loans will be secured by either First Mortgages,
Junior Mortgages or Wraparound Mortgages. A First Mortgage is a lien on real
property which must be satisfied prior to the repayment of all other Mortgages
on such property. A Junior Mortgage is a Mortgage which is satisfied only after
the satisfaction of at least one other Mortgage which possesses a superior lien
on such property. The Mortgage which has a prior lien on such property is known
as a Senior Mortgage. A Wraparound Mortgage is a Junior Mortgage which includes
and wraps around all Senior Mortgages on the property and pursuant to which the
Wraparound Mortgage lender agrees to service the Senior Mortgages on the
property.
Some of the mortgages that may be made or acquired by the Company with
the net proceeds of this Offering may be either non-recourse or limited
recourse. Under the terms of a non-recourse mortgage, the borrower has no
personal obligation to pay the debt which the mortgage secures and under the
terms of a limited recourse mortgage, the borrower has only a limited personal
obligation to pay the debt which the mortgage secures. Thus, upon default, the
Company's ability to recover its investment is dependent upon the value of the
property which the mortgage secures. In some instances the Company may make or
acquire both long-term and short-term Mortgage Loans. The Company anticipates
its Mortgage Loans will typically mature in approximately one to three years.
However, the Company may also invest in Mortgage Loans with shorter or longer
maturities and then reinvest the proceeds from such Mortgage Loans to acquire or
make additional Mortgage Loans. The Company anticipates that generally its
Mortgage Loans will provide for balloon payments due at the time of maturity.
In certain instances the Company may make or acquire an Accrual
Mortgage Loan. Under an Accrual Mortgage Loan a portion, or all, of the interest
thereon is accrued, but not paid, until maturity or other specified events. In
certain instances the Company may make or acquire Mortgage Loans with contingent
interest. These loans provide for a contingent interest to the Company which is
in addition to repayment of principal and ordinary interest calculated solely on
the outstanding principal balance of such Mortgage Loan. For example, the
contingent interest may
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include a right to receive an amount equal to a share of the profit on the sale
of the real estate which is the subject of the Mortgage Loan with contingent
interest.
Mortgage Investment Policy
The Company's investments in Mortgages are selected by the management
of the Company ("Management"). The Company has not adopted any formal policy
regarding the percentage of the Company's assets which may be invested in any
single mortgage, or type of mortgage, or regarding the geographic location of
properties which constitute security for the mortgages. The Company will
determine the suitability of the making or acquisition of a particular loan
after reviewing, on a loan-by-loan basis, such factors as the loan-to-value
ratio, the loan's expected yield and the borrower's experience and financial
ability. The importance given to any particular factor varies from loan to loan.
The loan-to-value ratio of a loan is the ratio between the principal amount of
the Loan and the value of the property which the Mortgage secures. The Company
may make loans having loan-to-value ratios generally of up to 85%, but in some
cases the ratio may be higher.
When deemed necessary, before making a Mortgage Loan or purchasing a
Mortgage, Management may obtain a third party appraisal of the property to be
secured by the Mortgage. These appraisals will normally be conducted by members
of the Appraisal Institute and will be of the type required by institutional
lenders prior to making or purchasing a participation in a Mortgage Loan.
Management also will normally conduct on-site inspections prior to making or
purchasing Mortgage Loans.
The initial mortgages the Company intends to make or purchase on income
producing properties with the net proceeds of this Offering will likely be
concentrated in the New York metropolitan area. In the future, the Company may
attempt to diversify its mortgage portfolio by expanding into additional
geographical areas and markets, but there can be no assurance that the Company
will be successful in this objective.
There is no limitation on the dollar amount of loans that may be made
by the Company. The Company's present expectation is that its average loan will
be in the $500,000 range, but it may make larger loans. In some instances, the
Company may make or acquire Mortgage Loans as a participant in a joint venture,
partnership, tenancy in common or similar arrangements in order to spread the
risk associated with large loans.
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The Company intends to leverage its investments by borrowing additional
funds. It is contemplated that such borrowing will be under lines of credit that
the Company will seek to obtain from banks. The Company has not yet established
any line of credit with any banks at this time and the Company cannot anticipate
what the terms of such credit lines will be. No assurance can be given that the
Company will be able to leverage its investments by borrowings or otherwise.
The Company has no established restrictions on the loans it may make or
acquire.
Operation and Business Policies
The Company`s proposed loans will be concentrated on existing income
producing properties and will be based on amounts which existing debt service
coverage can support. The Company will focus on the existing income of a
particular property, not the projected income, when determining whether or not
to make a loan.
The basis and criteria upon which loans will be made is as follows: The
Company will process each loan application to determine if location, net
operating income ("NOI"), and building condition justify the loan request. The
criteria to be evaluated will be income and expenses, engineer's reports,
environmental audits, market value assessment, method of proposed repayment,
credit and experience of borrower, and the availability of additional
collateral. The Company will make its loans in an amount which it believes can
be repaid either from refinancing or sale.
Even though the Company intends to make loans based on income stream as
opposed to the market value of assets, there is nothing in the governing
instruments which prohibit the Company from investing in mortgages based on
market asset value.
Coronet Capital Distinguished
The operation and the business of the Company and Coronet are not
similar. Approximately 65% of the total principal of the Coronet partnership was
invested in co-op conversion, unsold share, sponsor-financing loans, and single
family, land, construction, and non-real estate loans. The ability of borrowers
to repay these loans was not supported by the existing cash flow of the property
financed. Rather, repayment was made through interest reserves funded by the
lender and principal repayment was based upon the sale of the mortgaged asset at
projected market values set forth in appraisals.
The failure of Coronet was primarily caused by the economic
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depression and downturn in the real estate industry. Coronet was an asset based
lender/borrower that lent or borrowed money based primarily on the resale value
of thousands of cooperative, condominium, residential apartment units that
collateralized the loans it either made to others or borrowed against. These
loans would be paid down as the collateral in question was sold in the normal
course of business. Accordingly, these loans were not deemed income stream loans
(unlike the proposed lending of the Company), and were made at a time that
turned out to be the peak of a then healthy real estate market. With the
subsequent collapse of the real estate market in the Northeast (and in
particular in those geographic areas in which Coronet did business), the value
of the collateral that secured these loans likewise dropped in value thereby
resulting in insufficient cash proceeds from the routine sale of such assets.
Accordingly, Coronet went into default on loans owned by it. Additionally,
Coronet was involved in new luxury single family home construction. Such
residences were planned, financed and built in a healthy real estate market.
With the onset of the decline in the real estate market in the Northeast, prices
plummeted causing Coronet to be unable to sell its homes at amounts sufficient
to satisfy borrowings.
The Company will make its loans based on a present income stream to
maintain current loan payments and will not depend on the prepayment of such
loans based solely upon the future resale value of the collateral that secures
them. The Company believes that its lending approach will enable it to be less
affected by market fluctuations. No assurance can be given however that the
income stream supporting the Company's mortgages will be maintained sufficient
to support the payments required under the loans made by the Company. In the
event the income stream is not sufficient to satisfy principal and interest
payments on the Company's mortgages, the Company could be faced with similar
problems as Coronet. In the event that were to occur investors would likely
loose their investment.
Effect of Government Regulation
Investment in mortgages on real properties presently may be impacted by
government regulation in several ways. Residential properties may be subject to
rent control and rent stabilization laws. As a consequence, the owner of the
property may be restricted in its ability to raise the rents on apartments. If
real estate taxes, fuel costs and maintenance of and repairs to the property
were to increase substantially, and such increases could not be offset by
increases in rental income, the ability of the owner of the property to make the
payments due on the mortgage as and when they are due might be adversely
affected.
Laws and regulations relating to asbestos and lead paint have
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been adopted in many jurisdictions, including New York City, which require that
whenever any work is undertaken in a property in an area in which asbestos is
present, the asbestos must be removed or encapsulated in accordance with such
applicable local and federal laws and regulations and proper disclosure of lead
paint must be made if the same is present. The cost of asbestos removal or
encapsulation may be substantial, and if there were not sufficient cash flow
from the property, after debt service on mortgages, to fund the required work,
and the owner of the property fails to fund such work from other sources, the
value of the property could be adversely affected, with consequent impairment of
the security for the Mortgage Loan.
Laws regulating the storage, disposal and clean up of hazardous or
toxic substances at real property have been adopted at the federal, state and
local levels. Such laws may impose a lien on the real property superior to any
mortgages on the property. In the event such a lien were imposed on any property
which serves as security for a mortgage owned by the Company, the security for
such loan could be impaired.
Indemnification
Pursuant to the Operating Agreement of the Company, the Company may
indemnify certain employees and manager of the Company against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorney's fees,
actually and necessarily incurred by such certain employees or manager as a
result of any action or proceeding, or any appeal therein, to the extent such
indemnification is permitted under the laws of the State of New York (in which
the Company is incorporated). Insofar as indemnification for liabilities under
the Securities Act of 1933 may be permitted to manager, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable. No indemnification will be provided for any
actions or transactions affecting or involving Coronet.
The Company believes that the proceeds from this offering will satisfy
cash requirements for at least the period through the first six months of the
next fiscal year. It does not believe it will be necessary to raise additional
funds to meet the expenditures required for operating the business in the next
six months. However, the Company may decide to sell additional debentures within
the next six months to meet a market demand for its short-term mortgage product.
The Company believes that it is in the position to control certain expenses,
internal legal fees, and bank borrowing costs relating to the business operation
at levels which
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will be in line with projected revenue from interest and income earned from
mortgage brokerage fees.
The Company does not plan to pursue any material product research or
development. Its business plan is based on the financial condition of the
general economy as it affects the demand for short-term loans for income
producing properties. The Company proposes to maintain a presence in the local
market with real estate brokers and other professionals in the real estate
lending industry.
The Company does not anticipate any material acquisition of any plant
or equipment, nor does it anticipate any material change in the number of
employees in its various departments. However, depending on the volume of loans
originated the Company may consider expanding its mortgage origination or other
similar departments.
The Company's plan of operation for the remainder of this fiscal year
and for the first six months of next year is conditioned on its ability to close
under the proposed offering of debentures.
MANAGEMENT
General
The business of the Company will be managed by the Management which has
full authority to act on behalf of the Company in all matters relating to
Company activities.
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The following are the Manager and Key Executives of the Company:
Manager
Name Age Position
Norman Dansker 71 Chief Executive
and Financial
Executive and
Manager
Key Executives
Barry M. Bloom 59 Chief Operating Executive
Mitchell H. Gordon 46 Senior Administrator
The Management of the Company may not be spending full time,
in connection with the Company activities and they may be actively engaged in
other ventures, some which may be in competition with the Company. Management
will devote such time as it determines will be necessary for the operation of
the Company's business. It is anticipated that each of the Key Executives will
devote the following percentage of their time to the operation of the Company's
business: Norman Dansker - 50%, Barry M. Bloom - 90%, and Mitchell H. Gordon -
30%.
The background and experience of the Manager and Key Executives of the
Company are as follows:
Norman Dansker has been a principal in real estate investments
throughout the United States for over 50 years. During this time, his business
activities have included buying and/or selling residential apartment buildings,
office buildings, shopping centers and undeveloped land and, to a limited
extent, the operation of companies engaged in real estate construction. His
companies have converted numerous apartment buildings into cooperatives and
condominiums encompassing thousands of apartment units. In connection with all
such activities, he has had extensive experience in the creation of various
forms of real estate financing. Such experience includes mortgage lending
activities, such as conventional mortgage loans, mortgage loans with contingent
interest, conversion and/or accrual features, first mortgage loans, junior
mortgage loans, and wraparound mortgage loans, as well as various forms of
unsecured real estate financing. Mr. Dansker received an honorary Doctor of Laws
degree from Molloy College in 1990. He has served as a member of the Board of
Trustees of Molloy College and on the Board of The American Friends of The
Rambam Medical Center in Haifa, Israel.
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On January 7, 1991 100 Fairfield Avenue Corporation ("Corporation") a
Connecticut corporation of which Norman Dansker and Mitchell Gordon were
President and Vice-President respectively, and 100 Fairfield Avenue Associates
("Associates") a New York limited partnership of which Norman Dansker was a
principal, each filed a voluntary petition for reorganization under Chapter 11
of the bankruptcy Code in the United States Bankruptcy Court for the District of
Connecticut. The Corporation was the fee owner of an office building, as nominee
for Associates, in this single asset bankruptcy. On June 21, 1991, the Court
entered an order converting each case to Chapter 7 under the Bankruptcy code and
appointed a Trustee and oversee the liquidation. The stipulation settling all
the forgoing proceedings was approved by the Bankruptcy Court on August 30,
1995. All sums due under the stipulation have been paid and the matter has been
finalized.
Key Executives
Barry M. Bloom received his Bachelor of Arts degree from Cornell
University and his law degree from the Harvard law School and is admitted to
practice as an attorney in the State of New York. Over the past 30 years he has
specialized in real estate, commercial mortgage lending and liquidation
procedures both as an attorney and in executive positions with mortgage finance
companies. He was a former Assistant United States Attorney and an associate of
the law firm of Rosenman Colin Kaye Petschek & Freund. Mr. Bloom founded Bloom
Funding Co., Inc. in 1970, an approved Federal Housing Administration mortgage
company which originated mortgages for institutional and private investors.
During the past five years Mr. Bloom has been actively involved in the
acquisition, liquidation and workout of residential and commercial mortgage
loans. From 1990 to June 1994, Mr. Bloom was counsel to Stockschlaeder &
McDonald, a law firm representing banks, insurance companies and private
lenders. He formed mortgage workout companies since 1991 which purchased over
$20 million in non-performing mortgages in the tri-state New York area. From
June 1994 until joining the Company, Mr. Bloom was a director and general
counsel of the mortgage finance-workout division of Simon Rudd Associates Inc.,
a New York based real estate management firm. Mr. Bloom is a trustee of
Kingsbrook Jewish Medical Center and a director of the Henry Street Settlement.
Mitchell H. Gordon received his Bachelor of Arts degree in 1972 from
the University of Denver and his J.D. in 1976 from Chicago-Kent College of Law.
From 1979 until 1981, Mr. Gordon was an associate with the law firm of Doran,
Buckley, Kremer, O'Reilly & Pieper. He served as in-house general counsel to
Coronet Properties Company and related entities from 1981 to 1991 and
specialized in the buying and selling of residential apartment
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buildings, cooperative and condominium conversions and the sale of thousands of
individual units, and end-loan and mortgage financing. From 1991 to date, he has
served as a loan and real property workout specialist in conjunction with his
own real estate law practice and has been involved in various business
enterprises related to office leasing, the buying and selling of real estate,
mortgage origination and commercial and residential financing. Mr. Gordon is
licensed to practice law in the States of New York and Illinois and has been
licensed as a New York State real estate broker since 1991. He is the nephew of
Norman Dansker.
On February 25, 1993, Hudson Ridge Owners Corp. ("HRDC") a New Jersey
cooperative housing corporation in which Mitchell H. Gordon was the Vice
President, filed a voluntary petition for reorganization under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the district of New
Jersey. The stipulation settling all the forgoing proceedings was approved by
the Bankruptcy Court on December 7, 1993. No sums were due under the settlement.
See "Management - Norman Dansker".
Executive Compensation
Mr. Norman Dansker as the Manager will receive annual
compensation of $75,000.
Mr. Barry M. Bloom will receive a base salary of $50,000 if $3,000,000
is raised in the offering contemplated hereby, which base will increase by
$5,000 for each additional $1,000,000 raised for a total base of no more than
$90,000.
Mr. Mitchell H. Gordon will be compensated at the annual rate
of $30,000.
Any Executive or employee may be granted bonuses as determined from
time to time by the Manager in his sole discretion.
Executive Boards: The Company has established a Mortgage
Origination Board and an Investment Advisory Board.
Members of the Mortgage Origination Board will provide underwriting and
property analysis, property inspections, review of loan applications and
servicing of accounts, as required by the Company. Compensation for these
services will generally be payable from fees chargeable to the Company's
borrowers. Service on this Board may be terminated at the option of either the
Company or any member.
Members of the Investment Advisory Board will review current
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policies with the Company's Management as well as programs to implement the
Company's growth and future business development. It is anticipated that this
Board will have regular meetings during the course of each year. The initial
first year's aggregate compensation to the members is projected at $30,000.
Service on this Advisory Board may be terminated at the option of either the
Company or any member.
The Mortgage Origination Board consists of the following persons:
Sidney Klotz, 53, received his Bachelor of Science degree in Real
Estate and Finance in 1968 from New York University. From 1968 to 1976, Mr.
Klotz was a Real Estate Broker, licensed in New Jersey and New York, where he
specialized in the sales, financing, and management of investment real estate.
From 1976 to 1979, Mr. Klotz was director of O.R.E.O. for National Bank of North
America (now Nat West USA), where he directed the management and disposition of
a nationwide portfolio of foreclosed properties. Mr. Klotz was also responsible
for the restructuring of problem real estate loans, and served on the Real
Estate Loan Committee. From 1979 to 1991, Mr. Klotz was with the Coronet group
of companies where he served in several capacities, and as Director of Mortgage
Servicing where he supervised the servicing of more than 1,000 loans secured by
commercial, multi-family, and residential real estate interests with a total
value in excess of $100 million. From 1991 to date, Mr. Klotz has divided his
time between directing mortgage servicing for Sovereign Servicing Corporation
and heading up the commercial loan department for Mercury, Inc. of Fairfield,
New Jersey.
Lawrence M. Shapiro, 41, received his Bachelor of Arts degree in
Architecture in 1977 from Syracuse University. From 1977 to 1981, Mr. Shapiro
managed construction and architectural development at D.W. Campanga Development
Corporation, where he directed the development of a 400 unit residential
condominium (new construction) in Staten Island, New York. From 1981 to 1983, he
served as Vice-President of Preferred Licenses Ltd. heading up a range of
architectural and construction projects including residential, commercial,
office, gallery, hotel and religious facilities. From 1983 to 1991, Mr. Shapiro
was Director of Construction for Coronet Properties Company and related entities
overseeing a variety of residential and commercial projects totalling over $1
billion in value. From 1991 to date he managed his own company, Lawrence M.
Shapiro, Inc. where he is a real estate work-out specialist and consultant to
major lending institutions, property manager and property owners. Mr. Shapiro
has also been instrumental in the development and expansion of an executive
suite business facility in New York City.
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The Investment Advisory Board consists of the following persons:
Richard L. Farren, 48, is a graduate of Yale University and Harvard Law
School. He has practiced law for approximately 24 years in the City of New York.
He is a member of the law firm of McLaughlin & Stern, LLP. For a number of years
he specialized primarily in real estate, representing developers, lenders,
owners, tenants, landlords and investors. He has acted as general partner for a
number of real estate partnerships owning shopping centers, residential
complexes and office buildings. He has represented both public and private
lenders in connection with mortgage loans and revolving credit loans. In 1994 he
acted as Chairman of the Committee on Environmental Affairs for Governor George
E. Pataki's Transition Team in New York State.
Bruce F. Henderson, 65, became President and CEO of the Arab American
Bank in New York in 1985; in 1987 he became President and CEO of Union Chelsea
National Bank, and in 1991 became President and CEO of the International Bank
for Investment and Development in Sofla, Bulgaria. From 1992 to the present he
has been an advisor to the Central Bank of Indonesia and Coordinator of a World
Bank Financial Sector Development Project to assist in resolving the problem
loans in the portfolios of the Indonesian banking Sector. He founded Manhattan
Asia Pacific International Inc., a bank consulting company. Mr. Henderson is on
the International Advisory Board of the American Management Association,
Treasurer of The Near East Foundation and a Director of the American Indonesia
Chamber of Commerce in New York. He is the author of several published articles
and has lectured on credit, regulatory compliance and internal controls at
seminars sponsored by the South East Asian Central Bank Institute.
Jenesta E. Marlin, 56, received her undergraduate degree from the
University of Southern California and a Masters in Business Administration from
The Wharton School. Her career covers almost 30 years in senior level positions
in the banking industry. At Citibank she was a Division Chief of Staff,
Marketing Director, Regional Manager responsible for a 35 branch region and
Business Manager in charge of new business acquisitions. From 1987 to 1995 she
was a Senior Vice President at The Dime Savings Bank of New York. At the Dime
she was General Manager, Consumer Financial Services from 1987-1992 where she
managed an $8 billion retail and consumer lending portfolio. From 1992 to 1995
she was the chief executive in charge of managing and liquidating the Dime's
non-performing mortgage assets of $1 billion. She is currently President of
Marlin Enterprises, Inc., a consulting company. Ms.
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Marlin is president of the board of directors of Friends for the Arts, a leading
non-profit organization presenting performing arts programs to the Long Island,
New York community.
Bruce M. Merchant, 61 graduated from Harvard College in 1956 and
entered Irving Trust Company's corporate banking training program in New York
City. In 1965 he became a Vice President with Morgan Guaranty Trust Company in
the corporate area in New York. In 1974 he assumed responsibility for Morgan's
non-conforming commercial real estate assets. In 1977 he transferred to Morgan's
London Office to establish a commercial real estate lending operation for
Europe. In 1982 he joined the London based Hammerson Property Group and as
President of their Western United States operations developed commercial
properties in California. When the properties were sold in 1990 he became a real
estate consultant and has provided consulting services to institutional lenders.
CERTAIN TRANSACTIONS
Various conflicts of interest may arise out of the relationships
between and among the Company, its Management and their Affiliates.
Among the most significant conflicts of interest which may arise are
the following:
Other Activities of the Management and Affiliates. Management and its
Affiliates are and will continue to be engaged in other business activities and
will devote only so much time to the business of Management as they deem
necessary. Management and/or their Affiliates may in the future own or have an
interest in properties or businesses which compete directly or indirectly with
the Company.
Decisions. Management will be the only party entitled to make decisions
regarding the business of the Company. Such decisions including whether or not
to institute a foreclosure proceeding in the event of a default under a mortgage
could have adverse effects on the Debenture Holders.
Affiliates of the Company may enter into other transactions with or
render services for the benefit of the Company. For example, an affiliate of the
Company may provide mortgage servicing to the Company. Any future transactions
between the Company and any of its affiliates will be entered into on terms at
least as
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favorable as could be obtained from unaffiliated independent third
parties.
In February 1996, Tri-State Capital Company LLC became an owner of the
Company by investing $250,000 and becoming the sole Class I Member of the
Company. The principals of Tri-State Capital Company, LLC are Mitchell H.
Gordon, who has a 49% interest in Tri- State, and Robert S. Dansker, who has a
51% interest in Tri-State. Robert S. Dansker is the sole manager of Tri-State.
Tri-State, as the Class I member of the Company, is entitled to a preferred
return equal to 9% per annum, subordinate to payments due to Debentureholders.
Norman Dansker is the sole Manager of the Company. The structure of the Company
was created to satisfy certain estate planning objectives for Mr. Dansker and
his family. At the same time, The ECC Irrevocable Trust became the sole Class II
Member of the Company by investing $1,000. In addition, Norman Dansker, the sole
Manager of the Company, invested $900 along with his son Robert S. Dansker, who
invested $1,500 and, his nephew, Mitchell H. Gordon, who invested $600 to become
the Class III Members of the Company. The ECC Irrevocable Trust is a trust for
the benefit of family members of Norman Dansker, including his wife, children,
grandchildren and sister, sister-in-law and nephew, Mitchell H. Gordon. The
primary beneficiary is his wife, Gloria Dansker.
All profit distributions to members of the Company are subordinate to
the rights of the Debentureholders. In the event that a judgment is executed
against any of the members of the Company, the judgment creditor is solely
entitled, upon application to court, to a charging lien which does not provide
any equitable rights against the Company as set forth in the New York Limited
Liability Company Act. There can be no way to determine how each class will
share in profits, if any, since Class I members have a priority over the other
two classes and, the Class II members are entitled to a greater return on their
equity than the Class III members.
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MEMBERS
The following table sets forth information concerning the ownership of
the Company, all of which is beneficially owned by the persons listed below:
Name and Address Percent
of Beneficial Owners Owned
Class I Members
Tri-State Capital Company, LLC 100% of Class I Interest
110 East 59th Street
New York, New York 10022
Class II Members
The ECC Irrevocable Trust 100% of Class II Interest
c/o Robert S. Dansker
33 Liberty Street
Montpelier, VT 05607
Class III Members
Robert S. Dansker(1) 50% of Class III Interest
33 Liberty Street
Montpelier, VT 05607
Norman Dansker 30% of Class III Interest
200 East 62nd Street
New York, New York 10021
Mitchell H. Gordon(2) 20% of Class III Interest
400 East 77th Street
New York, New York 10021
- ----------------------------
(1) The son of Norman Dansker and a principal of Tri-State Capital Company,
LLC, the Class I Member of the Company and Trustee and a beneficiary of
the Class II member.
(2) The nephew of Norman Dansker and a principal of Tri-State Capital
Company, LLC, the Class I Member of the Company and a beneficiary of
the Class II member.
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DESCRIPTION OF DEBENTURES
The Company will issue the Debentures under an Indenture to be dated as
of March 1, 1996 (the "Indenture"), between the Company and United States Trust
Company of New York (the "Trustee"). The terms and provisions of the Debentures
are stated in the Indenture. Such terms and provisions also include certain
provisions of the Trust Indenture Act of 1939 (as in effect on the date of the
Indenture) which are incorporated by reference into the Indenture. Debenture
Holders are referred to the Indenture and the Trust Indenture Act of 1939 for a
more complete statement of such terms and provisions. The following summary of
certain provisions of the Indenture does not purport to be complete, and where
particular provisions of the Indenture are referred to, such particular
provisions are incorporated herein by reference, and such summary is qualified
in its entirety by such incorporated provisions. The form of the Indenture is on
file as an exhibit to the Registration Statement. The following is a complete
description of the material terms of the Indenture.
General
The Debentures will be limited to $10,000,000 aggregate principal
amount and will be issued in fully registered form without coupons in
denominations of $1,000 and in integral multiples thereof. The Debentures will
be issued in two series of maturities, $4,000,000 will mature on October 31,
1998 and $6,000,000 will mature on June 30, 2001. The Debentures will be
unsecured obligations of the Company, subordinated in right of payment to Senior
Indebtedness of the Company, as described under "Subordination" below. The
Debentures will be transferable at United States Trust Company of N.Y. in New
York City, provided that payment of interest may be made at the option of the
Company by check mailed to the address of the registered holder indicated on the
records of the Company.
The Debentures are transferable on the books of the Company by the
registered holders thereof upon surrender of the Debentures to the Registrar
appointed by the Company and, if requested by the Registrar, shall be
accompanied by a written instrument of transfer in form satisfactory to the
Registrar. The Company has appointed United States Trust Company of New York as
the "Trustee", "Registrar" and "Paying Agent" for the Debentures. The person in
whose name any Debenture is registered shall be treated as the absolute owner of
the Debenture for all purposes, and shall not be affected by any notice to the
contrary. Upon transfer, the Debentures will be cancelled, and one or more new
registered
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Debentures, in the same aggregate principal amount, of the same maturity and
with the same terms, will be issued to the transferee in exchange therefor.
The Indenture does not contain any covenants or provisions that may
afford the Debenture Holders protection in the event of highly leveraged
transactions.
Once the Company has received orders for at least $1,000,000 of
Debentures, the Company may close as to those Debentures (the "First Closing").
With respect to Debentures sold at the First Closing, interest on the Debentures
for the initial period will accrue from the fifth day following the First
Closing. With respect to Debentures sold after the First Closing, interest for
the initial period will accrue from the day of sale. The first payment of
interest on any Debenture will be due on the first day of the next calendar
quarter, if the Debenture is sold on or before the fifteenth day of the second
month of the quarter, or the first day of the second calendar quarter, if sold
thereafter. Debentures sold after the First Closing will be deemed sold on the
date the Company receives payment therefor.
Maturities: Interest
The Debentures will be issued in two maturities: $4,000,000 due October
31, 1998 ("1998 Debentures"); and $6,000,000 due June 30, 2001 ("2001
Debentures"). The Debentures will bear simple interest from the date of issuance
at differing rates depending on the date of maturity. The 1998 Debentures are
offered at par with an interest rate per annum of 9% and the 2001 Debentures are
offered at par with an interest rate of 11%. Interest on the Debentures will be
payable quarterly within five (5) business days following the end of each
calander quarter from the date of issue of the Debentures.
The Company will pay interest on the Debentures to the persons who are
registered holders of the Debentures ("Debenture Holder"). A determination of
the registered holders of the Debentures will be made at the close of business
on the fifteenth day of the month of preceding applicable interest payment date.
Principal and interest may be paid by check. Payments of interest made by check
may be mailed to a Debenture Holder at the address shown on the records of the
Company for such holder. Upon maturity of the Debentures, or upon earlier
redemption, Debenture Holders must surrender the Debentures to any paying agent
appointed by the Company (including itself), to collect principal payments and
payments of accrued
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interest on the Debentures. The Company will maintain an office or agency where
the Debentures may be presented for payment (the "Paying Agent") and an office
or agency where the Debentures may be presented for registration of transfer or
for exchange (the "Registrar").
Debentures of one Maturity may not be exchanged for Debentures of
another Maturity. The term "Maturity" is defined in the Indenture to mean either
of the two maturities of Debentures offered hereby and issued pursuant to the
Indenture.
Duties of the Trustee
The Indenture provides, in part, that in case an Event of Default (as
defined) therein shall occur and continue, the Trustee will be required to
exercise such of the rights and powers vested in it by the Indenture and use the
same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs. While
the Trustee may pursue any available remedies to enforce any provision of the
Indenture or the Debentures, the holders of a majority in principal amount of
all outstanding Debentures may direct the time, method, and place of conducting
any proceeding for exercising any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. The Trustee will not be required to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties under the Indenture, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Authentication and Delivery of Debentures
The Registrar shall authenticate Debentures for original issue in the
aggregate principal amount of up to $10,000,000 upon receipt of a written order
of the Company, specifying the amount of Debentures to be authenticated and the
date of authentication, which is signed by a Manager of the Company.
Certificates representing the Debentures will be delivered to the purchasers of
the Debentures promptly after Closing.
Redemption
The Debentures may not be called for redemption in whole or in part for
six months after their issuance. Thereafter the Debentures will be redeemable as
follows: If the 1998 Debentures are called for redemption after six months
following their issuance for a one
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year period, the registered holder will be entitled to a premium of 0.5% of the
principal amount. If the 1998 Debentures are called for redemption thereafter no
redemption premium will be paid. If the 2001 Debentures are called for
redemption after six months following issuance for a one year period, the
registered holder will be entitled to a premium of 1.5% of the principal amount.
If the 2001 Debentures are called for redemption thereafter, no redemption
premium will be paid.
If less than all the Debentures of a given maturity are to be redeemed,
the Company shall select the Debentures to be redeemed by such method as the
Registrar shall deem fair and appropriate or, if the Debentures are listed on a
national securities exchange in accordance with the rules of such exchange. The
accrued and unpaid interest on the Debentures to be redeemed shall be paid to
the redemption date. No interest will be paid on the Debentures after the
redemption date unless there is a default in payment.
Preference
All holders of Debentures of the same maturity shall be treated alike
with respect to payment of interest, principal and redemption premium, if any,
thereon.
No Sinking Fund or Security
The Company will not provide for the retirement or redemption
of any Debentures through the operation of a sinking fund. The
Debentures are unsecured.
Subordination
The Debentures will be subordinated in payment of principal and
interest to all Senior Indebtedness. The term "Senior Indebtedness" is defined
to mean all indebtedness of the Company, whether outstanding on the date hereof
or thereafter created, which (i) is secured, in whole or in part, by any asset
or assets owned by the Company or by a corporation, a majority of whose voting
stock is owned by the Company or a subsidiary of the Company ("Subsidiary"), or
(ii) arises from unsecured borrowings by the Company from commercial banks,
institutional lenders, savings banks, savings and loan associations, insurance
companies, companies whose securities are traded in a national securities
market, or any wholly-owned subsidiary of any of the foregoing, or (iii) arises
from unsecured borrowings by the Company from any pension plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended), or (iv) arises from borrowings by the Company which are evidenced by
commercial paper,
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or (v) is a guarantee or other liability of the Company of or with respect to
Indebtedness of a Subsidiary of a type described in any of clause (ii), (iii),
(iv) or (v) above, or (vi) arises from other lenders to the Company whether on a
secured or unsecured basis. Senior Indebtedness does not include Indebtedness
which is characterized as pari parsu with or subordinate to the Debentures. As
of February 29, 1996, the Company had no Senior Indebtedness. There is no
limitation or restriction on the creation of Senior Indebtedness by the Company
or on the amount of such Senior Indebtedness to which the Debentures may be
subordinated. There is also no limitation on the creation or amount of
indebtedness which is pari passu with (i.e. having no priority of payment over
and not subordinated in right of payment to) the Debentures.
Upon any distribution of assets of the Company in connection with any
dissolution, winding up, liquidation or reorganization of the Company, the
holders of all Senior Indebtedness will first be entitled to receive final and
indefeasible payment in full of the principal and premium, if any, thereof and
any interest due thereon, before the holders of the Debentures are entitled to
receive any payment upon the principal of or interest on the Debentures, and
thereafter payments to Debenture Holders will be pro rata. In the absence of any
such events, the Company is obligated to pay principal of and interest on the
Debentures in accordance with their terms.
Limitation on Payments
The Indenture will provide that the Company will not make any
distribution on its ownership interests or purchase, redeem or otherwise acquire
or retire for value ownership interests of the Company, if at the time of such
payment, or after giving effect thereto, an Event of Default, as hereinafter
defined, shall have occurred and be continuing or a default shall occur as a
result thereof; provided, however, that the foregoing limitation shall not
prevent the acquisition or retirement of any ownership interests by exchange
for, or out of the proceeds of the sale of ownership interests.
Discharge Prior to Redemption or Maturity
If the Company at any time deposits with the Trustee money or U.S.
Government Obligations or equivalents sufficient to pay principal and interest
on the Debentures prior to their redemption or maturity, the Company will be
discharged from the Indenture, provided certain other conditions specified in
the Indenture are satisfied. In the event of such deposit, which is irrevocable,
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Debenture Holders must look only to the deposited money and
securities for payment. U.S. Government Obligations are securities
backed by the full faith and credit of the United States.
Access of Information to Security Holders
Debenture Holders may obtain from the Trustee information necessary to
communicate with other Debenture Holders. Upon written application to the
Trustee by any Debenture Holder stating that such Debenture Holder desires to
communicate with other Debenture Holders with respect to such holders rights
under the Indenture or under the Debentures, and upon providing the Trustee with
the form of proxy or other communication which the Debenture Holder proposes to
transmit, and upon receipt by the Trustee from the Debenture Holder of
reasonable proof that such Debenture Holder has owned a Debenture for a period
of at least six months preceding the date of such application, the Trustee
shall, within five business days after the receipt of such information, either
(a) provide the applicant Debenture Holder access to all information in the
Trustee's possession with respect to the names and addresses of the Debenture
Holders; or (b) provide the applicant Debenture Holder with information as to
the number of Debenture Holders and the approximate cost of mailing to such
Debenture Holders the form of proxy or other communication, if any, specified in
the applicant Debenture Holders' application, and upon written request from such
applicant Debenture Holder and receipt of the material to be mailed and of
payment, the Trustee shall mail to all the Debenture Holders copies of the form
of proxy or other communication so specified in the request.
Compliance with Conditions and Covenants
The Company shall deliver to the Trustee within 45 days after the end
of each fiscal quarter a (i) Manager's Certificate of the Company stating that
all conditions and covenants in the Indenture relating to the proposed action
have been complied with and (ii) an opinion of counsel stating that, in the
opinion of such counsel, all such conditions and covenants have been complied
with.
Amendment, Supplement and Waiver
Subject to certain exceptions, the Indenture or the Debentures may be
amended or supplemented, and compliance by the Company with any provision of the
Indenture or the Debentures may be waived, with the consent of the Trustee.
Without notice to or consent of any of the holders of Debentures, the Company
may amend or
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supplement the Indenture or the Debentures to cure any ambiguity, omission,
defect or inconsistency, or make any change that does not adversely affect the
rights of any holders of Debentures. However, the Company, with the consent of
the Trustee, may amend or supplement this Indenture or the Debentures without
notice to any Debentureholder, but with the written consent of the Holders of at
least a majority in principal amount of the outstanding Debentures. Subject to
the immediately succeeding sentence, the Holders of a majority in principal
amount of the outstanding Debentures may waive compliance by the Company with
any provision of this Indenture or the Debentures without notice to any
Debentureholder. Without the consent of each Debentureholder affected, however,
an amendment, supplement or waiver may not: (i) reduce the amount of Debentures
whose Holders must consent to an amendment, supplement or waiver; (ii) reduce
the rate of or extend the time for payment of interest on any Debenture (except
that Holders of not less than 75% in principal amount of all outstanding
Debentures may consent, on behalf of the Holders of all of the outstanding
Debentures, to the postponement of any interest payment for a period not
exceeding three years from its due date); (iii) reduce the principal of or
extend the fixed maturity of any Debenture; (iv) waive a default in the payment
of the principal of or interest on, or redemption payment with respect to, any
Debenture, (v) make any Debenture payable in money other than that stated in the
Debenture; (vi) make any change in the subordination provisions that adversely
affects the rights of any Debentureholder; or waive a default in payment of
principal of or interest on, or other redemption payment on any Debentures.
Defaults and Remedies
Each of the following is an "Event of Default" under the Indenture: (a)
failure by the Company to pay any principal on the Debentures when due; (b)
failure by the Company to pay any interest installment on the Debentures within
thirty days after the due date; (c) failure to perform any other covenant or
agreement of the Company made in the Indenture or the Debentures, continued for
sixty days after receipt of notice thereof from the Trustee or the holders of at
least 25% in principal amount of the Debentures; and (d) certain events of
bankruptcy, insolvency or reorganization. If an Event of Default (other than
those described in clause (d) above) occurs and is continuing, the Trustee or
the holders of at least 25% in principal amount of the Debentures, by notice to
the Company, may (but shall not be obligated to) declare the principal of and
accrued interest on all of the Debentures to be due and payable immediately. If
an Event of Default of the type described in clause (d) above occurs, all unpaid
principal and accrued
47
<PAGE>
interest on the Debentures shall automatically become due and payable without
any declaration or other act on the part of the Trustee or any holder. The
Trustee may refuse to enforce the Indenture or the Debentures unless it receives
indemnity and security satisfactory to it. Subject to certain limitations, the
holders of a majority in principal amount of the Debentures may direct the
Trustee in its exercise of any trust or power conferred on the Trustee, and may
rescind an acceleration of the Debentures. The Trustee may withhold from holders
of Debentures notice of any continuing default (except a default in payment of
principal or interest) if it determines that withholding notice is in their
interest.
The Indenture requires the Company to furnish to the Trustee an annual
statement, signed by a specified Manager of the Company, stating whether or not
such Manager has knowledge of any Default under the Indenture, and, if so,
specifying each such Default and the nature thereof.
Federal Income Tax Consequences
Payment of Interest. Payments of interest on the Debentures will
generally result in taxable interest income to the recipient of such payments
and the recipient will be required to pay the tax on such income.
Sale or Redemption of Debentures. A holder of Debentures will recognize
gain or loss on the sale or redemption of the Debentures equal to the difference
between the sale price (exclusive of any amount paid for accrued interest) and
the holder's tax basis in the Debenture (generally the purchase price to the
holder). Any gain or loss generally will be capital gain or loss and long-term
if the Debenture is held for more than one year.
In General. The tax consequences referred to in the preceding
paragraphs are based on the current provisions of the Internal Revenue Code of
1986, as amended, and the currently applicable regulations promulgated
thereunder. The Internal Revenue Code of 1986, as amended, currently provides
that gain from the sale of long-term capital assets will be taxed at a maximum
federal rate of 28% There can be no assurance, however, that any such provisions
may not change in the future, either retroactively or prospectively, resulting
in changes in such tax consequences. Several proposals are presently pending in
Congress to change the capital gains tax. It is uncertain as to which, if any,
of such proposals will be acted on and no assurance can be given with respect to
any proposed changes in the law affecting taxation of capital gains.
48
<PAGE>
There may, in addition, be other federal, state, local or foreign tax
considerations applicable to the circumstances of a prospective holder.
Holders who hold the Debentures for investment purposes should treat
all reportable interest (whether actually received or constituting original
issue discount under the Code) as portfolio income under applicable Code
provisions.
The Company's deposit of funds with the Trustee to effect the discharge
of the Company's obligations under the Debentures and the Indenture prior to
redemption or maturity of the Debentures, will have no effect on the amount of
income realized or recognized (gain or loss) by the Debenture Holders or the
timing of recognition of gain or loss for federal income tax purpose.
The foregoing discussion is a complete discussion of all material tax
consequences of holding, owning and disposing of the Debentures.
PLAN OF OFFERING
The Company is offering through its Management and participating
broker/dealers which may be appointed by the Management, on a all or none basis
with respect to the Minimum Offering of Debentures and on a "best efforts"
basis, as to the Maximum Offering of its Series A Registered Redeemable
Subordinated Debentures (the "Debentures"). The Company will pay participating
broker dealers a commission on the purchase price of each Debenture sold equal
to 5% on the 1998 Debentures and 8% with respect to the 2001 Debentures.
The Management of the Company reserves the right to purchase with
personal funds up to 25% ($250,000) of the Debentures in order to meet the
Minimum Offering. If the Management exercises this option such purchases will be
for investment purposes only and not for resale.
This offering will terminate on or before , 1996, unless extended for
an additional six month period by the Company, with notice to subscribers to
___________ 1997, (the "Termination Date"). No minimum number of Debentures must
be purchased after completion of the minimum offering of $1,000,000 of
Debentures in order for a closing under this Offering to occur. The Company may
close this Offering from time to time after the minimum is sold with respect to
those subscribers whose subscriptions are accepted and continue the Offering of
unsold Debentures until the Termination Date. Until accepted, all subscription
payments received from subscribers will be held in escrow in an interest-bearing
account established by the Company through its
49
<PAGE>
attorney's McLaughlin & Stern, LLP, as Escrow Agent established with Chase
Manhattan Bank, N.A., an unaffiliated commercial bank. A subscriber will not
have the right to withdraw his subscription, except as provided by certain state
laws.
Suitability Standard
Each investor in this Offering shall have a minimum annual gross income
of $35,000 and a net worth of $35,000 or alternatively, a net worth of $100,000
excluding home furnishings and automobiles. Interest earned, if any, on
subscription payments from subscribers whose subscriptions are accepted by the
Company will be remitted to such subscriber following the closing with respect
to the Debentures purchased. Interest earned, if any, on subscription payments
from subscribers whose subscriptions are rejected will be remitted to such
subscriber promptly along with a refund of the subscription payment. Interest on
returned subscriptions, if any, shall be at the rate earned where the investment
funds are deposited, which rate may fluctuate. It is expected that a subscriber
will be issued the Debentures subscribed for within five business days following
the acceptance of the subscription by the Company. It shall be a condition to
the remittance of interest earned, if any, to a subscriber that the subscriber
furnish a completed and executed Form W-9 so than any interest earned and to be
distributed to such subscriber may be properly reported.
Only the Management of the Company and certain NASD registered
broker-dealers designated by Management are authorized to offer the Debentures
for sale and to effect sales of the Debentures. The Company currently has no
broker-dealers committed to sell the Debentures. The Company reserves the right
to reject any subscription in whole or in part for any reason and to terminate
this Offering at any time in its sole discretion. The Company may also allot
Debentures of a particular maturity among subscribers for the Debentures of that
maturity if such Debentures are over-subscribed. No sales literature or other
material of any kind except this Prospectus has been authorized for use in
connection with this Offering.
How to Subscribe
Any subscriber who wishes to purchase one or more Debentures should
deliver the following items to the Company:
(a) One completed, dated, executed and notarized Subscription
Agreement.
(b) One completed, dated and executed Form W-9.
(c) A check payable to the order of McLaughlin & Stern, LLP,
50
<PAGE>
as Escrow Agent in the amount of $1,000 or multiples thereof
for the Debentures subscribed for. Such payment shall be due
upon presentation of an executed Subscription Agreement.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement
under the Securities Act with respect to the Debentures offered hereby. Such
Registration Statement is complete in all material respects. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits thereto, certain portions having been omitted from this
Prospectus in accordance with the rules and regulations of the Commission. For
further information with respect to the Company, the securities offered by this
Prospectus and such omitted information, reference is made to the Registration
Statement, including any and all exhibits and amendments thereto. Statements
contained in this Prospectus concerning the provisions of any document filed as
an exhibit are of necessity brief descriptions thereof and are not necessarily
complete, and in each instance reference is made to the copy of the document
filed as an exhibit to the Registration Statement, each such statement being
qualified in its entirety by this reference.
Following the sale of the securities offered by this Prospectus, the
Company will file reports, proxy statements and other information requirements
of the Exchange Act, and in accordance therewith the Company will file reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information may be inspected and copied at public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
500 West Madison Street, Suite 1400, Chicago, Illinois 60601 and 7 World Trade
Center, New York, New York 10048. Copies of such material, including the
Registration Statement, can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
LEGAL MATTERS
The validity of the securities being offered hereby will be passed upon
for the Company by McLaughlin & Stern, LLP, New York, New York.
EXPERTS
The financial statements included herein at February 28, 1996
51
<PAGE>
have been included herein in reliance on the report of Friedman Alpren & Green
LLP, independent auditors, given on the authority of that firm as experts in
accounting and auditing.
52
<PAGE>
GLOSSARY
Accrual Mortgage Loan: A Mortgage Loan that provides for the accrual of
a portion, or all, of the base interest until maturity or another specified
event.
Acquisition/Refinancing Loans: Loans acquired or made by the Company to
borrowers for the purpose of acquiring and/or refinancing commercial or
multi-family residential properties.
Affiliate: Generally, a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by,
or is under common control with, the person specified.
Code: The Internal Revenue Code of 1986, as amended.
First Mortgage: A Mortgage which must be satisfied prior to
all other Mortgages on the property. A First Mortgage Loan is a
Mortgage Loan secured or collateralized by a First Mortgage.
Junior Mortgage: A Mortgage which must be satisfied after at least one
other Mortgage on the property. A Junior Mortgage Loan is a Mortgage Loan
secured or collateralized by a Junior Mortgage.
Loan-to-Value Ratio: The amount of a loan as a percentage of
the value of the property securing the loan.
Mortgage: A security interest in real property granted to
secure a Mortgage Loan.
Mortgage Loan: A note, bond or other evidence of indebtedness
or obligation, the repayment of which is secured or collateralized
by an interest in real property.
Person: A corporation, an association, a partnership, a joint
venture, an estate, a trust, or any other legal entity, or an
individual.
Wraparound Mortgage Loan: A Junior Mortgage Loan which includes and
wraps around all prior Mortgage Loans pursuant to which the Wraparound Mortgage
lender agrees to service all prior Mortgage Loans.
sass/east.coa/prvamd.4
53
<PAGE>
TO THE MEMBERS OF EAST COAST CAPITAL COMPANY, LLC
We have audited the accompanying balance sheet of EAST COAST CAPITAL
COMPANY, LLC (a limited liability company) as of February 28, 1996. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly,
in all material respects, the financial position of EAST COAST CAPITAL COMPANY,
LLC as of February 28, 1996, in conformity with generally accepted accounting
principles.
Friedman Alpren & Green LLP
New York, New York
March 1, 1996
54
<PAGE>
EAST COAST CAPITAL COMPANY, LLC
BALANCE SHEET
February May 31,
28,
1996 1996
(Unaudited)
ASSETS
Cash $ 220,947 $ 152,611
Organization costs 13,053 24,553
Offering costs 25,000 86,273
------ ------
$ 259,000 $ 263,437
= ======= = =======
LIABILITIES AND MEMBERS' EQUITY
Liabilities
Accounts payable
and accrued expenses $ 9,000 $ 13,437
- ----- - ------
Members' equity
Total members' equity 254,000 254,000
Less - Receivable from members 4,000 4,000
----- -----
250,000 250,000
------- -------
$259,000 $ 263,437
55
<PAGE>
EAST COAST CAPITAL COMPANY, LLC
NOTES TO BALANCE SHEET
1 - ORGANIZATION
East Coast Capital Company, LLC (the "Company") is a New York limited
liability company formed in February 1996 principally to make real estate loans
and purchase real estate mortgages. The Company may also act as a mortgage
broker if necessary licenses are applied for and obtained.
Pursuant to a public offering, the Company is offering up to an aggregate
principal amount of $10,000,000 of its Series A Registered Subordinated
Debentures (the "Debentures"). The Debentures will be issued in two maturities
as follows: $4,000,000 due October 31, 1998 and $6,000,000 due June 30, 2001.
Interest payable on the Debentures will be at 9% and 11%, respectively. The
Debentures are unsecured obligations of the Company and will be subordinated to
all senior indebtedness, as defined.
The managing member of the Company is Norman Dansker.
As of May 31, 1996, the Company has not commenced operations.
A member's equity contribution of $250,000 was made by Tri- State Capital
Company, LLC.
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization Costs
Costs incurred to organize the Company, including, but not limited to,
legal and accounting fees, are considered organization costs, and will be
amortized over a 60-month period commencing with the operations of the Company.
Offering Costs
Costs incurred in connection with the offering and issuance of the
Debentures will be ortized over the terms of the Debentures.
Income Taxes
The Company is not a taxpaying entity for income tax purposes and,
accordingly, no provision will be made for income taxes. The members' allocable
shares of the Company's taxable income or loss are reportable on their income
tax returns.
56
<PAGE>
57
<PAGE>
-----------------------------------
No dealer, salesperson or other person has been authorized to give
any information or to make any representations in connection with this Offering
other than those contained in this Prospectus and, if given or made, such
information or representations must not be relied on as having been authorized
by the Company. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the securities offered
by this Prospectus, or an offer or a solicitation of an offer to buy any
securities by any person in any jurisdiction in which such offer or solicitation
is not authorized or is unlawful. The delivery of this Prospectus shall not,
under any circumstances, create any implication that the information herein is
correct as of any time subsequent to the date of this Prospectus.
-----------------------------------
TABLE OF CONTENTS
Page
Risk Factors..........................8
Prospectus Summary...................19
Use of Proceeds......................21
Capitalization.......................24
Management's Discussion and
Analysis of Financial
Condition and Results
of Operations.......................25
Business.............................25
Management...........................32
Certain Transactions.................38
Members..............................40
Description of Debentures............41
Plan of Offering.....................49
Additional Information...............51
Legal Matters........................51
Experts..............................51
Glossary.............................53
Financial Statements.................54
Until ___________, 199_ (25 days after the date of this
Prospectus), all dealers effecting transactions in the Debentures, whether or
not participating in the distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with regard to their unsold allotments or
subscriptions.
$10,000,000 DEBENTURES
EAST COAST CAPITAL COMPANY, LLC
----------------------------
PROSPECTUS
----------------------------
, 1996
58
<PAGE>
PART II
Information Not Required in Prospectus
ITEM 30. Other Expenses of Issuance and Distribution
The expenses payable by Registrant in connection with the issuance
and distribution of the securities being registered (other than underwriting
discounts and commissions) are estimated as follows:
Securities and Exchange Commission Fees.......... $ 3,448.28
Trustees Fees and Expenses....................... $ 7,500.00
Accounting Fees and Expenses..................... $ 5,000.00
Blue Sky Fees and Expenses....................... $ 2,500.00
Printing Expenses (including Securities)......... $ 10,000.00
Legal Fees....................................... $115,000.00
Miscellaneous.................................... $ 6,551.72
-----------
TOTAL.................................. $150,000.00
ITEM 31. Sales to Special Parties
Not Applicable
ITEM 32. Recent Sales of Unregistered Securities
In February 1996, the following persons became owners of the
Company by subscribing and paying for, in cash, ownership interest as follows:
CLASS I MEMBERS
Name and Address Contribution
Tri-State Capital Company, LLC $250,000
CLASS II MEMBERS
Name and Address Contribution
The ECC Irrevocable Trust $ 1,000
CLASS III MEMBERS
Name and Address Contribution
Norman Dansker $ 900
Mitchell H. Gordon $ 600
Robert S. Dansker $ 1,500
Neither the Company nor any person acting on its behalf offered or
sold the securities described above by means of any form of
59
<PAGE>
general solicitation or general advertising. Each purchaser represented in
writing that he acquired the securities for his own account. A legend was placed
on the certificates stating the restrictions on their transferability and sale.
Each purchaser signed a written agreement that the securities will not be sold
without registration under the Act or exemption therefrom. The Registrant
believes such issuances are exempt transactions not involving a public offering
under Section 4(2) of the Securities Act of 1933, as amended.
ITEM 33. Indemnification of Officers and Directors
ITEM 34. Treatment of Proceeds from Stock Being Registered
Not Applicable
ITEM 35. Financial Statements and Exhibits
(a) Exhibits
3.1 Registrant's Articles of Organization
3.2 Registrant's Operating Agreement
4.1 Form of Debenture [Filed as part of
Exhibit 10.1]
5 Opinion of McLaughlin & Stern, LLP
8 Tax Opinion of McLaughlin & Stern, LLP
10.1* Form of Indenture between the Registrant
and United States Trust Company of New York
10.2 Form of Subscription Agreement for
purchase of Debentures.
10.3 Escrow Agreement
24.1* Consent of Friedman Alpren & Green LLP
24.2 Consent of McLaughlin & Stern, LLP
(b) Financial Statement Schedules
Schedules other than those listed above have been omitted since
they are either not required, are not applicable or the required information is
shown in the financial statements or related notes.
* Filed herewith
60
<PAGE>
ITEM 36. Undertakings
The undersigned Registrant hereby undertakes to:
(a) (1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental
change in the information in the registration statement;
and
(iii) Include any additional or changed material
information on the plan of distribution;
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement for the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering;
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of
the offering; and
(b) If the Registrant requests acceleration of the effective date
of the Registration Statement under Rule 461 under the Securities Act, the
Registrant acknowledges that:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the small business issuer
pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses
incurred or paid by a director, officer or controlling person of
the small business issuer in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final
adjudication of such issue.
61
<PAGE>
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the Trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Act.
The undersigned Registrant hereby undertakes to file a
sticker supplement pursuant to Rule 424(c) under the Act during the distribution
period describing each property not identified in the prospectus at such time as
there arises a reasonable probability that such property will be acquired and to
consolidate all such stickers into a post-effective amendment filed at least
once every three months, with the information contained in such amendment
provided simultaneously to the existing investors. Each sticker supplement shall
disclose all compensation and fees received by managers of the Company and its
affiliates in connection with any such acquisition. The post-effective amendment
shall include audited financial statements meeting the requirements of Rule 3-14
of Regulation S-X only for properties acquired during the distribution period.
62
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form S- 11 and authorized this Amendment to
the registration statement to be signed on its behalf by the undersigned, in the
City of New York, State of New York, on June 25, 1996.
EAST COAST CAPITAL COMPANY, LLC
By: /s/ Norman Dansker
Norman Dansker
Manager
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following person in the capacities
and on the dates stated.
/s/ Norman Dansker Manager, Principal June 25, 1996
Norman Dansker Executive Officer,
Principal and
Financial Officer
63
<PAGE>
======================================
EAST COAST CAPITAL COMPANY, LLC
AND
United States Trust Company of New York
Trustee
--------------
INDENTURE
Dated as of March 1, 1996
--------------
$10,000,000
Series A Registered
Subordinated Debentures
---------------
$4,000,000 due 10/31/98
$6,000,000 due 6/30/01
========================================
1
<PAGE>
CROSS REFERENCE TABLE
TIA Section Indenture Section
310(a)(1) and (2). . . . . . . . . . . . . . . . . 7.10
310(a)(3) and (4). . . . . . . . . . . . . . . . . N.A.
310(b) . . . . . . . . . . . . . . . . . . . . . . 7.08,7.10,11.02
310(c) . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) and (b) . . . . . . . . . . . . . . . . . . 7.11
311(c) . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . 2.05
312(b) and (c) . . . . . . . . . . . . . . . . . . 2.06
313(a) . . . . . . . . . . . . . . . . . . . . . . 7.06
313(b)(1). . . . . . . . . . . . . . . . . . . . . N.A.
313(b)(2). . . . . . . . . . . . . . . . . . . . . 7.06
313(c) . . . . . . . . . . . . . . . . . . . . . . 7.06, 11.02
313(d) . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . 4.02, 11.02
314(b) . . . . . . . . . . . . . . . . . . . . . . N.A.
314(c)(1) and (c)(2) . . . . . . . . . . . . . . . 11.03
314(c)(3) and (d). . . . . . . . . . . . . . . . . N.A.
314(e) . . . . . . . . . . . . . . . . . . . . . . 11.04
314(f) . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a), (c) and (d). . . . . . . . . . . . . . . . 7.01
315(b) . . . . . . . . . . . . . . . . . . . . . . 7.05, 11.02
315(e) . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(1)(A) . . . . . . . . . . . . . . . . . . . 6.05
316(a)(1)(B) . . . . . . . . . . . . . . . . . . . 6.04
316(a)(2). . . . . . . . . . . . . . . . . . . . . 9.02
316(a) Last Paragraph. . . . . . . . . . . . . . . 2.10, 11.05
316(b) . . . . . . . . . . . . . . . . . . . . . . 6.07
317(a) . . . . . . . . . . . . . . . . . . . . . . 6.08, 6.09
317(b) . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . 11.01
------------
N.A. means Not Applicable.
Note: This cross reference table shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
ARTICLE ONE
PAGE DEFINITIONS AND INCORPORATION BY REFERENCE
1.01. Definitions. . . . . . . . . . . . . . . . . . . . . 1
-----------
1.02. Other Definitions. . . . . . . . . . . . . . . . . . 3
-----------------
1.03. Incorporation by Reference of Trust Indenture Act. . 3
-------------------------------------------------
1.04. Acts of Holders. . . . . . . . . . . . . . . . . . . 4
---------------
1.05. Rules of Construction. . . . . . . . . . . . . . . . 5
---------------------
ARTICLE TWO
THE DEBENTURES
2.01. Form and Dating. . . . . . . . . . . . . . . . . . . 5
---------------
2.02. Execution and Authentication . . . . . . . . . . . . 5
----------------------------
2.03. Registrar and Paying Agent . . . . . . . . . . . . . 6
--------------------------
2.04. Paying Agent to Hold Money in Trust. . . . . . . . . 7
-----------------------------------
2.05. Debentureholder Lists. . . . . . . . . . . . . . . . 7
---------------------
2.06. Access of Information to Debentureholders. . . . . . 7
-----------------------------------------
2.07. Transfer and Exchange. . . . . . . . . . . . . . . . 8
---------------------
2.08. Replacement Debentures . . . . . . . . . . . . . . . 9
----------------------
2.09. Outstanding Debentures . . . . . . . . . . . . . . . 9
----------------------
2.10. Treasury Debentures. . . . . . . . . . . . . . . . . 9
-------------------
2.11. Temporary Debentures . . . . . . . . . . . . . . . . 10
--------------------
2.12. Cancellation . . . . . . . . . . . . . . . . . . . . 10
------------
2.13. Defaulted Interest . . . . . . . . . . . . . . . . . 10
------------------
2.14. CUSIP Numbers. . . . . . . . . . . . . . . . . . . . 11
-------------
2.15 Persons Deemed Owners. . . . . . . . . . . . . . . . 11
---------------------
<PAGE>
ARTICLE THREE
PAGEEDEMPTION
3.01. Notices to Trustee . . . . . . . . . . . . . . . . . 12
------------------
3.02. Selection of Debentures to be Redeemed . . . . . . . 12
--------------------------------------
3.03. Notice of Redemption . . . . . . . . . . . . . . . . 12
--------------------
3.04. Effect of Notice of Redemption . . . . . . . . . . . 13
------------------------------
3.05. Deposit of Redemption Price. . . . . . . . . . . . . 13
---------------------------
3.06. Debentures Redeemed in Part. . . . . . . . . . . . . 13
---------------------------
ARTICLE FOUR
COVENANTS
4.01. Payments of Debentures . . . . . . . . . . . . . . . 13
----------------------
4.02. SEC Reports. . . . . . . . . . . . . . . . . . . . . 14
-----------
4.03. Compliance Certificate . . . . . . . . . . . . . . . 14
----------------------
4.04. Limitation on Dividends and REPURCHASE
of Ownership Interests. . . . . . . . . . . . . . 14
-----------------------
4.05. Pari Passu and Other Indebtedness. . . . . . . . . . 15
---------------------------------
ARTICLE FIVE
SUCCESSOR COMPANY
5.01. When the Company May Merge, etc. . . . . . . . . . . 15
--------------------------------
ARTICLE SIX
DEFAULTS AND REMEDIES
6.01. Events of Default. . . . . . . . . . . . . . . . . . 15
-----------------
6.02. Acceleration . . . . . . . . . . . . . . . . . . . . 16
------------
6.03. Other Remedies . . . . . . . . . . . . . . . . . . . 17
--------------
6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . 17
-----------------------
6.05. Control by Majority. . . . . . . . . . . . . . . . . 17
-------------------
6.06. Limitation of Suits. . . . . . . . . . . . . . . . . 18
-------------------
6.07. Rights of Holders to Receive Payment . . . . . . . .18
------------------------------------
6.08. Collection Suit by Trustee . . . . . . . . . . . . .18
--------------------------
<PAGE>
6.09. Trustee May File Proof of Claim. . . . . . . . . . .18
-------------------------------
6.10. Priorities . . . . . . . . . . . . . . . . . . . . .19
----------
6.11. Undertaking for Costs. . . . . . . . . . . . . . . .19
---------------------
6.12. Restoration of Rights and Remedies. . . . . . . . . 19
----------------------------------
ARTICLE SEVEN
TRUSTEE
7.01. Duties of Trustee . . . . . . . . . . . . . . . . . 20
-----------------
7.02. Rights of Trustee. . . . . . . . . . . . . . . . . .21
-----------------
7.03. Individual Rights of Trustee . . . . . . . . . . . . 22
----------------------------
7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . 22
--------------------
7.05. Notice of Defaults . . . . . . . . . . . . . . . . . 22
------------------
7.06. Reports by Trustees to Holders . . . . . . . . . . . 23
------------------------------
7.07. Compensation and Indemnity . . . . . . . . . . . . .23
--------------------------
7.08. Replacement of Trustee . . . . . . . . . . . . . . . 24
----------------------
7.09. Successor Trustee by Merger, etc.. . . . . . . . . .25
---------------------------------
7.10. Eligibility; Disqualification. . . . . . . . . . . .25
-----------------------------
7.11. Preferential Collection of Claims
Against the Company. . . . . . . . . . . . . . . . 25
-------------------
7.12. Paying Agents. . . . . . . . . . . . . . . . . . . . 26
-------------
ARTICLE EIGHTS
DISCHARGE OF INDENTURE
8.01. Termination of the Company's Obligations . . . . . .26
----------------------------------------
8.02. Application of Trust Money . . . . . . . . . . . . .27
--------------------------
8.03. Repayment to the Company . . . . . . . . . . . . . . 27
------------------------
<PAGE>
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
9.01. Without Consent of Holders . . . . . . . . . . . . .28
--------------------------
9.02. With Consent of Holders. . . . . . . . . . . . . . . 28
-----------------------
9.03. Execution of Supplemental Indentures . . . . . . . . 29
------------------------------------
9.04. Compliance with Trust Indenture Act. . . . . . . . . 29
-----------------------------------
9.05. Revocation and Effect of Consents. . . . . . . . . . 29
---------------------------------
9.06. Notation on or Exchange of Debentures. . . . . . . . 30
-------------------------------------
9.07. Trustee to Sign Amendments, etc. . . . . . . . . . . 30
--------------------------------
ARTICLE TEN
SUBORDINATION
10.01. Debentures Subordinate to Senior
Indebtedness . . . . . . . . . . . . . . . 31
------------
10.02. Payment Over of Proceeds Upon Dissolution,
Etc.. . . . . . . . . . . . . . . . . . . . . . . . 31
----
10.03. No Payment When Senior Indebtedness in Default . . . 33
----------------------------------------------
10.04. Payment Permitted If No Default. . . . . . . . . . . 33
-------------------------------
10.05. Subrogation to Rights of Holders of Senior
Indebtedness . . . . . . . . . . . . . . . . . . . 34
------------
10.06. Provisions Solely to Define Relative Rights . . . .34
-------------------------------------------
10.07. Trustee to Effectuate Subordination. . . . . . . . . 35
-----------------------------------
10.08. No Waiver of Subordination Provisions. . . . . . . . 35
-------------------------------------
10.09. Notice to Trustee. . . . . . . . . . . . . . . . . . 35
-----------------
10.10. Reliance on Judicial Order or Certificate of
Liquidating Agent . . . . . . . . . . . . . . . . . 36
-----------------
10.11. Trustee Not Fiduciary for Holders of Senior
Indebtedness . . . . . . . . . . . . . . . . . . . . 37
------------
10.12. Rights of Trustee as Holder of Senior Indebtedness
Preservation of Trustee's Rights. . . . . . . . . . 37
--------------------------------
10.13 Article Applicable to Paying Agents. . . . . . . . .37
-----------------------------------
ARTICLE ELEVEN
<PAGE>
MISCELLANEOUS
11.01. Trust Indenture Act Controls . . . . . . . . . . . . 37
----------------------------
11.02. Notices. . . . . . . . . . . . . . . . . . . . . . . 37
-------
11.03. Certificate and Opinion as to Conditions Precedent . 38
--------------------------------------------------
11.04. Statements Required in Certificate or Opinion. . . . 39
---------------------------------------------
11.05. Rules by Trustee and Agents. . . . . . . . . . . . . 39
---------------------------
11.06. Legal Holidays . . . . . . . . . . . . . . . . . . . 39
--------------
11.07. Governing Law. . . . . . . . . . . . . . . . . . . . 39
-------------
11.08. No Recourse Against Others . . . . . . . . . . . . .39
--------------------------
11.09. Successors . . . . . . . . . . . . . . . . . . . . .39
----------
11.10. Duplicate Originals. . . . . . . . . . . . . . . . .39
-------------------
11.11. Separability . . . . . . . . . . . . . . . . . . . .40
------------
<PAGE>
INDENTURE, dated as of March 1, 1996, between EAST COAST CAPITAL
COMPANY, LLC, a New York limited liability company (the "Company"), and United
States Trust Company of New York, a New York corporation, as trustee (the
"Trustee").
Intending to be legally bound hereby, each party agrees as follows
for the benefit of the other party and for the equal and ratable benefit of the
Holders of the Company's Series A Registered Subordinated Debentures.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
Subsidiary. For purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Board of Managers" means the Managers of the Company or any
committee of that Board duly authorized to act for it hereunder.
"Business Day" means a day that is not a Legal Holiday.
"Capital Stock" means any and all shares, interests,
participations, rights or other equivalents (however designated) of stock or
equity interest.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to the applicable provisions hereof and
thereafter means any such successor.
"Debentures" means the Series A Registered Subordinated
Debentures, issued under this Indenture, in two maturities as follows: October
31, 1998 and June 30, 2001, as amended or supplemented from time to time
pursuant to the terms of this Indenture; "Debenture" means any one of such
Debentures.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Holder" or "Debentureholder" means the Person in whose name a
Debenture is registered on the Debenture Register.
"Indebtedness" means, with respect to any Person: (i)(A) all
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indebtedness of such person for borrowed money, (B) all indebtedness of such
person which is evidenced by a note, debenture, bond or other similar instrument
(including capitalized lease and purchase money obligations), and (C) all
indebtedness (including capitalized lease obligations) incurred, assumed or
given in the acquisition (whether by way of purchase, merger or otherwise) of
any business, real property, personal property or other assets (except assets
required in the ordinary course of the acquiror's business); (ii) any
indebtedness of others described in the preceding clause which such Person has
guaranteed or for which it acts as a surety is otherwise liable; and (iii) any
amendment, renewal, extension or refunding of any Indebtedness referred to in
clauses (i) and (ii) above.
"Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Maturity" means any of the four maturities of Debentures issued
under this Indenture.
"Manager" means any of the persons designated in the Company's
Operating Agreement to manage the affairs of the Company.
"Managers' Certificate" means a certificate signed by two
Managers.
"Managers' Resolution" means action duly taken by the Board of
Managers.
"Opinion of Counsel" means a written opinion from legal counsel
who may be counsel for the Company or other counsel and who shall be acceptable
to the Trustee.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, entity,
trust, unincorporated organization or government or other agency or political
subdivision thereof.
"principal" of a debt security means the principal of the security
plus the premium, if any, on the security.
"Responsible Officer", when used with respect to the Trustee,
means any officer of the Trustee assigned by the Trustee to administer its
corporate trust business.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means a corporation, limited liability company, or
any other entity, a majority of whose voting stock or ownership interest is
owned by the Company or a Subsidiary. Voting stock is Capital Stock having
voting power under ordinary circumstances to
2
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elect directors, managers or persons having similar functions.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code 77aaa-
77bbbb) as in effect on the date this Indenture was executed, provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent provided by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and thereafter means the successor.
"United States" means the United States of America.
SECTION 1.02 Other Definitions.
Term Defined in Section
"Bankruptcy Law" 6.01
"Custodian" 6.01
"Debenture Payment" 10.02
"Debenture Register" 2.03
"Defaulted Interest" 2.13
"Event of Default" 6.01
"Interest Payment Date" 2.04
"Legal Holiday" 11.06
"Paying Agent" 2.03
"Registrar" 2.03
"Proceeding" 10.02
"Restricted Payments" 4.04
"Senior Indebtedness" 10.01
"U.S. Government Obligations" 8.01
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Debentures.
"indenture security holder" means a Debentureholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any
other obligor on the Debentures.
3
<PAGE>
All other terms in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rules have the
meanings assigned to them therein.
4
<PAGE>
SECTION 1.04. Acts of Holders. (a) Any request, demand
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by an agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of Holders signing such instrument or instruments. Subject to the
provisions of Article VII hereof, proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and conclusive in favor of the Trustee and the Company, if made
in the manner provided in this Section.
(b) The fact and date of the execution by any Person of such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any such manner which the Trustee deems sufficient.
(c) The ownership of Debentures shall be proved by registration
on the Debenture Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Debenture shall bind every
future Holder of the same Debenture and the Holder of every Debenture issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Debenture.
(e) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Company may, at its option, by or pursuant to a Managers' Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the
5
<PAGE>
purposes of determining whether Holders of the requisite proportion of
outstanding Debentures have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the outstanding Debentures shall be computed as of such record
date; provided that no such request, demand, authorization, direction, notice,
consent, waiver or other Act by the Holders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.
SECTION 1.05. Rules of Construction. Unless the context otherwise
requires: (i) a term has the meaning assigned to it; (ii) an accounting term not
otherwise defined has the meaning assigned to it in accordance with generally
accepted accounting principles; (iii) "or" is not exclusive; and (iv) words in
the singular include the plural, and words in the plural include the singular.
ARTICLE TWO
THE DEBENTURES
SECTION 2.01. Form and Dating. The Debentures and the Trustee's
certificate of authentication shall be substantially in the forms set forth in
Exhibits A and B, which are incorporated in and form a part of this Indenture.
The Debentures may have notations, legends or endorsements required by law,
securities exchange rule or usage. The Company shall approve the form of the
Debentures and any notation, legend or endorsement on them and its execution
shall constitute conclusive evidence of its approval. Each Debenture shall be
dated the date of its authentication. The terms and provisions contained in the
forms of Debenture annexed hereto as Exhibits A and B shall constitute, and are
hereby expressly made, a part of this Indenture.
SECTION 2.02. Execution and Authentication. Any Manager shall
execute the Debentures for the Company by manual or facsimile
signature. The Company's seal, if any, shall be affixed or
reproduced on the Debentures.
If a Manager whose signature is on a Debenture no longer holds
that office at the time the Trustee authenticates the Debenture, the Debenture
shall be valid nevertheless.
A Debenture shall not be valid until the Trustee manually signs
the certificate of authentication on the Debenture. The signature shall be
conclusive evidence and the only evidence that the Debenture has been
authenticated under this Indenture.
The Trustee shall authenticate Debentures for original issue in
the aggregate principal amount of up to $10,000,000 (but not
more then $4,000,000 of Debentures maturing October 31, 1998; and
$6,000,000 of Debentures maturing June 30, 2001) upon a Managers'
6
<PAGE>
Certificate. The Certificate shall specify the amount and Maturity of Debentures
to be authenticated and the date on which the original issue of Debentures is to
be authenticated. The aggregate principal amount of Debentures outstanding at
any time may not exceed the amount set forth above except as provided in
Sections 2.08 and 2.09.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Debentures. Unless limited by the terms of said
appointment, an authenticating agent may authenticate Debentures whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such authenticating agent. An authenticating
agent has the same rights as an Agent to deal with the Company or an Affiliate.
The Debentures shall be issuable only in registered form without
coupons and only in denominations of $1,000 and in integral multiples thereof.
SECTION 2.03. Registrar and Paying Agent. The Company shall cause
to be kept at the office of the Registrar (the "Registrar"), a register (the
register maintained in such office and in any other office or agency designated
pursuant to Section 2.05 being herein sometimes collectively referred to as the
"Debenture Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Debentures and of
transfers of Debentures. The Company may authorize a Person to pay the principal
of or interest on any Debentures on its behalf (the "Paying Agent"). The Company
may have one or more co-Registrars and one or more additional Paying Agents. The
term "Paying Agent" includes any additional Paying Agent. The Company or any of
its Subsidiaries may act as Paying Agent, Registrar or co-Registrar.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent and shall incorporate the
provisions of the TIA. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, upon notification and delivery of necessary records, the Trustee
shall act as such and shall be entitled to appropriate compensation in
accordance with the provisions of Section 7.07.
The Company initially appoints United States Trust Company of New
York, a New York corporation, as Trustee and Registrar. The
Trustee shall initially act as Paying Agent.
SECTION 2.04. Paying Agent to Hold Money in Trust. The Company
shall require each Paying Agent to agree in writing to hold in
trust for the benefit of the Debentureholders or the Trustee all
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<PAGE>
money held by the Paying Agent for the payment of principal of or interest on
the Debentures, to be held as provided in the TIA, and the Company and the
Paying Agent shall each 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. If the
Company or a Affiliate acts as Paying Agent, it shall segregate the money and
hold it as a separate trust fund. The Company at any time may require a Paying
Agent to pay all money held by it to the Trustee. Upon collection of such
payment by the Trustee the Paying Agent shall have no further liability for the
money delivered to the Trustee. So long as there is no default with respect to
Senior Indebtedness, the Paying Agent after receipt of funds therefor shall pay
interest on the Debentures on each Interest Payment Date, which shall be the
dates specified in the Debentures for the payment of interest.
SECTION 2.05. Debentureholder Lists. The Registrar shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Debentureholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee quarterly, not more than 15
days after each record date for the determination of Debentureholders entitled
to receive payments of interest and at such other times as the Trustee may
request in writing, within 30 days after the receipt by the Company of any such
request, a list, in such form and as of such date as the Trustee may reasonably
require, of the names and addresses of Debentureholders.
SECTION 2.06. Access of Information to Debentureholders. Within
-----------------------------------------
five Business Days after the receipt by the Trustee of a written application by
any Debentureholder stating that the applicant desires to communicate with other
Debentureholders with respect to such holders' rights under this Indenture or
under the Debentures, and accompanied by a form of proxy or other communication
which such applicant proposes to transmit, and by reasonable proof that each
such applicant has owned a Debenture for a period of at least six months
preceding the date of such application, the Trustee shall, at its election after
notification to the Company, either:
(a) afford to such applicant reasonable access to all
information in the possession of the Trustee as to the names and
addresses of the Debentureholders; or
(b) inform such applicant as to the approximate number of
Debentureholders according to the most recent information so furnished or
received by the Trustee, and as to the approximate cost of mailing to such
Debentureholders the form of proxy or other communication, if any, specified in
such application.
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If the Trustee shall elect not to afford such applicant access to
such information, the Trustee shall, upon the written request of such applicant,
mail to all the Debentureholders whose names and addresses appear in the
information preserved at the time by the Registrar in accordance with Section
2.05 copies of the form of proxy or other communication which is specified in
the request, with reasonable promptness after a tender to the Trustee of the
material to be mailed and of payment, or provision for the payment, of the
reasonable expenses of such mailing, unless within five Business Days after such
tender, the Trustee shall mail to such applicant and file with the SEC, together
with a copy of the material to be mailed, a written statement to the effect
that, in the opinion of the Trustee, such mailing would be contrary to the best
interests of the Debentureholders or would be in violation of applicable law.
Such written statement shall specify the basis of such opinion.
The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss.312.
SECTION 2.07. Transfer and Exchange. Where a Debenture is
presented to the Registrar or co-Registrar with a request to register a
transfer, the Registrar shall register the transfer as requested if its
requirements for such transaction are met. Where Debentures of one Maturity are
presented to the Registrar or a co- Registrar with a request to exchange them
for an equal principal amount of Debentures of other denominations of the same
Maturity, the Company shall execute, and the Trustee shall authenticate and
deliver, the Debentures which the Holder making the exchange is entitled to
receive. Debentures of one Maturity may not be exchanged for Debentures of
another Maturity. To permit transfers and exchanges, upon surrender of any
Debenture for registration of transfer at the office or agency maintained
pursuant to Section 2.03, the Company shall execute and the Trustee shall
authenticate and deliver Debentures to be issued upon transfer or exchange. If
so requested by the Registrar, all Debentures presented for exchange or
registration of transfer shall be duly endorsed or shall be accompanied by a
written instrument of transfer in form satisfactory to the Registrar, duly
executed by the registered owner or by his attorney duly authorized in writing.
Any exchange or transfer shall be without charge to the Debentureholder except
that the Company may require payment from the Debentureholder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto. The Company shall not be required (i) to issue, register the
transfer of or exchange any Debenture during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Debentures selected for redemption under Section 3.03 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Debenture so selected for
9
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redemption in whole or in part, except the unredeemed portion of any Debenture
being redeemed in part.
SECTION 2.08. Replacement Debentures. If a mutilated Debenture is
surrendered to the Registrar or if the Holder of a Debenture claims that the
Debenture has been lost, destroyed or wrongfully taken, in the absence of notice
to the Registrar, the Company or the Trustee that such Debenture has been
acquired by a bona fide purchaser, the Company shall issue and the Trustee shall
authenticate a replacement Debenture if the requirements of the Company, the
Trustee and the Registrar for such transaction are met. The Trustee and the
Registrar may require security or indemnity which shall be sufficient in the
judgment of the Trustee and the Registrar, the Company to and the Trustee to
save each of them and any agent of any of them harmless. The Company may charge
such Holder for its expenses in replacing such Debenture. Every replacement
Debenture is an additional obligation of the Company. In case any such
mutilated, destroyed, lost or stolen Debenture has become or is about to become
due and payable, the Company in its discretion may, instead of issuing a new
Debenture, pay such Debenture. Upon the issuance of any Debenture under this
Section, the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith. The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Debentures.
SECTION 2.09. Outstanding Debentures. Debentures outstanding at
any time are all Debentures authenticated by the Trustee except for those
cancelled by it, those delivered to it for cancellation, and those described in
this Section 2.09. A Debenture does not cease to be outstanding because the
Company or one of its Subsidiaries holds the Debenture.
If a Debenture is replaced pursuant to Section 2.08, it ceases to
be outstanding unless the Trustee or the Registrar receives proof satisfactory
to it that the replaced Debenture is held by a bona fide purchaser.
If the Paying Agent (other than the Company or Affiliate) holds on
a redemption date or maturity date money sufficient to pay Debentures payable on
that date, then on and after that date such Debentures shall be deemed to be no
longer outstanding and interest on them shall cease to accrue.
SECTION 2.10. Treasury Debentures. In determining whether the
Holders of the required amount of Debentures have concurred in any
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Act, and for the purpose of calculating and making payments of interest and
selecting Debentures for redemption, Debentures owned by the Company or an
Affiliate shall be disregarded, except that for the purposes of determining
whether the Trustee shall be protected in relying on any Act, only Debentures
the Trustee actually knows are so owned shall be so disregarded.
SECTION 2.11. Temporary Debentures. Until definitive Debentures
are ready for delivery, the Company may prepare and execute and the Trustee
shall authenticate temporary Debentures. Temporary Debentures shall be
substantially in the form of definitive Debentures but may have variations that
the Company considers appropriate for temporary Debentures. Without unreasonable
delay, the Company shall prepare and execute and the Trustee shall authenticate
definitive Debentures in exchange for temporary Debentures. Until such exchange,
temporary Debentures shall be entitled to the same rights, benefits and
privileges as definitive Debentures.
SECTION 2.12. Cancellation. All Debentures surrendered for
payment, redemption or registration of transfer shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and shall be promptly
canceled by it. The Company may at any time deliver to the Trustee for
cancellation any Debentures previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Debentures
so delivered shall be promptly canceled by the Trustee. The Trustee and no one
else shall cancel and may destroy any Debentures surrendered for cancellation
and deliver a certificate of any such destruction to the Company unless the
Company instructs the Trustee in writing to deliver the Debentures to the
Company. The Company may not issue new Debentures to replace, or reissue
Debentures that it has (i) paid or redeemed or (ii) purchased or otherwise
acquired and delivered to the Trustee for cancellation.
SECTION 2.13. Defaulted Interest. Any interest on any Debenture
which is payable, but is not punctually paid or duly provided for, on any
Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease
to be payable to the Debentureholder on the relevant Interest Payment Date by
virtue of having been such Debentureholder, and such Defaulted Interest may be
paid by the Company, at its election in each case, as provided in clause (1) or
(2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Debentures are registered at the
close of business on a Special Record Date (the "Special Record Date") for the
payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest
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proposed to be paid on each Debenture and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the Persons entitled to such Defaulted Interest as
in this clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Debentureholder at
his address as it appears in the Debenture Register, not less than 10 days prior
to such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the Debentures
are registered at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Debentures may be listed or any quotation
service on which the Debentures may be quoted, as applicable, and upon such
notice as may be required by such exchange or quotation service, if after notice
given by the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Debenture delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Debenture shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Debenture.
SECTION 2.14. CUSIP Numbers. The Company in issuing the Debentures
may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee
shall use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Debentures or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Debentures, and any such redemption shall
not be affected by any
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defect in or omission of such numbers.
SECTION 2.15. Persons Deemed Owners. Prior to due presentment of a
Debenture for registration of transfer, the Company, the Trustee and any agent
of the Company or the Trustee may treat the Person in whose name such Debenture
is registered as the owner of such Debenture for the purpose of receiving
payment of principal of (and premium, if any) and (subject to Section 2.13)
interest on such Debenture and for all other purposes whatsoever, whether or not
such Debenture be overdue, and neither the Company, the Trustee nor any agent of
the Company or the Trustee shall be affected by notice to the contrary.
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ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee. The Debentures may be redeemed
at any time after six months after issuance and during the one year period
thereafter, in whole or in part, at the redemption price(s) set forth in Section
5 of the Debentures. The Trustee may select for redemption portions of the
principal amount of Debentures that have denominations larger than $1,000.
Debentures and portions of them it selects shall be in amounts of $1,000 or
integral multiples of $1,000. If the Company elects to redeem Debentures, it
shall notify the Trustee in writing of the redemption date, the Maturity or
Maturities to be redeemed, and the principal amount of each Maturity of
Debentures to be redeemed. In the case of any such redemption, the Company shall
deliver to the Trustee a Managers' Certificate stating that such redemption will
comply with the provisions for redemption contained herein and in the
Debentures.
The Company shall give each notice provided for in this Section
3.01 at least 45 days before the redemption date (except that the Trustee may in
its sole discretion waive such notice period at any time).
SECTION 3.02. Selection of Debentures to be Redeemed. If less
--------------------------------------
than all the Debentures of any Maturity are to be redeemed, the Trustee shall
not more than 45 days prior to the redemption date select the Debentures to be
redeemed by such method as the Trustee shall deem fair and appropriate or, if
the Debentures are listed on a national securities exchange, in accordance with
the rules of such exchange. The Trustee shall make the selection from Debentures
outstanding and not previously called for redemption. Provisions of this
Indenture that apply to Debentures called for redemption also apply to portions
of Debentures called for redemption.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
than 90 days before a redemption date, the Company shall mail a notice of
redemption by first-class mail to each Holder of Debentures to be redeemed. The
notice shall identify the Debentures to be redeemed and shall state: (i) the
redemption date; (ii) the redemption price and accrued interest, if any; (iii)
the name and address of the Paying Agent; (iv) that Debentures called for
redemption must be surrendered to the Paying Agent to collect the redemption
price and accrued interest, if any; (v) that, unless the Company defaults in
making the redemption payments, interest on Debentures called for redemption
ceases to accrue on and after the redemption date and the only remaining right
of the Holders is to receive payment of the redemption price
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and accrued interest upon surrender to the Paying Agent of the Debenture to be
redeemed; (vi) if less than all the outstanding Debentures are to be redeemed,
the identification (and, in the case of partial redemption of any Debentures,
the principal amounts) of the particular Debentures to be redeemed; (vii) the
CUSIP number, if any. At the Company's request and expense, the Trustee shall
give the notice of redemption to the Holders of Debentures as their names and
addresses appear in the information preserved at the time by the Registrar in
accordance with Section 2.05 in the Company's name.
SECTION 3.04. Effect of Notice of Redemption. Once a notice of
redemption is mailed, Debentures called for redemption become due and payable on
the redemption date and at the redemption price. Upon surrender to the Paying
Agent, such Debentures shall be paid at the redemption price, plus accrued
interest to the redemption date, but interest installments for which the
Interest Payment Date is on such redemption date will be payable to the Holders
of record at the close of business on the relevant record dates referred to in
the Debentures.
SECTION 3.05. Deposit of Redemption Price. At least one Business
Day prior to the redemption date, the Company shall deposit with the Paying
Agent (or if the Company is its own Paying Agent, shall segregate and hold in
trust) immediately available funds sufficient to pay the redemption price of,
and accrued interest on, all Debentures to be redeemed on that date (except if
the redemption date shall be an Interest Payment Date), in which event the
interest due on such date shall also be paid.
SECTION 3.06. Debentures Redeemed in Part. Upon surrender of a
Debenture that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder, at the expense of the Company, a new
Debenture of the same Maturity equal in principal amount to the unredeemed
portion of the Debenture surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Debentures. The Company shall pay the
principal of and interest on the Debentures on the dates and in the manner
provided in the Debentures. An installment of principal or interest shall be
considered paid on the date due if the Paying Agent (other than the Company or
Affiliate) holds on that date money designated for and sufficient to pay the
installment. The Company shall deposit with the Paying Agent immediately
available funds sufficient to pay the principal of or interest on the Debentures
at least one Business Day prior to the dates provided in
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the Debentures. In the event the Company acts as Paying Agent it shall segregate
the funds to be used for payment in a separate account, which funds will be held
in trust for the benefit of Debentureholders.
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The Company shall pay interest on overdue principal and interest
on overdue installments of interest, to the extent lawful, at the rate per annum
borne by the Debentures.
SECTION 4.02. SEC Reports. Within 15 days after the Company files
with the SEC copies of its annual reports and other information, documents and
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) which it is required to file with the SEC
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Company shall file the same with the Trustee. The Company also shall comply with
the other provisions of TIA ss. 314(a).
SECTION 4.03. Compliance Certificate. The Company shall deliver to
the Trustee within 45 days after the end of each fiscal quarter a Managers'
Certificate stating that a review of the activities of the Company has been made
under the supervision of the signing Manager with a view to determining whether
a Default or Event of Default has occurred and whether or not the signers know
of any Default by the Company in performing any of its obligations under this
Indenture. If they do know of such a Event of Default or Default, the
certificate shall describe all such Events of Default or Defaults, their status
and what action the Company is taking or proposes to take with respect thereto.
Upon becoming aware of any Default or Event of Default, the Company shall
deliver a Managers' Certificate to the Trustee specifying the Default or Event
of Default, its status and the action the Company proposes to take with respect
thereto.
SECTION 4.04. Limitation on Dividends or Distributions and
Repurchase of Ownership Interests. The Company shall not declare or pay any
dividend or make any distribution on its ownership interests or to its owners or
purchase, redeem or otherwise acquire or retire for value, or permit any
Subsidiary to purchase or otherwise acquire for value, any ownership interests
of the Company or any Subsidiary (collectively, "Restricted Payments") if, at
the time of such Restricted Payment, or after giving effect thereto, (i) an
Event of Default shall have occurred and be continuing, or (ii) a Default shall
occur as a result thereof; provided, however, that the provisions of this
limitation on dividends and distributions shall not prevent (A) the payment of
any dividend or distribution, within 60 days after the date of declaration
thereof, if at said date of declaration such payment complied with the
provisions of this limitation on dividends or distributions, or (B) the
acquisition or retirement of any of the Company's ownership interests by
exchange for, or out of the proceeds of the sale of, its ownership interests.
SECTION 4.05. Pari Passu Indebtedness. There shall be no
restriction on the amount or type of Indebtedness of the Company
which may be pari passu with (i.e. having no priority of payment
over and not subordinated in right of payment to) or subordinate to
the Debentures.
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ARTICLE FIVE
SUCCESSOR COMPANY
SECTION 5.01. When the Company May Merge, etc. The Company shall
not consolidate with or merge into any other Person or convey, transfer or lease
its properties and assets substantially as an entirety to any Person, and the
Company shall not permit any Person to consolidate with or merge into the
Company or convey, transfer or lease its properties and assets substantially as
an entirety to the Company, unless (i) such other Person is a corporation or
limited liability company organized or existing under the laws of the United
States or a state thereof or the District of Columbia, (ii) if the Company is
not the surviving person in such transaction, such surviving person (other than
the Company) expressly assumes by supplemental indenture executed and delivered
to the Trustee, in form satisfactory to the Trustee, all the obligations of the
Company under the Debentures, this Indenture and the other agreements related
thereto, (iii) immediately after such transaction no Default or Event of Default
exists, and (iv) the Company has delivered to the Trustee a Managers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or transfer and such supplemental indenture comply with this Indenture
and that all conditions precedent herein provided for have been complied with.
Thereafter all such obligations of the predecessor shall terminate unless
otherwise specifically provided to the contrary.
ARTICLE SIX
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" occurs
if:
(1) the Company defaults in the payment of interest on any
Debenture when the same becomes due and payable and the default continues for a
period of 30 days, whether or not such payment shall be prohibited by the
provisions of Article Ten;
(2) the Company defaults in the payment of principal of any
Debenture when the same becomes due and payable at maturity, upon redemption of
otherwise, whether or not such payment shall be prohibited by the provisions of
Article Ten;
(3) the Company fails to comply with any of its other
agreements in the Debentures or this Indenture and the default
continues for the period and after the notice specified below;
(4) the Company pursuant to or within the meaning of any
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Bankruptcy Law: (A) commences a voluntary case or proceeding, (B) consents to
the entry of an order for relief against it in an involuntary case or
proceeding, (C) consents to the appointment of a Custodian (as defined herein)
of it or for all or substantially all of its property, or (D) makes a general
assignment for the benefit of its creditors;
(5) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (A) is for relief against the Company in
an involuntary case or proceeding, (B) appoints a Custodian of the Company or
for all or substantially all of its property, or (C) orders the liquidation of
the Company, and in each case the order or decree remains unstayed and in effect
for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
A default under clause (3) is not an Event of Default until the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Debentures 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". If the Holders of 25% in principal amount of the
outstanding Debentures request the Trustee to give such notice on their behalf,
the Trustee shall do so.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(4) or (5)) occurs and is continuing,
the Trustee by notice to the Company or the Holders of at least 25% in principal
amount of the outstanding Debentures by notice to the Company and the Trustee,
may (but shall not be obligated to) declare the principal of and all accrued
interest on all the Debentures to be due and payable immediately. Upon such
declaration such principal and interest shall be due and payable immediately. If
an Event of Default specified in Section 6.01(4) or (5) occurs, all unpaid
principal and accrued interest on the Debentures then outstanding shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Debentureholder. The Holders of a majority
in principal amount of the outstanding Debentures by notice to the Trustee may
rescind an acceleration and its consequences if all existing Events of Default
have been cured or waived, and the Company has deposited with the Trustee a sum
sufficient to pay all overdue interest, the principal of (and premium, if any,
on) any Debentures which have become due otherwise than by such declaration of
acceleration and interest thereon at
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the rate borne by the Debentures, interest upon overdue interest at the rate
borne by the Debentures (to the extent that payment of such interest is lawful)
and all sums paid or advanced by the Trustee and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
except nonpayment of principal or interest that has become due solely because of
the acceleration, provided that no Default can be rescinded if the Default is in
respect of a covenant or provision hereof which under Section 9.02 cannot be
modified or amended without the consent of each Debentureholder affected, or if
the rescission would conflict with any judgment or decree. No such rescission
shall affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of or interest on the Debentures
or to enforce the performance of any provision of the Debentures or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Debentures or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Debentureholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. Subject to Sections 6.07
and 9.02, the Holders of a majority in principal amount of the outstanding
Debentures by notice to the Trustee may waive a past Default and its
consequences, except a Default under Section 6.01(1) or (2). When a Default is
so waived, it shall be deemed cured and ceases.
SECTION 6.05. Control by Majority. The Holders of a majority in
principal amount of outstanding Debentures 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 the Trustee; provided, however: (i)
such direction shall not be in conflict with any rule of law or with this
Indenture; (ii) the Trustee shall have the right to decline to follow any such
direction if the Trustee, being advised by counsel, determines that the action
so directed may not lawfully be taken or if the Trustee in good faith shall
determine that the proceedings so directed would involve it in personal
liability; and (iii) the Trustee may take any action deemed proper by the
Trustee which is not inconsistent with such direction. In the event that the
Trustee takes any action or follows any direction pursuant to this
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Indenture, the Trustee shall be entitled to indemnification satisfactory to it
in its sole discretion against all risk, loss or expense caused by taking such
action or following such direction.
SECTION 6.06. Limitation of Suits. A Debentureholder may not
pursue any remedy with respect to this Indenture or the Debentures unless: (i)
the Holder gives to the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in principal amount of the outstanding
Debentures make a written request to the Trustee to pursue the remedy; (iii)
such Holder or Holders offer and, if requested, provide to the Trustee indemnity
and security satisfactory to the Trustee against any loss, liability or expense;
(iv) the Trustee does not comply with the request within 60 days after receipt
of the request and the offer and, if requested, provision of indemnity and
security; and (v) during such 60-day period the Holders of a majority in
principal amount of the Debentures do not give the Trustee a direction
inconsistent with such request.
A Debentureholder may not use this Indenture to prejudice the
rights of another Debentureholder or to obtain a preference or priority over
another Debentureholder.
SECTION 6.07. Rights of Holders to Receive Payment. Subject to
Article Ten and notwithstanding any other provisions of this Indenture, the
right of any Holder of a Debenture to receive payment of principal of and
interest on the Debenture on or after the respective due dates expressed in the
Debenture, 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, except as to the payment of Defaulted Interest as provided in
Section 2.13 hereof or a postponement of an interest payment consented to as
provided in clause (ii) of Section 9.02.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
in payment of interest or principal specified in Section 6.01(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, together with interest on overdue
principal and, to the extent that the payment of such interest is lawful,
interest on overdue installments of interest.
SECTION 6.09. Trustee May File Proof of Claim. The Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions authorized under the TIA in order to have the claims of
the Trustee (including any claim for compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and any predecessor Trustee and
the
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Debentureholders allowed in any judicial proceedings relative to the Company,
its creditors or its property. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Debentureholder any plan of reorganization, arrangement, adjustment or
composition affecting the Debentures or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Debentureholder in
any such proceedings.
SECTION 6.10. Priorities. If the Trustee collects any money
pursuant to this Article Six, it shall pay out the money in the following order,
at the date or dates fixed by the Trustee and, in case of the distribution of
such money on account of principal (or premium, if any) or interest, upon
presentation of the Debentures and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid: (i) first, to the
Trustee and any predecessor Trustee for costs and expenses of collection of such
monies and for compensation payable to the Trustee or its agents and counsel and
all other expenses, liabilities, advances and other amounts incurred, made or
due under Section 7.07; (ii) second, to holders of Senior Indebtedness of the
Company to the extent required by Article Ten; (iii) third, to Debentureholders
for amounts due and unpaid on the Debentures for principal and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Debentures for principal and interest, respectively; and
(iv) fourth, to the Company or any person or persons determined to be entitled
thereto. The Trustee may fix a record date and payment date for any payment to
Debentureholders pursuant to this Section.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as 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 and expenses
against any party litigant in the suit, having due regard for the merits and
good faith of the claims or defenses made by the party litigant. This Section
6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to
Section 6.07 or a suit by Holders of more than 10% in principal amount of the
outstanding Debentures.
SECTION 6.12. Restoration of Rights and Remedies. If the Trustee
or any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company,
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the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
In connection with any litigation or arbitration under and
pursuant to the terms of this Indenture between the Company and a
Debentureholder, the prevailing party in any such proceeding shall be entitled
in addition to any award or judgment to recover costs of litigation, including
reasonable attorneys' fees and expenses.
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
The duties and responsibilities of the Trustee shall be as
provided by the TIA. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default; (i) the
Trustee need perform only those duties that are specifically set forth in this
Indenture and no others and the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and (ii) 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;
in the case of any certificates or opinions which by any provision of this
Indenture are specifically required to be furnished to the Trustee, the Trustee,
however, shall examine the certificates and opinions submitted in accordance
with Section 11.03 to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that: (i) this paragraph does not limit the effect of
paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes or
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omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05.
(d) The Trustee may refuse to perform any duty or exercise any
right or power or risk its own funds or otherwise incur any financial liability
unless it receives indemnity satisfactory to it against any and all loss,
liability or expense.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
SECTION 7.02. Rights of Trustee. Subject to Section 7.01:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting 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
a Managers' Certificate or an Opinion of Counsel, which shall conform with the
provisions of Section 11.04. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such certificate or opinion.
(c) The Trustee may act through 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.
(e) The Trustee may consult with counsel of its own choosing and
the advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect to any action
taken, omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders of the Debentures, pursuant to the provisions of
this Indenture, unless such Holders shall have offered to the Trustee security
and indemnity, satisfactory to the Trustee in its sole discretion, against all
costs, expenses and liabilities which might to incurred by the
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Trustee therein or thereby.
(g) The Trustee shall not be obligated to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture or any other paper or document; provided, however, the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by an agent or attorney.
Nothing contained in this Indenture shall create any liability to the Trustee in
the event it elects to make or not to make a further inquiry or investigation to
which it is entitled as aforesaid.
(h) The Trustee may conclusively rely as to the identity
and addresses of Holders and other matters contained therein on the Debenture
Register maintained by the Registrar pursuant to Section 2.03 and shall not be
affected by notice to the contrary.
(i) The Trustee may have separate counsel of its own
choosing, and the Company shall pay the fees and expenses of such
counsel.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Debentures
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not the Trustee. Any Agent may do the same with like
rights. The Trustee, however, must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Debentures; it shall not be accountable for the Company's
use of the proceeds from the Debentures, or any money paid to the Company or
upon the Company's direction under any provision hereof, it shall not be
responsible for the use or application of any money received by any Paying Agent
other than the Trustee and, it shall not be responsible for any statement of the
Company in this Indenture or any document issued in connection with the sale of
the Debentures or any statement in the Debentures other than its certificate of
authentication, if any, or in any prospectus used in connection with the sale of
Debentures, other than statements provided in writing by the Trustee for use in
such prospectus.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall
mail to each Debentureholder notice of the Default within 90 days
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after it occurs, or if it becomes known to the Trustee after such 90 days, as
soon as practicable after it becomes known to the Trustee. Except in the case of
a Default in payment of principal of or interest on any Debenture or any amounts
due on redemption, the Trustee may withhold the notice if and so long as the
board of directors of the Trustee, the executive or any trust committee of such
board and/or Responsible Officers of the Trustee in good faith determine(s) that
withholding the notice is in the interest of Debentureholders. The Trustee shall
not be charged with knowledge of any Event of Default under Section 6.01(3) or
any event which with notice or lapse of time or both would constitute such an
Event of Default unless written notice thereof shall have been given to a
Responsible Officer of the Trustee by the Company, any Paying Agent, any
Debentureholder or any agent of any Debentureholder.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days after
each calendar quarter, beginning with the year ended December 31, 1996, the
Trustee shall mail to each Debentureholder a brief report dated as of such
calendar quarter that complies with TIA ss. 313(a). The Trustee also shall
comply with TIA ss. 313(b), (c) and (d).
A copy of each such report at the time of its mailing to
Debentureholders shall be filed by the Company with the SEC and each stock
exchange on which the Debentures are listed. The Trustee shall furnish the
Company with copies of such reports sufficiently in advance of its mailing to
Debentureholders to permit the Company to make such filings in a timely manner.
The Company shall notify the Trustee when the Debentures are listed on any stock
exchange.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to
the Trustee annually such compensation for its services as the Company and the
Trustee shall from time to time agree in writing. The Trustee's compensation
hereunder shall not be limited by any law on compensation relating to the
trustee of an express trust. The Company shall reimburse the Trustee upon
request for reasonable disbursements, advances and expenses incurred or made by
it in connection with its duties hereunder (including the reasonable
compensation and the expenses and disbursements of its agents and counsel). The
Company shall indemnify each of the Trustee and any predecessor Trustee for, and
hold them harmless against, any loss or liability or expense incurred by it in
connection with the administration of this trust and the performance of its
duties hereunder, including the expenses and attorneys' fees of defending itself
against any claim of liability arising hereunder. The Company shall defend any
claim against the Trustee of which the Company has notice. The Trustee may have
separate counsel, and if it does, the Company shall pay the reasonable fees and
expenses of such counsel. The Company need not reimburse any expenses or
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indemnify against any loss or liability incurred by the Trustee through the
Trustee's negligence or bad faith.
The obligations of the Company under this Section 7.07 to
indemnify and compensate the Trustee to pay or reimburse the Trustee for such
expenses, disbursements, and advances shall constitute Indebtedness. To secure
the Company's payment obligations in this Section, the Trustee shall have a lien
prior to the Debentures on all money or property held or collected by the
Trustee, except that held in trust to pay principal of or interest on particular
Debentures.
When the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in Section 6.01(4) or (5), the
expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of the Indenture.
SECTION 7.08. Replacement of Trustee. A resignation or removal of
the Trustee and the 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 outstanding Debentures may remove the
Trustee by so notifying the Trustee and the Company, and may appoint a successor
Trustee with the Company's consent. The Company may remove the Trustee if: (i)
the Trustee fails to comply with Section 7.10; (ii) the Trustee is adjudged a
bankrupt or an insolvent; (iii) a receiver or other public officer takes charge
of the Trustee or its property; or (iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately thereafter,
the retiring Trustee shall, upon payment of its charges, transfer all property
held by it as Trustee to the successor Trustee (subject to the lien provided for
in Section 7.07), the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have all the rights, powers,
and duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Debentureholder.
If a successor Trustee does not take office within 30 days after
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the retiring Trustee resigns or 90 days after the Trustee is removed, the
retiring Trustee, the Company or the Holders of a majority in principal amount
of the outstanding Debentures 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
Debentureholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee, provided, however,
that if the Trustee shall fail to comply with TIA ss. 310(b)(i), only a
Debentureholder who has been a bona fide holder of the Debentures for at least
six months and has requested the Trustee in writing to comply with such
provision may so petition such court.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 7.09. Successor Trustee by Merger, etc. If the Trustee
consolidates with, merges or converts into or transfers all or substantially all
of its corporate trust business to, another corporation, the successor
corporation without any further act shall be the successor Trustee, provided
such corporation shall be otherwise qualified and eligible under this Article.
In case any Debentures shall have been authenticated, but not delivered, by the
Trustee then in office, any successor by merger, conversion or consolidation to
such authenticating Trustee may adopt such authentication and deliver the
Debentures so authenticated with the same effect as if such successor Trustee
had itself authenticated such Debentures.
SECTION 7.10. Eligibility; Disqualification. There shall at all
times be a trustee hereunder which shall be a corporation organized and doing
business under the laws of the United States or of any state thereof authorized
under such laws to exercise corporate trust powers, shall be subject to
supervision or examination by Federal or state authority and shall at all times
have a combined capital and surplus of at least $1,000,000. If such trustee
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervisory or examining authority, then for the purposes
of this Section 7.10, the combined capital and surplus of such trustee shall be
deemed to be its combined capital and surplus as set forth in its most recent
published annual report of condition.
This Indenture shall always have a trustee who satisfies the
requirements of TIA ss. 310(a)(1) and (2).
SECTION 7.11. Preferential Collection of Claims Against the
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Company. The Trustee shall be subject to TIA ss. 311(a), excluding any creditor
relationship arising as provided in TIA ss. 311(b). A Trustee who has resigned
or been removed shall be subject to TIA ss. 311(a) to the extent indicated.
SECTION 7.12. Paying Agents. The Company shall cause each Paying
Agent other than the Trustee to execute and deliver to it and the Trustee an
instrument in which such Agent shall agree with the Trustee, subject to the
provisions of this Section 7.12; (i) that it will hold sums held by it as Agent
for the payment of principal of or interest on the Debentures (whether such sums
have been paid to it by the Company or by any obligor on the Debentures) in
trust for the benefit of Holders of the Debentures; (ii) that it will at any
time during the continuance of any Event of Default, upon written request from
the Trustee, deliver to the Trustee all sums so held in trust by it; (iii) that
it will give the Trustee written notice within three Business Days of any
failure of the Company (or by any obligor on the Debentures) in the payment of
any installment of the principal of or interest on the Debentures when the same
shall be due and payable; and (iv) that it will comply with the provisions of
the TIA applicable to it.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of the Company's Obligations. The
Company may terminate all of its obligations under the Debentures and this
Indenture if all Debentures previously authenticated and delivered (other than
destroyed, lost or stolen Debentures which have been replaced or paid) have been
delivered to the Trustee for cancellation or if:
(1) the Debentures which have not theretofore been
delivered to the Trustee for cancellation are due and payable or mature within
one year or all of them are to be called for redemption within one year under
arrangement satisfactory to the Trustee for giving the notice of redemption;
(2) the Company irrevocably deposits in trust with the
Trustee money or direct non-callable obligations of, or non-callable obligations
of a Person controlled or supervised by, or acting as an agency or
instrumentality of, the United States and guaranteed by the United States for
the payment of which guarantee or obligation the full faith and credit of the
United States is pledged ("U.S. Government Obligations"), sufficient to pay,
when due, principal of and interest on the outstanding Debentures to maturity or
redemption, as the case may be, and immediately after making the deposit, the
Company shall give notice of such event to the Debentureholders; provided,
however, that if such irrevocable
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deposit in trust with the Trustee of cash or U.S. Government Obligations is
made, the Company shall have delivered to the Trustee an Opinion of Counsel with
no material qualifications in form and substance satisfactory to the Trustee to
the effect that Holders of the Debentures (i) will not recognize income, gain or
loss for Federal income tax purposes as a result of such deposit (and the
defeasance contemplated in connection therewith) and (ii) will be subject to
Federal income tax on the same amounts and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred, or an applicable favorable ruling to that effect is received from or
published by the Internal Revenue Service;
(3) the Company has paid or caused to be paid all sums then
payable by the Company to the Trustee hereunder as of the date of such deposit;
and
(4) the Company has delivered to the Trustee a Managers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for herein relating to the satisfaction and discharge of this
Indenture have been complied with. The Company's obligations in paragraph 9 of
the Debentures and in Sections 2.03, 2.04, 2.05, 2.07, 2.08, 4.01, 7.07 and
8.03, however, shall survive until the Debentures are no longer outstanding.
Thereafter, the Company's obligations in such paragraph 9 and in Sections 7.07
and 8.03 shall survive.
After such irrevocable deposit and delivery of a Managers'
Certificate and Opinion of Counsel pursuant to this Section 8.01, the Trustee
upon request shall acknowledge in writing the discharge of the Company's
obligations under the Debentures and this Indenture except for those surviving
obligations specified above.
SECTION 8.02. Application of Trust Money. The Trustee shall hold
in trust money and U.S. Government Obligations deposited with it pursuant to
Section 8.01. It shall apply the deposited money through the Paying Agent and in
accordance with this Indenture to the payment of principal of and interest on
Debentures. Money and U.S. Government Obligations so held in trust shall not be
subject to Article Ten.
SECTION 8.03. Repayment to the Company. Subject to Section 7.07,
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 payment of principal or interest that remains unclaimed for two years,
provided such request is made by the Company within one year after the
expiration of such two year period that such money remains unclaimed.
Thereafter, the Company shall have no right to request
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repayment of unclaimed money, and such unclaimed money shall be held and
disposed of by the Trustee in accordance with applicable law. The Trustee and
the Paying Agent shall have no right to request or require that the Company
accept repayment of any unclaimed money.
The Trustee or the Paying Agent, before being required to make any
repayment to the Company of unclaimed money, may at the expense of the Company
mail to each Holder who has failed to claim a payment of interest or principal
which is due, as their names and addresses appear in the information preserved
at the time by the Registrar in accordance with Section 2.05, or cause to be
published, notice that such money remains unclaimed and that, after a date
specified therein (which shall not be less than 30 days from the date of such
mailing), any unclaimed balance of such money then remaining will be repaid to
the Company. Any such notice shall be published in a newspaper printed in the
English language and customarily published at least once a day for at least five
days in each calendar week and of general circulation in New York, New York.
After payment to the Company, Debentureholders entitled to such money must look
to the Company for payment as general creditors unless applicable abandoned
property law designates another person, and all liability of the Trustee or
Paying Agent with respect to such money shall thereupon cease.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company, with the
consent of Trustee, may amend or supplement this Indenture or the Debentures
without notice to or consent of any Debentureholder: (i) to cure any ambiguity,
omission, defect or inconsistency; (ii) to comply with Section 5.01; or (iii) to
make any change that does not adversely affect the rights of any
Debentureholder. The Trustee shall not be obligated to enter into any
supplemental indenture which affects its own rights, duties or immunities under
this Indenture.
SECTION 9.02. With Consent of Holders. The Company, with the
consent of the Trustee, may amend or supplement this Indenture or the Debentures
without notice to any Debentureholder, but with the written consent of the
Holders of at least a majority in principal amount of the outstanding
Debentures. Subject to the immediately succeeding sentence, the Holders of a
majority in principal amount of the outstanding Debentures may waive compliance
by the Company with any provision of this Indenture or the Debentures without
notice to any Debentureholder. Without the consent of each Debentureholder
affected, however, an amendment, supplement or
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waiver, including a waiver pursuant to Section 6.04, may not: (i) reduce the
amount of Debentures whose Holders must consent to an amendment, supplement or
waiver; (ii) reduce the rate of or extend the time for payment of interest on
any Debenture (except that Holders of not less than 75% in principal amount of
all outstanding Debentures may consent, on behalf of the Holders of all of the
outstanding Debentures, to the postponement of any interest payment for a period
not exceeding three years from its due date); (iii) reduce the principal of or
extend the fixed maturity of any Debenture; (iv) waive a default in the payment
of the principal of or interest on, or redemption payment with respect to, any
Debenture, (v) make any Debenture payable in money other than that stated in the
Debenture; (vi) make any change in Article Ten that adversely affects the rights
of any Debentureholder; or (vii) make any change in Sections 6.02, 6.04, 6.05,
6.07 and 6.10 or the third sentence of this Section 9.02 or any change in
Article III which adversely affects the rights of any Debentureholder.
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After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders a notice briefly
describing the amendment.
It shall not be necessary for the consent of the Holders under
this section to approve the particular form of any proposed amendment or
supplement, but it shall be sufficient if such consent approved the substance
thereof.
Upon the request of the Company, accompanied by a resolution of
the Board of Managers or any duly authorized committee thereof, authorizing the
execution of any such supplemental indenture, and upon the filing with the
Trustee of evidence satisfactory to the Trustee of the consent of the
Debentureholders as aforesaid, the Trustee shall join with the Company in
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.03. Execution of Supplemental Indentures. In executing,
or accepting the additional trust created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by
this Indenture, the Trustee shall be entitled to receive, and (subject to
Section 7.01) shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.04. Compliance with Trust Indenture Act. Every
amendment to or supplement of this Indenture or the Debentures
shall comply with the TIA as then in effect.
SECTION 9.05. Revocation and Effect of Consents. Until an
amendment, supplement or waiver becomes effective, a consent to an amendment,
supplement or waiver by a Holder of a Debenture is a continuing consent by the
Holder and every subsequent Holder of that Debenture or portion of that
Debenture that evidences the same debt as the consenting Holder's Debenture,
even if notation of the consent is not made on any Debenture. Any such Holder or
subsequent Holder, however, may revoke the consent as to his Debenture or
portion of a Debenture. Such revocation shall be effective only if the Trustee
receives the notice of revocation before the date the amendment, supplement or
waiver becomes effective. An amendment, supplement or waiver shall become
effective on receipt by the Trustee of written consents from the Holders of the
requisite percentage in principal amount of the outstanding Debentures.
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The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the persons entitled to consent to any indenture
supplemental hereto. If a record date is fixed, the Holders on such record date,
or their duly designated proxies, and only such persons, shall be entitled to
consent to such supplemental indenture, whether or not such Holders remain
Holders after such record date; provided, that unless such consent shall have
become effective by virtue of the requisite percentage having been obtained
prior to the date which is six months after such record date, any such consent
previously given shall automatically and without further action by any Holder be
canceled and of no further effect.
After an amendment, supplement or waiver becomes effective, it
shall bind every Debentureholder unless it makes a change described in any of
clauses (i) through (vii) of Section 9.02.
SECTION 9.06. Notation on or Exchange of Debentures. If an
-------------------------------------
amendment, supplement or waiver changes the terms of a Debenture, the Trustee
may require the Holder of the Debenture to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Debenture about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Debenture shall issue and the
Trustee shall authenticate a new Debenture that reflects the changed terms.
Failure to make the appropriate notation or issue a new Debenture shall not
affect the validity and effect of such amendment, supplement or waiver.
Debentures authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee about the changed terms of such
Debenture or may reflect the changed terms.
SECTION 9.07. Trustee to Sign Amendments, etc. The Trustee may but
need not sign any amendment, supplement or waiver authorized pursuant to this
Article if the amendment, supplement or waiver adversely affects the rights,
duties, liabilities or immunities of the Trustee. The Trustee shall be entitled
to request and receive an indemnity satisfactory to it before signing any
amendment, supplement or waiver.
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Debentures Subordinate to Senior Indebtedness. The
Company covenants and agrees, and each Debentureholder by his
acceptance thereof, likewise covenants and agrees, that, to the
extent and in the manner hereinafter set forth in this Article and
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Section 4.01, the payment of the principal of each and all of the Debentures
(and premium thereon, if any) and interest on each and all of the Debentures is
hereby expressly made subordinate and subject in right of payment to the prior
final and indefeasible payment in full of all Senior Indebtedness. "Senior
Indebtedness" means Indebtedness of the Company outstanding at any time, whether
outstanding on the date hereof or hereafter created, which (i) is secured, in
whole or in part, by any asset or assets owned by the Company or a Subsidiary,
or (ii) arises from unsecured borrowings by the Company from a commercial bank,
institutional lender, a savings bank, a savings and loan association, an
insurance company, a company whose securities are traded in a national
securities market, or any wholly-owned subsidiary of any of the foregoing, or
(iii) arises from unsecured borrowings by the Company from any pension plan (as
defined in ss. 3(2) of the Employee Retirement Income Security Act of 1974, as
amended), or (iv) arises from borrowings by the Company which are evidenced by
commercial paper, or (v) is a guarantee or other liability of the Company of or
with respect to Indebtedness of a Subsidiary of a type described in any of
clause (ii), (iii), (iv) or (v) above or (vi) arises from other loans to the
Company whether secured or unsecured. Senior Indebtedness does not include
Indebtedness which is pari passu with or subordinate to the Debentures.
SECTION 10.02. Payment Over of Proceeds Upon Dissolution, Etc. In
the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company, as such, or to its assets, or (b)
any liquidation, dissolution or other winding up of the Company, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshalling of
assets and liabilities of the Company, then and in any such event specified in
(a), (b) or (c) above (each such event, if any, herein sometimes referred to as
a "Proceeding'), the holders of Senior Indebtedness shall be entitled to receive
final and indefeasible payment in full of all amounts due or to become due on or
in respect of all Senior Indebtedness, or provision shall be made for such final
and indefeasible payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Indebtedness, before the Debentureholders
are entitled to receive any payment or distribution of any kind or character,
whether in cash, property or securities, on account of principal of (or premium,
if any) or interest on the Debentures or on account of any purchase or other
acquisition of Debentures by the Company or any Subsidiary (all such payments,
distributions, purchases and acquisitions herein referred to, individually and
collectively, as a "Debenture Payment"), and to that end the holders of Senior
Indebtedness shall be entitled to receive, for application to the final and
indefeasible payment thereof, any
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Debenture Payment which may be payable or deliverable in respect of the
Debentures in any such Proceeding.
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In the event that, notwithstanding the foregoing provision of this
Section, (a) the Trustee or the Debentureholder shall have received any
Debenture Payment before all Senior Indebtedness is paid in full or final and
indefeasible payment thereof provided for in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Indebtedness and (b)
if the event described in (a) above shall, at or prior to the time of such
Debenture Payment, have been made known to the Trustee or, as the case may be,
such Debentureholder, then and in such event such Debenture Payment shall be
held in trust for the benefit of and paid over or delivered forthwith to the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent
or other Person making payment or distribution of assets of the Company for
application to the final and indefeasible payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include a payment or distribution of Capital Stock of the
Company provided for by a plan of reorganization or readjustment authorized by
an order or decree of a court of competent jurisdiction in a reorganization
proceeding under any applicable bankruptcy law or of any other corporation
provided for by such plan of reorganization or readjustment, which Capital Stock
is subordinated in right of payment to all then outstanding Senior Indebtedness
to substantially the same extent as the Debentures are so subordinated as
provided in this Article. The consolidation of the Company with, or the merger
of the Company into, another Person or the liquidation or dissolution or the
Company following the conveyance or transfer of all or substantially all of its
properties and assets as an entirety to another Person upon the terms and
conditions set forth herein shall not be deemed a Proceeding for the purposes of
this Section if the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer such
properties and assets as an entirety, as the case may be, shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the conditions
set forth herein.
SECTION 10.03. No Payment When Senior Indebtedness in Default. In
the event that any Debentures are declared due and payable before their stated
Maturity, then and in such event the holders of the Senior Indebtedness
outstanding at the time such Debentures so become due and payable shall be
entitled to receive payment in full of all amounts due or to become due on or in
respect of all Senior Indebtedness, or provision shall be made for such payment
in cash or cash equivalents or otherwise in a manner satisfactory to the
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holders of such Senior Indebtedness, before the Debentureholders are entitled to
receive any Debenture Payment.
41
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Subject to the last paragraph of this Section 10.03, in the event
and during the continuation of any default in the payment of principal of (or
premium, if any) or interest on any Senior Indebtedness beyond any applicable
grace period with respect thereto, or in the event that any event of default
with respect to any Senior Indebtedness shall have occurred and be continuing
permitting the holders of such Senior Indebtedness (or a trustee on behalf of
the holders thereof) to declare such Senior Indebtedness due and payable prior
to the date on which it would otherwise have become due and payable, unless and
until such default or event of default shall have been cured or waived or shall
have ceased to exist and such acceleration shall have been rescinded or
annulled, or in the event any judicial proceeding shall be pending with respect
to any such default in payment or event of default with respect to Senior
Indebtedness, then no Debenture Payment shall be made.
In the event that, notwithstanding the foregoing, the Company
shall make any Debenture Payment to the Trustee or any Debentureholder
prohibited by the foregoing provisions of this Section, and if the fact that
such Debenture Payment was prohibited shall, at or prior to the time of such
Debenture Payment, have been made known to the Trustee or, as the case may be,
such Debentureholder, then and in such event such Debenture Payment shall be
paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any Debenture
Payment with respect to which Section 10.02 would be applicable.
Notwithstanding anything to the contrary contained in this Section
10.03, unless the holders of Senior Indebtedness or their representative or
representatives shall have accelerated the maturity of such Senior Indebtedness,
the Company may resume payments on the Debentures, and may acquire them, after
120 days following the due date of any payment prevented by the provisions of
this Section 10.03.
SECTION 10.04. Payment Permitted If No Default. Nothing contained
in this Article or elsewhere in this Indenture or in any of the Debentures shall
prevent (a) the Company, at any time except during the pendency of any
Proceeding referred to in Section 10.02 or under the conditions described in
Section 10.03, from making any Debenture Payment, (b) the application by the
Trustee of any money deposited with it hereunder to Debenture Payments or the
retention of any Debenture Payment by the Debentureholders, if, at the time of
such application by the Trustee, it did not have knowledge that such Debenture
Payment would have been prohibited by the provisions of this Article or (c) any
Debentureholders from keeping any Debenture Payment where such Debentureholder
shall have received such Debenture Payment without knowledge of the fact that
such
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Debenture Payment is prohibited hereunder.
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SECTION 10.05. Subrogation to Rights of Holders of Senior
Indebtedness. Subject to the final and indefeasible payment in full of all
amounts due or to become due on or in respect of Senior Indebtedness, or the
provision for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Indebtedness, the Debentureholders shall
be subrogated to the extent of the payments or distributions made to the holders
of such Senior Indebtedness pursuant to the provisions of this Article (equally
and ratably with the holders of all indebtedness of the Company which by its
express terms is subordinated to indebtedness of the Company to substantially
the same extent as the Debentures are subordinated and is entitled to like
rights of subrogation) to the rights of the holders of such Senior Indebtedness
to receive payments and distributions of cash, property and securities
applicable to the Senior Indebtedness until the principal of (and premium, if
any) and interest on the Debentures shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Debentureholders
or the Trustee would be entitled except for the provisions of this Article, and
no payments over pursuant to the provisions of this Article to the holders of
Senior Indebtedness by Debentureholders or the Trustee, shall as among the
Company, its creditors other than holders of Senior Indebtedness and the
Debentureholders, be deemed to be a payment or distribution by the Company to or
on account of the Debentures.
SECTION 10.06. Provisions Solely to Define Relative Rights. The
-------------------------------------------
provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Debentureholders on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Debentures is intended to or
shall (a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Debentureholders, the obligation of the Company,
which is absolute and unconditional (and which, subject to the rights under this
Article of the holders of Senior Indebtedness, is intended to rank equally with
all other general obligations of the Company), to pay to the Debentureholders
the principal of (and premium, if any) and interest on, the Debentures as and
when the same shall become due and payable in accordance with their terms; or
(b) affect the relative rights against the Company of the Debentureholders and
creditors of the Company other than the holders of Senior Indebtedness; or (c)
prevent the Trustee or any Debentureholder from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article of the holders of Senior Indebtedness
to receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Debentureholder.
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SECTION 10.07. Trustee to Effectuate Subordination. Each
Debentureholder by his acceptance thereof authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to effectuate
the subordination provided in this Article and appoints the Trustee his
attorney-in-fact for any and all such purposes.
SECTION 10.08. No Waiver of Subordination Provisions. No right
-------------------------------------
of any present or future holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Debentureholders,
without incurring responsibility to the Debentureholders and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Debentureholders to the holders of Senior Indebtedness, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Indebtedness or
otherwise amend or supplement in any manner Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any
Person liable in any manner for the collection of Senior Indebtedness; and (iv)
exercise or refrain from exercising any rights against the Company and any other
Person.
SECTION 10.09. Notice to Trustee. The Company shall give prompt
written notice to the Trustee of any fact known to the Company which would
prohibit the making of any payment to or by the Trustee in respect to the
Debentures. Notwithstanding the provisions of this Article or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by the Trustee in respect of the Debentures, unless and until the Trustee shall
have received written notice thereof from the Company or a holder of Senior
Indebtedness or from any trustee therefor; and, prior to the receipt of any such
written notice, the Trustee, subject to the provisions of this Indenture, shall
be entitled in all respects to assume that no such facts exist; provided,
however, that if the Trustee shall not have received the notice provided for in
this Section at least two Business Days prior to the date upon which by
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the terms hereof any money may become payable for any purpose (including,
without limitation, the payment of the principal of and premium, if any, or
interest on, or amounts payable upon repurchase of, any Debenture), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
purpose for which such money was received and shall not be affected by any
notice to the contrary which may be received by it within two Business Days
prior to such date.
Subject to the provisions of this Indenture, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee therefor). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
SECTION 10.10. Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment by or on behalf of the Company or
distribution of assets of the Company referred to in this Article, the Trustee,
subject to the provisions of this Indenture, and the Debentureholders shall be
entitled to rely upon any order or decree entered by any court of competent
jurisdiction in which such proceeding is pending, or a certificate of the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Debentureholders, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 10.11. Trustee Not Fiduciary for Holders of Senior
Indebtedness. 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 it
shall in good faith mistakenly pay over or distribute to Debentureholders or to
the Company or to any other
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Person cash, property or securities to which any holders of Senior Indebtedness
shall be entitled by virtue of this Article or otherwise.
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SECTION 10.12. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights. The Trustee in its individual capacity shall
be entitled to all the rights set forth in this Article with respect to any
Senior Indebtedness which may at any time be held by it, to the same extent as
any other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to,
the Trustee under or pursuant to this Indenture.
SECTION 10.13. Article Applicable to Paying Agents. In case at
-----------------------------------
any time any Paying Agent other than the Trustee shall have been appointed by
the Company and be then acting hereunder, the term "Trustee" as used in this
Article shall in such case (unless the context otherwise requires) be construed
as extending to and including such Paying Agent within its meaning as fully for
all intents and purposes as if such Paying Agent were named in this Article in
addition to or in place of the Trustee; provided, however, that Section 10.12
shall not apply to the Company or any Affiliate of the Company if it or such
Affiliate acts as Paying Agent.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered or mailed as
follows:
(a) Notices or communications to the Company or the Trustee shall
be given only by hand delivery or by certified or registered first class mail,
return receipt requested, or by facsimile transmission promptly followed by hand
delivery or certified or registered first class mail, return receipt requested,
as follows:
If to the Company, addressed to:
EAST COAST CAPITAL COMPANY, LLC 110 East 59th Street 6th Floor New
York, New York 10022
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Attention: Norman Dansker, Manager
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If to the Trustee, addressed to:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust, 15th Floor
Any notice or communication to the Company or the Trustee shall be
deemed given on the day delivered and receipted for if delivered by hand, or on
the day the return receipt card is signed on behalf of the Company or the
Trustee if sent by certified or registered mail. The Company or the Trustee by
notice to the other and to Debentureholders may designate additional or
different addresses for subsequent notices or communications.
(b) Notices or communications to a Debentureholder shall be mailed
by first class mail to such Debentureholder at the address which appears on the
registration books of the Registrar and shall be sufficiently given to such
Debentureholder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Debentureholder or
any defect in it shall not affect its sufficiency with respect to other
Debentureholders. If a notice or communication is mailed to a Debentureholder in
the manner provided in this paragraph (b), it is duly given, whether or not the
addressee receives it. If the Company mails a notice or communication to
Debentureholders it shall mail a copy of such notice to the Trustee and each
Agent at the same time.
SECTION 11.03. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee: (i) a Managers'
Certificate in form and substance satisfactory to the Trustee stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed actions have been complied with; and (ii) an Opinion of Counsel in form
and substance satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.04. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include: (i) a statement that the person
making such certificate or opinion has read such covenant or condition; (ii) 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
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are based; (iii) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (iv) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
SECTION 11.05. Rules by Trustee and Agents. The Trustee may
make reasonable rules for action by, or at a meeting of,
Debentureholders. The Registrar or Paying Agent may make
reasonable rules for its functions.
SECTION 11.06. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
City of New York, in the State of New York, or in the city in which the Trustee
administers its corporate trust business. If a payment date or a redemption date
is a Legal Holiday at a place of payment, payment may be made at such place on
the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 11.07. Governing Law. The laws of the State of New
York, without regard to the principles of conflicts of law, shall
govern this Indenture and the Debentures.
SECTION 11.08. No Recourse Against Others. Liabilities of
managers, officers, employees and owners, as such, of the Company
are waived and released as provided in paragraph 14 of the
Debentures.
SECTION 11.09. Successors. All agreements of the Company in
this Indenture and the Debentures shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.10. Duplicate Originals. This Indenture may be
executed in one or more counterparts, each of which shall be deemed
an original but all of which together will constitute one and the
same instrument.
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SECTION 11.11. Separability. In case any provision in this
Indenture or in the Debentures 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.
SIGNATURES
Dated as of March 1, 1996 EAST COAST CAPITAL COMPANY, LLC
By: ___________________________
Name: Norman Dansker
Title: Manager
UNITED STATES TRUST COMPANY
OF NEW YORK
----------------------------
as Trustee
By: _________________________
Name: _______________________
Title:_______________________
STATE OF NEW YORK ) ss.:
NEW YORK COUNTY )
On the _____ day of March, 1996, before me personally came Norman
Dansker, to me known, who, being by me duly sworn, did depose and say that he is
a Manager of East Coast Capital Company, LLC, one of the entities described in
and which executed the foregoing instrument; that he signed by authority of the
Board of Managers and the he signed his name thereto by like authority.
--------------------------
Norman Dansker
STATE OF NEW YORK ) ss.:
NEW YORK COUNTY )
On the _____ day of March, 1996, before me personally came
____________________, to me known, who, being by me duly sworn, did depose and
say that [he--she] is ___________________ of United States Trust Company of New
York, one of the entities described in and which executed the foregoing
instrument; that [he--she] knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and the [he--she] signed [his--her]
name thereto by like authority.
--------------------------
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Exhibit A
FORM OF QUARTERLY PAYMENT DEBENTURE MATURING OCTOBER 31, 1998)
Number R (_______/98) $
EAST COAST CAPITAL COMPANY, LLC
Series A Registered
Subordinated Debenture due October 31, 1998
EAST COAST CAPITAL COMPANY, LLC, a limited liability company duly
organized and existing under the laws of the State of New York (the "Company"),
promises to pay to _____________________ or registered assigns the principal sum
of __________________ Dollars on October 31, 1998, together with interest at 9%
per annum. The Provisions on the back of this certificate are incorporated as if
set forth on the face of the certificate.
Interest Payment Dates:
The first day of each calendar quarter
in arrears
Record Dates:
The last day of the calendar quarter
DATED: ______________________
Authenticated to be one of the Debentures described in the Indenture
referred to herein:
United States Trust Company
Of New York, as Trustee EAST COAST CAPITAL COMPANY, LLC
By: ________________________ By:-----------------
Authorized Signatory Manager
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Exhibit B
(FORM OF QUARTERLY PAYMENT DEBENTURE MATURING JUNE 30, 2001)
Number R (_______/01) $
EAST COAST CAPITAL COMPANY, LLC
Series A Registered
Subordinated Debenture due June 30, 2001
EAST COAST CAPITAL COMPANY, LLC, a limited liability company
duly organized and existing under the laws of the State of New York (the
"Company"), promises to pay to ___________________ or registered assigns the
principal sum of __________________ Dollars on June 30, 2001, together with
interest at 11% per annum. The Provisions on the back of this certificate are
incorporated as if set forth on the face of the certificate.
Interest Payment Dates:
The first day of each calendar quarter
in arrears
Record Dates:
The last day of the calendar quarter
DATED: ______________________
Authenticated to be one of the Debentures described in the Indenture
referred to herein:
United States Trust Company
Of New York, as Trustee EAST COAST CAPITAL COMPANY, LLC
By: ________________________ By:------------------------
Authorized Signatory Manager
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(REVERSE OF DEBENTURE)
Series A Registered
Subordinated Debenture due ___________, 19__
1. Interest. The Company promises to pay interest on the
principal amount of this Debenture at the rate per annum shown on the back of
this certificate. The Company will pay interest quarterly in arrears on the
first day of each calendar quarter of each year.
With respect to Debentures sold by the Company on the date
$1,000,000 or more of Debentures are first approved for issuance (the "First
Closing Date"), interest will accrue from the fifth day following the First
Closing Date. Debentures sold after the First Closing Date shall be deemed sold
on the date the Company receives payment therefor. The first payment of interest
on Debentures shall be due on the first day of the next calendar quarter
following the date of sale of the Debenture; provided, that the first payment of
interest on Debentures sold after the 15th day of the calendar month next
preceding such calendar quarter shall be due on the first day of the immediately
following calendar quarter.
After the first payment date, interest on the Debenture will
accrue from the most recent date to which interest has been paid. Interest will
be computed on the basis of a 360-day year consisting of twelve 30-day months.
The quarterly payment of interest due on the first day of each quarter will be
computed based on the interest rate of the Debenture.
2. Method of Payment. The Company will pay interest on the
Debentures (except defaulted interest) to the persons who are registered holders
of Debentures at the close of business on the 15th day of the calendar month
next preceding the applicable interest payment date. Holders must surrender
Debentures to a Paying Agent to collect principal payments. The Company will pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. The Company may,
however, pay principal and interest by its check payable in such money. It may
mail an interest check to a holder's registered address.
3. Paying Agent and Registrar. United States Trust Company
of New York will initially act as Paying Agent and Registrar and will
authenticate the Debentures. The Company may change any Paying Agent, Registrar
or co-Registrar without notice.
4. Indenture. This Debenture is one of a duly authorized
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series of Debentures issued by the Company under an Indenture dated as of March
1, 1996 (the "Indenture") between the Company and United States Trust Company of
New York, as trustee (the "Trustee"). The term "Debentures" being used herein
refers to all Maturities of Debentures issued under the Indenture. Capitalized
terms herein are used as defined in the Indenture unless otherwise indicated.
Reference is hereby made to the Indenture for a description of the rights,
obligations, duties and immunities of the Trustee and the Debentureholders and
for the terms and conditions upon which the Debentures are and are to be issued.
The Debentures are general unsecured obligations of the Company limited to the
aggregate principal amount of $10,000,000 of which a maximum of $4,000,000 will
have a maturity dated of October 31, 1998 (the "98 Debentures"); and $6,000,000
will have a maturity date of June 30, 2001 (the "01 Debentures").
5. Optional Redemption. The Company may at its option
redeem the Debentures of any Maturity in whole or in part commencing six months
after issuance and for a one year period thereafter. The redemption price will
be equal to the face amount of the Debentures to be redeemed plus a premium of
.5% with respect to the 98 Debentures, 1% with respect to the 99 Debentures and
1.5% with respect to the 00 Debentures and 01 Debentures.
6. Selection and Notice of Redemption. If less than all
of the Debentures of any Maturity are to be redeemed, the Trustee shall, not
more than 45 days prior to the redemption date, select the Debentures to be
redeemed by such method as the Trustee shall deem fair and appropriate, or if
the Debentures are listed on a national securities exchange, in accordance with
the rules of such exchange. The Trustee shall make the selection from the
Debentures outstanding and not previously called for redemption. The Trustee may
select for redemption portions (equal to $1,000 or any integral multiples of
$1,000 thereof) of the principal amount of Debentures that have denominations
larger than $1,000. Provisions of the Indenture that apply to Debentures called
for redemption also apply to portions of Debentures called for redemption.
Notice of redemption will be mailed at least 30 days but not more than 90 days
before the redemption date to each holder of Debentures to be redeemed at his
registered address. On and after the redemption date, interest ceases to accrue
on Debentures or portions thereof called for redemption.
7. Denominations, Transfer, Exchange. The Debentures are
issuable in registered form without coupons in denominations of $1,000 and
integral multiples of $1,000. A holder may transfer or exchange Debentures in
accordance with the Indenture. A Debenture of one Maturity may not be exchanged
for a Debenture of another Maturity. The Trustee may require a holder, among
other things, to furnish appropriate endorsements and transfer documents, and to
pay
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any tax or other governmental charge that may be imposed in relation to the
transfer. The Trustee need not transfer or exchange any Debenture or portion of
a Debenture selected for redemption, or transfer or exchange any Debentures for
a period of 15 days before the date of mailing of a notice of redemption of
Debentures selected for redemption.
8. Persons Deemed Owners. The registered holder of a
Debenture may be treated as the owner of it for all purposes.
9. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee or Paying Agent will pay
the money back to the Company, if the Company requests such repayment within one
year after such two year period that such money remains unclaimed. If such
unclaimed money is so paid back to the Company, thereafter, holders entitled to
the money must look to the Company for payment as general creditors, unless
applicable abandoned property law designates another person. If such unclaimed
money is not so paid back to the Company, it may be disposed of by the Trustee
in accordance with applicable law.
10. Amendment, Supplement, Waiver. Subject to certain
exceptions, the Indenture or the Debentures may be amended or supplemented, and
any past default or compliance with any provision may be waived, including
without limitation the Debentureholders right to postpone payment of interest,
with the consent of the holders of a majority in principal amount of the
outstanding Debentures. Without the consent of any Debentureholder, the Company
may amend or supplement the Indenture or the Debentures to cure any ambiguity,
omission, defect or inconsistency, to comply with Article Five of the Indenture
(providing for the assumption of the obligations of the Company under the
Indenture by a successor corporation), or to make any change that does not
adversely affect the rights of any Debentureholder.
11. Defaults and Remedies. The Indenture provides that the
Trustee will give the Debentureholders notice of an uncured Default known to it,
within 90 days after the occurrence of an Event of Default (as defined in the
Indenture), or as soon as practicable after it learns of an Event of Default
which occurred more than 90 days beforehand. In case an Event of Default occurs
and is continuing, the Trustee or the holders of not less than 25% of aggregate
principal amount of the Debentures then outstanding, by notice in writing to the
Company (and to the Trustee if given by the Debentureholders), may declare the
principal of and all accrued interest on all the Debentures to be due and
payable immediately (except that, if certain bankruptcy-related Events of
Default occur, principal and interest shall automatically become due and payable
without any declaration or other act on the part of the Trustee or any
Debentureholder). Such declaration may be rescinded
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by holders of a majority in principal amount of the Debentures if all existing
Events of default (except nonpayment of principal or interest that has become
due solely because of the acceleration) have been cured or waived, if the
rescission would not conflict with any judgement or decree and if the Company
has deposited with the Trustee a sum sufficient to pay all overdue interest, the
principal of (and premium, if any, on) any Debentures which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate borne by the Debenture. The Indenture requires the Company to file periodic
reports with the Trustee as to the absence of defaults.
12. Subordination. The indebtedness evidenced by all of
the Debentures is, to the extent provided in the Indenture, subordinate and
subject in right of payment to the prior final and indefeasible payment in full
of all Senior Indebtedness, and this Debenture is issued subject to such
provisions of the Indenture, and each holder of this Debenture by accepting
same, agrees to and shall be bound by such provisions. "Senior Indebtedness"
means Indebtedness of the Company outstanding at any time, whether outstanding
on the date hereof or hereafter created, which (i) is secured, in whole or in
part, by any asset or assets owned by the Company or a Subsidiary, or (ii)
arises from unsecured borrowings by the Company from a commercial bank, a
savings bank, a savings and loan association, an insurance company, a company
whose securities are traded in a national securities market, or any wholly-owned
subsidiary of any of the foregoing, or (iii) arises from unsecured borrowings by
the Company from any pension plan (as defined in ss. 3(2) of the Employee
Retirement Income Security Act of 1974, as amended), or (iv) arises from
borrowings by the Company which are evidenced by commercial paper or (v) is a
guarantee or other liability of the Company of or with respect to Indebtedness
of a Subsidiary of a type described in any of clause (ii), (iii), (iv) or (v)
above or (vi) arises from other loans to the Company whether secured or
unsecured. Senior Indebtedness does not include Indebtedness which is pari passu
with or subordinate to the Debentures.
13. Trustee Dealings with the Company. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A manager, officer,
employee or owner, as such, of the Company shall not have any liability for any
obligations of the Company under the Debentures or the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Debentureholder by accepting a Debenture waives and releases all
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such liability. The waiver and release are part of the
consideration for the issue of the Debentures.
15. Authentication. This Debenture shall not be valid
until the Trustee signs the certificate on the other side of this
Debenture.
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16. Abbreviations. Customary abbreviations may be used in the
name of the Debentureholder or an assignee, such as: TEN COM (=tenants in
common), TEN ENT (=tenants by entirety), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= custodian), and U/G/M/A
(=Uniform Gifts to Minors Act).
The Company will furnish to any Debentureholder upon written
request without charge a copy of the Indenture. Requests may be made to East
Coast Capital Company, LLC, 110 East 59th Street, 6th
Floor, New York, New York 10022.
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ASSIGNMENT
If you want to assign this Debenture, fill in the form below and have your
signature guaranteed by a commercial bank or trust company or a member firm of
any national securities exchange registered under the Securities Exchange Act of
1934.
I or we assign and transfer this Debenture to
-----------------------------------------------------------------
(Please insert assignee's social security or tax identification number)
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint __________________________________________
agent to transfer this Debenture on the books of the Company. The
agent may substitute another to act for him.
Date: ____________ Your signature: ___________________________
--------------------------------------------
(Sign exactly as your name appears on the
other side of this Debenture)
Signature Guarantee: ________________________________
<PAGE>
CONSENT OF INDEPENDENT PULBIC ACCOUNTANTS
We consent to the use of our report included herein and to the
reference to our firm under the heading "Experts" in Registration Statement
(Form S-11) and related prospectus of East Coast Capital Company, LLC.
New York, New York
June 25, 1996
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