<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission file number: 001-13003
SILVERLEAF RESORTS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2259890
(State of incorporation) (I.R.S. Employer
Identification No.)
1221 RIVERBEND DRIVE, SUITE 120
DALLAS, TEXAS 75247
(Address of principal executive offices, including zip code)
214-631-1166
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Number of shares of common stock outstanding of the issuer's Common
Stock, par value $0.01 per share as of May 12, 1998: 13,311,517
<PAGE> 2
SILVERLEAF RESORTS, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION (Unaudited)
Item 1. Condensed consolidated statements of income for the three months
ended March 31, 1998 and 1997........................................................... 1
Condensed consolidated balance sheets for the three months ended
March 31, 1998 and the year ended December 31, 1997..................................... 2
Condensed consolidated statement of shareholders' equity for the
three months ended March 31, 1998 ...................................................... 3
Condensed consolidated statements of cash flows for the three months
ended March 31, 1998 and 1997........................................................... 4
Notes to the condensed consolidated financial statements................................ 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................... 10
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K........................................................ 14
Signatures.............................................................................. 15
</TABLE>
<PAGE> 3
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1998 1997
------------ ------------
<S> <C> <C>
REVENUES:
Vacation Interval sales $ 26,239 $ 14,503
Interest income 2,959 1,933
Interest income from affiliates 15 107
Management fee income 502 499
Lease income 450 485
Other income 864 399
------------ ------------
Total revenues 31,029 17,926
COSTS AND OPERATING EXPENSES:
Cost of Vacation Interval sales 3,698 1,221
Sales and marketing 12,409 5,949
Provision for uncollectible notes 3,444 2,355
Operating, general and administrative 3,867 2,171
Depreciation and amortization 564 331
Interest expense to affiliates -- 225
Interest expense to unaffiliated entities 1,275 1,461
------------ ------------
Total costs and operating expenses 25,257 13,713
Income from continuing operations before income taxes 5,772 4,213
Income tax expense (2,198) (1,559)
------------ ------------
NET INCOME $ 3,574 $ 2,654
============ ============
NET INCOME PER COMMON SHARE:
BASIC $ 0.32 $ 0.34
============ ============
ASSUMING DILUTION $ 0.31 $ 0.34
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 11,311,517 7,711,517
============ ============
DILUTED 11,537,446 7,711,517
============ ============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1998 1997
-------- --------
<S> <C> <C>
Cash and equivalents $ 6,556 $ 4,970
Restricted cash 200 200
Notes receivable, net 109,837 92,036
Amounts due from affiliates 2,153 1,389
Inventory 34,259 28,310
Land, equipment and utilities, net 23,911 21,629
Land held for sale 466 466
Prepaid and other assets 8,556 7,401
-------- --------
TOTAL ASSETS $185,938 $156,401
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 7,514 $ 5,106
Unearned revenues 5,488 3,122
Income taxes payable 2,029 1,500
Deferred income taxes, net 15,706 14,037
Notes payable and capital lease obligations 67,862 48,871
-------- --------
Total Liabilities 98,599 72,636
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock, par value $0.01 per share, 100,000,000
shares authorized, 11,311,517 shares issued and
outstanding at March 31, 1998 and December 31, 1997 113 113
Additional paid-in capital 64,577 64,577
Retained earnings 22,649 19,075
-------- --------
Total Shareholders' Equity 87,339 83,765
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $185,938 $156,401
======== ========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
------------------------
Number of $0.01 Additional
Shares Par Paid-in Retained
Issued Value Capital Earnings Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
January 1, 1998 11,311,517 $ 113 $ 64,577 $ 19,075 $ 83,765
Net income -- -- -- 3,574 3,574
---------- ---------- ---------- ---------- ----------
March 31, 1998 11,311,517 $ 113 $ 64,577 $ 22,649 $ 87,339
========== ========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 3,574 $ 2,654
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 564 330
Discontinued operations -- 524
Deferred tax provision 1,669 1,213
Increase (decrease) in cash from changes in
assets and liabilities:
Amounts due from affiliates (764) (257)
Inventory (5,949) (1,090)
Prepaid and other assets (1,154) (1,130)
Accounts payable and accrued expenses 2,408 180
Amounts due to affiliates -- 194
Unearned revenues 2,366 (217)
Income taxes payable 529 346
-------- --------
Net cash provided by operating activities 3,243 2,747
-------- --------
INVESTING ACTIVITIES:
Purchases of land, equipment and utilities (2,081) (339)
Notes receivable, net (17,802) (6,689)
-------- --------
Net cash used in investing activities (19,883) (7,028)
-------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings from unaffiliated entities 22,937 8,231
Payments on borrowings to unaffiliated entities -- (3,528)
Payments on borrowings to affiliates (4,711) (212)
Discontinued operations -- (62)
-------- --------
Net cash provided by financing activities 18,226 4,429
-------- --------
Net increase in cash 1,586 148
CASH AND CASH EQUIVALENTS:
Beginning of period 4,970 973
-------- --------
End of period $ 6,556 $ 1,121
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 1,502 $ 1,184
Equipment acquired under capital lease or note 749 30
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 7
SILVERLEAF RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in thousands, except share and per share data)
NOTE 1 - BACKGROUND
These condensed consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q, and do not include certain
information and disclosures required by generally accepted accounting principles
for complete financial statements. However, in the opinion of management, all
adjustments considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1998.
These statements should be read in conjunction with the audited consolidated
financial statements and footnotes included in the Company's Form 10-K/A (File
No. 001-13003) as filed with the Securities and Exchange Commission. The
accounting policies used in preparing these consolidated financial statements
are the same as those described in such Form 10-K/A.
The Company has adopted Statement of Financial Accounting Standards No. 130,
"Reporting on Comprehensive Income", effective January 1, 1998. The Company had
no items classified as other comprehensive income in the periods presented;
therefore, comprehensive income is not presented.
NOTE 2 - EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted
average shares outstanding. Earnings per share assuming dilution is computed by
dividing net income by the weighted average number of shares and equivalent
shares outstanding. The number of equivalent shares is computed using the
treasury stock method which assumes that the increase in the number of shares
resulting from the exercise of the stock options described in Note 3 is reduced
by the number of shares which could have been repurchased by the Company with
the proceeds from the exercise of the options. For the period ending March 31,
1998, the weighted average shares outstanding assuming dilution was calculated
by increasing the basic weighted average shares outstanding by the assumed
issuance of 892,333 shares upon exercise of the options and the repurchase of
666,404 shares with the proceeds of the exercise of such options.
NOTE 3 - STOCK PLAN
During 1997, the Company established a stock option plan (the "1997 Stock Option
Plan" or "Plan"). The 1997 Stock Option Plan provides for the award of
nonqualified stock options to directors, officers, and key employees, and the
grant of incentive stock options to salaried key employees. Nonqualified stock
options will provide for the right to purchase common stock at a specified price
which may be less than fair market value on the date of grant (but not less than
par value). Nonqualified stock options may be granted for any term and upon such
conditions determined by the board of directors of the Company. The Company has
reserved 1,100,000 shares of common stock for issuance pursuant to the Company's
1997 Stock Option Plan. In February 1998, the Board of Directors approved an
amendment to the plan reserving an additional 500,000 shares of common stock for
issuance under the plan; however, this amendment will not become effective
unless it is approved by the shareholders. As of March 31, 1998, approximately
1,004,500 options were granted as part of the 1997 Stock Option Plan. Such
options have a graded vesting schedule, with equal installments of shares
exercisable up through four years of the original grant date. These options are
exercisable at prices ranging from $16.00 to $25.50 per share, and expire ten
years from the date of grant.
5
<PAGE> 8
NOTE 4 - NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
Notes payable and capital lease obligations as of March 31, 1998 and
December 31, 1997, consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
--------- ------------
1998 1997
------- -------
<S> <C> <C>
$40 million revolving loan agreement, which contains certain financial
covenants, due October 2005, principal and interest payable from the proceeds
obtained from customer notes receivable which are pledged as collateral for
the note, at an interest rate of LIBOR plus 2.5% ............................. $29,838 $22,137
$12 million revolving loan agreement which contains certain financial covenants,
due May 2003, principal and interest payable from the proceeds obtained from
customer notes receivable which are pledged as collateral for the note, at an
interest rate of Base plus 2.75% (11.25% at December 31, 1997) ............... 3,669 4,122
$60 million revolving loan agreement, which contains certain financial
covenants, due December 1999, principal and interest payable from the proceeds
obtained on customer notes receivable pledged as collateral for the note, at
an interest rate of LIBOR plus 2.55% ......................................... 1,456 1,529
$15 million revolving loan agreement which contains certain financial covenants,
due November 2002, principal and interest payable from the proceeds obtained
from customer notes receivable which are pledged as collateral for the note,
at an interest rate of Prime plus 2% ......................................... 13,618 12,596
$10 million line of credit due January 2000, with drawings permitted until
December 1998, at a variable rate of LIBOR plus 3%, secured by land,
improvements, and equipment of various existing resorts and new resorts ...... 3,936 4,070
$10 million revolving construction loan due October 2000, with drawings
permitted until April 1999, at a variable rate of LIBOR plus 3.5%, secured by
land, construction in process, and customer notes receivable ................. 9,991 --
Various notes, due from April 1998, through October 2002, collateralized by
various assets with interest rates ranging from 4.3% to 24.7% ................ 2,354 1,785
------- -------
Total notes payable .................................................. 64,862 46,239
Capital lease obligations ...................................................... 3,000 2,632
------- -------
Total notes payable and capital lease obligations ................... $67,862 $48,871
======= =======
</TABLE>
Prime rate at March 31, 1998 was 8.5%.
LIBOR at March 31, 1998 was 5.75%.
6
<PAGE> 9
NOTE 5 - SUBSIDIARY GUARANTEES
All subsidiaries of the Company have guaranteed the Notes (as
defined in Note 8) which were issued in the offering of $75.0 million of Senior
Subordinated Notes. The separate financial statements of each guaranteeing
subsidiary (each, a "Guarantor Subsidiary") are not presented because the
Company's management has concluded that such financial statements are not
material to investors. The guarantee of each Guarantor Subsidiary is full and
unconditional and joint and several, and each Guarantor Subsidiary is a
wholly-owned subsidiary of the Company.
Combined summarized operating results of the Guarantor
Subsidiaries are as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
-----------------------
1998 1997
---------- -----------
<S> <C> <C>
Revenues $ 17 76
Expenses (54) (170)
------ ------
Net loss $ (37) $ (94)
====== ======
</TABLE>
Combined summarized balance sheet information as of March 31,
1998 for the Guarantor Subsidiaries is as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
1998
--------------
<S> <C>
Land, equipment, inventory and utilities, net $ 1,781
Other assets 290
--------
Total assets $ 2,071
========
Investment by parent (includes equity and
amounts due to parent) $(2,095)
Other liabilities 24
--------
Total liabilities and equity $(2,071)
========
</TABLE>
At March 31, 1998, there was no subsidiary of the Company, the
capital stock of which will comprise a substantial portion of the collateral for
the Notes within the meaning of Rule 3-10 of Regulation S-X.
NOTE 6 - ACQUISITIONS
In January 1998, the Company entered into an agreement with Crown
Resort Co., LLC ("Crown") to acquire timeshare management rights at eight
resorts in Alabama, Mississippi, North Carolina, Pennsylvania, South Carolina,
Tennessee, and Texas for $3.8 million. As part of this arrangement, Silverleaf
will also acquire any unsold Vacation Intervals at the eight resorts. This
proposed acquisition is subject to satisfactory completion of customary
due-diligence procedures; accordingly, there is no assurance that the proposed
acquisition will be completed.
7
<PAGE> 10
In January 1998, the Company entered into an employment agreement
proposing to make an individual an executive officer of the Company. The
agreement does not become effective until the individual relocates to Dallas,
Texas, which must occur before July 1, 1998. The agreement provides for an
annual base salary, options for the purchase of common stock, and other fringe
benefits. The agreement also provides for the purchase of the employee's
condominium, upon the individual's relocation to Dallas, for $108. Additionally,
if the officer is terminated without "good cause", the Company shall be
obligated to make severance payments in an amount equal to the officer's base
annual salary.
In February 1998, the Company purchased all the issued and
outstanding shares of a California marketing corporation for $250. This purchase
was completed in conjunction with a December 1997 employment agreement entered
into with an executive officer.
In February 1998, the Company acquired a parcel of land in
Galveston, Texas for approximately $1.2 million. The Company intends to develop
this parcel, along with an adjoining parcel acquired in December 1997, as a new
beach-front Destination Resort.
In February 1998, the Company entered into two agreements, one to
acquire a golf course and undeveloped land near Atlanta, Georgia for $3.5
million, and another to acquire undeveloped land near Kansas City, Missouri for
$1.6 million. The proposed acquisitions are subject to satisfactory completion
of customary due diligence procedures; accordingly, there is no assurance that
either proposed acquisition will be completed.
NOTE 7 - PRO FORMA FINANCIAL INFORMATION
The following unaudited condensed pro forma financial information
as of March 31, 1998 and for the three months ended March 31, 1998 and 1997 was
prepared from the financial statements of the Company by adjusting for the
effect of all public offerings in 1998 and 1997, which includes the Company's
initial public offering completed in 1997 and the equity and debt offerings
discussed in Note 8, including debt repaid from proceeds of such offerings, as
if all of these transactions had occurred on January 1, 1997. The pro forma
results do not include extraordinary losses on early extinguishment of debt.
The following information is not necessarily indicative of what
the performance would have been had these offerings actually occurred on January
1, 1997, nor does it purport to represent future results of operations of the
Company. (In thousands, except share and per share information.):
<TABLE>
<CAPTION>
Income Statement
-----------------------------
Three Months Ended
March 31,
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues $ 31,014 $ 17,818
Expenses 25,706 14,126
----------- -----------
Income from continuing operations
before income taxes 5,308 3,692
Income taxes 2,021 1,366
----------- -----------
Income from continuing operations $ 3,287 $ 2,326
=========== ===========
Net income per share:
Basic $ 0.25 $ 0.20
=========== ===========
Diluted $ 0.24 $ 0.20
=========== ===========
Weighted average shares outstanding:
Basic 13,311,517 11,354,122
=========== ===========
Diluted 13,537,446 11,354,122
=========== ===========
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
Pro Forma
Balance Sheet
------------------
Three Months Ended
March 31, 1998
------------------
<S> <C>
ASSETS
Cash and equivalents $ 55,032
Notes receivable 109,837
Inventory 34,259
Other assets 38,276
--------
Total Assets $237,404
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable and capital lease obligations $ --
Senior Subordinated Notes due 2008 75,000
Income taxes 17,567
Other payables 13,002
--------
Total Liabilities 105,569
Shareholders' Equity 131,835
--------
Total Liabilities and Shareholders' Equity $237,404
========
</TABLE>
NOTE 8 - SUBSEQUENT EVENTS
Effective April 8, 1998, the Company completed the sale of
2,000,000 shares of Company common stock (the "Equity Offering") at a price of
$24.375 per share. In addition to the 2,000,000 shares sold by the Company, the
majority shareholder of the Company sold 875,000 additional shares of the
Company.
The Company also completed its placement of $75.0 million
aggregate principal amount of 10 1/2% Senior Subordinated Notes due 2008 (the
"Notes"). The Notes are general unsecured obligations of the Company, ranking
subordinate in right of payment to all senior indebtedness of the Company,
including indebtedness under the Company's revolving credit facilities (the
"Note Offering"). The Company received proceeds from these two offerings in an
aggregate net amount of $118,940. Costs incurred in connection with the Equity
and Note Offerings were approximately $7.0 million. The Company will utilize the
proceeds primarily for the repayment of notes payable and capital lease
obligations and its construction and acquisition programs. See Management's
Discussion and Analysis of Financial Condition and Results of Operations
elsewhere in this Form 10-Q.
9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain matters discussed throughout this Form 10-Q filing are forward looking
statements that are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Such risks and uncertainties
include, but are not limited to, those discussed in the Company's Form 10-K/A
(File No. 001-13003) which is incorporated herein by reference.
RESULTS OF OPERATIONS
The following table sets forth certain operating information for the Company.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
As a percentage of Total Revenues:
Vacation Interval sales 84.6% 80.9%
Interest income 9.6% 11.4%
Management fee income 1.6% 2.8%
Lease income 1.4% 2.7%
Other income 2.8% 2.2%
------------ ------------
Total revenues 100.0% 100.0%
As a percentage of Vacation Interval sales:
Cost of Vacation Interval sales 14.1% 8.4%
Sales and marketing 47.3% 41.0%
Provision for uncollectible notes 13.1% 16.2%
As a percentage of Interest Income:
Interest expense 42.9% 82.6%
As a percentage of Total Revenues:
Operating, general and administrative 12.5% 12.1%
Depreciation and amortization 1.8% 1.8%
Total costs and operating expenses 81.4% 76.5%
</TABLE>
10
<PAGE> 13
QUARTER ENDED MARCH 31, 1998 VERSUS QUARTER ENDED MARCH 31, 1997. Revenues
for the quarter ended March 31, 1998 were $31.0 million, representing a $13.1
million or 73.2% increase over revenues of $17.9 million for the quarter ended
March 31, 1997. The increase was primarily due to a $11.7 million increase in
sales of Vacation Intervals, a $0.9 million increase in interest income, and a
$0.5 million increase in other income. The strong increase in Vacation Interval
revenues resulted from the Company's increased telemarketing capacity, arising
from investments in computer and automated dialing technology. In addition to
the forgoing, the Company recorded first quarter sales at two of its new
resorts, Timber Creek near St. Louis, Missouri and Fox River near Chicago,
Illinois, which both opened sales offices in the fourth quarter of 1997.
In the 1998 first quarter, the number of Vacation Intervals sold, exclusive
of upgraded Vacation Intervals, increased 85.6% to 2,662 from 1,434 in the same
period of 1997; the average price per interval decreased 1.7% to $7,533 from
$7,658. Total interval sales for the first three months of 1998 included 679
biennial intervals (counted as 340 Vacation Intervals), compared to 352 (176
Vacation Intervals) in the first three months of 1997. The Company has increased
revenues generated from sales of upgraded intervals at the existing resorts
through the continued implementation of marketing and sales programs focused on
selling upgraded intervals to Silverleaf owners.
Interest income increased 45.8% to $2.9 million for the quarter ended March
31, 1998, from $2.0 million for the same period of 1997. This increase resulted
from a $47.4 million increase in notes receivable, net of allowance for
uncollectible notes, due to increased sales.
Management fee income remained flat at $0.5 million for the 1998 first
quarter, as compared to the 1997 first quarter.
Lease income, which relates to the Company's Sampler program, decreased to
$0.4 million for the period ended March 31, 1998, compared to $0.5 million for
the same period in 1997. The decrease resulted from the Company's marketing of
lower cost biennial intervals as an alternative to the Sampler program.
Other income increased 116.6% to $0.9 million for the first three months of
1998, from $0.4 million for the first three months of 1997. This increase was
due primarily to higher amenity usage fees and higher water and sewer income
from resort utility operations.
Cost of sales as a percentage of gross Vacation Interval sales increased to
14.1% in the first quarter of 1998, from 8.4% for the same period of 1997. This
increase reflects increased sales of Vacation Intervals from new construction
units. The Company continues to deplete its inventory of low cost weeks acquired
primarily in 1995 and 1996. As a result of these factors and the Company's
construction program to build new inventory, the cost of sales percentage is
expected to increase.
Sales and marketing costs as a percentage of gross Vacation Interval sales
increased to 47.3% for the quarter ended March 31, 1998, from 41.0% for the same
period of 1997. This increase is due primarily to the implementation of new
marketing programs, and start up costs in new markets.
The provision for uncollectible notes as a percentage of Vacation Interval
sales decreased to 13.1% for the first three months of 1998 from 16.2% for the
same period of 1997, reflecting an increased focus on collection efforts for
notes receivable. The improvement can also be attributed to an increase in
receivables relating to upgrade sales, which typically represent better
performing accounts, resulting in fewer delinquencies.
Operating, general and administrative expenses as a percentage of total
revenues increased to 12.5% for the quarter ended March 31, 1998, as compared to
12.1% for the quarter ended March 31, 1997. The increase is attributable to
additional salaries and other costs incurred, resulting from being a public
company.
11
<PAGE> 14
For the three months ended March 31, 1998, depreciation and amortization
expense as a percentage of total revenue remained unchanged from 1997 at 1.8%.
Overall, depreciation and amortization expense increased $0.2 million for the
first quarter of 1998, as compared to 1997, primarily due to investments in a
new automated dialer, telephone system and central marketing facility.
Interest expense as a percentage of interest income decreased to 42.9% for
the first quarter of 1998, from 82.6% for the same period of 1997. This decrease
was due to lower borrowing costs during the first quarter of 1998, resulting
primarily from payment of indebtedness with proceeds from the Company's initial
public offering in June 1997, and more favorable interest rates on outstanding
indebtedness.
Income from continuing operations before income taxes increased 37.6% to
$5.8 million for the quarter ended March 31, 1998, from $4.2 million for the
quarter ended March 31, 1997 as a result of the above mentioned operating
results.
Income tax expense as a percentage of income from continuing operations
before income taxes increased to 38.1% in the first quarter of 1998 as compared
to 37.0% in the first quarter of 1997. This increase resulted from an increase
in the statutory Federal income tax rate.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES OF CASH. The Company generates cash primarily from the sale of
Vacation Intervals, the financing of customer notes receivable from Silverleaf
owners, management fees, Sampler sales, and resort and utility operations.
During the three months ended March 31, 1998, cash provided by operations was
$3.2 million. The Company generates cash from financing of customer notes
receivable (i) by borrowing at an advance rate of 70% of eligible customer notes
receivable and (ii) from the spread between interest received on customer notes
receivable and interest paid on related borrowings. Because the Company uses
significant amounts of cash in the development and marketing of Vacation
Intervals, but collects cash on customer notes receivable over a seven-year
period, borrowing against receivables has historically been a necessary part of
normal operations.
For the three months ended March 31, 1998 and 1997, cash provided by financing
activities was $18.2 million and $4.4 million, respectively. The increase in net
cash provided by financing activities was mainly attributable to increased
borrowings on the revolving credit facilities to support inventory construction
and customer notes receivable financing. The Company's credit facilities provide
for loans of up to $130.0 million. At March 31, 1998, approximately $62.5
million of principal and interest related to advances under the credit
facilities was outstanding. For the three months ended March 31, 1998, the
weighted average cost of funds for these borrowings was approximately 8.3%.
For regular Federal income tax purposes, the Company reports substantially all
of the Vacation Interval sales it finances under the installment method. Under
this method, income on sales of Vacation Intervals is not recognized until cash
is received, either in the form of a down payment, or as installment payments on
customer notes receivable. The deferral of income tax liability conserves cash
resources on a current basis. Interest will be imposed, however, on the amount
of tax attributable to the installment payments for the period beginning on the
date of sale and ending on the date the related tax is paid. If the Company is
otherwise not subject to tax in a particular year, no interest is imposed since
the interest is based on the amount of tax paid in that year. The consolidated
financial statements do not contain an accrual for any interest expense, which
would be paid on the deferred taxes related to the installment method, as the
12
<PAGE> 15
interest expense is not estimable. In addition, the Company is subject to
current alternative minimum tax ("AMT") as a result of the deferred income,
which results from the installment sales treatment. Payment of AMT reduces the
future regular tax liability attributable to Vacation Interval sales, and
creates a deferred tax asset. In April 1998, the Internal Revenue Service
issued a letter ruling to the Company granting a requested AMT accounting
adjustment effective as of January 1, 1997. As a result, the Company's
alternative minimum taxable income for 1997 through 2000 will be increased each
year by an estimated amount of approximately $9.0 million per year, which will
result in the Company paying substantial additional federal taxes in those
years. The Company's net operating loss carryforwards, which also may be used
to offset installment sales income, expire beginning in 2007 through 2012.
Realization of the deferred tax asset arising from net operating losses is
dependent on generating sufficient taxable income prior to the expiration of
the loss carryforwards and other factors.
USES OF CASH. Investing activities typically reflect a net use of cash
because of loans to customers in connection with the Company's Vacation Interval
sales, capital additions, and property acquisitions. Net cash used in investing
activities for the three months ended March 31, 1998 and 1997 was $19.9 million
and $7.0 million, respectively. The increase was due to the increased level of
customer notes receivable resulting from higher sales volume, and the purchase
of the Galveston property for $1.2 million.
SUBSEQUENT EVENTS
On April 8, 1998, the Company consummated the sale of 2,000,000 shares of
common stock, at an offering price of $24.375 per share (the "Equity Offering").
In addition to the 2,000,000 shares offered by the Company, the majority
shareholder of the Company sold 875,000 additional shares of the Company's
common stock. On April 8, 1998, the Company also consummated its placement of
$75.0 million aggregate principal amount of 10 1/2% Senior Subordinated Notes
due 2008 (the "Note Offering"). Net proceeds after consideration of offering
expenses totaled approximately $118,940,000. The discussion of the Equity
Offering and the Note Offering contained in this report on Form 10-Q does not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
The Company plans to utilize the proceeds from the Equity Offering and Note
Offering to repay substantially all of its outstanding indebtedness, develop
units, amenities and infrastructure at the existing resorts and to develop
units, amenities, and infrastructure at new resorts and to fund acquisitions,
working capital and general corporate purposes. Upon completion of the Equity
Offering and the Note Offering, the Company had $130.0 million of borrowing
capacity under its existing credit facilities, which will offer additional
flexibility to acquire new timeshare resorts, land upon which new timeshare
resorts may be constructed, or other companies which operate resort-type
properties. The consummation of the Equity Offering and the Note Offering
notwithstanding, the Company does not have sufficient capital to fully implement
its master plan for the total development of over 3,000 units at the existing
resorts and new resorts. To completely finance such master plan development and
fund additional acquisitions, the Company will likely be required to raise
capital in addition to the Equity Offering and the Note Offering through
existing and additional credit facilities, additional debt offerings or public
offerings of its common stock, or any combination of the above.
13
<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
4.1 Indenture dated April 1, 1998 between the Company and Norwest
Bank Minnesota, National Association, as Trustee.
4.2 Certificate No. 001 of 10 1/2% Senior Subordinated Notes due 2008 in
the amount of $75,000,000.
4.3 Subsidiary Guarantee dated April 8, 1998 by Silverleaf Berkshires,
Inc.; Bull's Eye Marketing, Inc. (California); Bull's Eye Marketing,
Inc. (Delaware); Silverleaf Resort Acquisitions, Inc.; Silverleaf
Travel, Inc.; Silverleaf Hotels, Inc.; Database Research, Inc.;
Condominium Builders, Inc.; and Villages Land, Inc.
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
none
14
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 12, 1998 By: /s/ ROBERT E. MEAD
-----------------------------
Robert E. Mead
Chairman of the Board and
Chief Executive Officer
Dated: May 12, 1998 By: /s/ JOE W. CONNER
-----------------------------
Joe W. Conner
Chief Financial Officer
15
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<S> <C>
4.1 Indenture dated April 1, 1998 between the Company and Norwest
Bank Minnesota, National Association, as Trustee.
4.2 Certificate No. 001 of 10 1/2% Senior Subordinated Notes due 2008 in
the amount of $75,000,000.
4.3 Subsidiary Guarantee dated April 8, 1998 by Silverleaf Berkshires,
Inc.; Bull's Eye Marketing, Inc. (California); Bull's Eye Marketing,
Inc. (Delaware); Silverleaf Resort Acquisitions, Inc.; Silverleaf
Travel, Inc.; Silverleaf Hotels, Inc.; Database Research, Inc.;
Condominium Builders, Inc.; and Villages Land, Inc.
27 Financial Data Schedule
</TABLE>
16
<PAGE> 1
SILVERLEAF RESORTS, INC.
10 1/2% SENIOR SUBORDINATED NOTES DUE 2008
INDENTURE
Dated as of April 1, 1998
-------------------------
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Trustee
-------------------------
<PAGE> 2
TABLE OF CONTENTS
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Page
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ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE............................................................1
Section 1.01. Definitions................................................................................1
Section 1.02. Other Definitions.........................................................................16
Section 1.03. Incorporation by Reference of Trust Indenture Act.........................................17
Section 1.04. Rules of Construction.....................................................................18
ARTICLE 2. THE NOTES............................................................................................18
Section 2.01. Form and Dating...........................................................................18
Section 2.02. Execution and Authentication..............................................................19
Section 2.03. Registrar and Paying Agent................................................................19
Section 2.04. Paying Agent to Hold Money in Trust.......................................................20
Section 2.05. Holder Lists..............................................................................20
Section 2.06. Transfer and Exchange.....................................................................20
Section 2.07. Replacement Notes.........................................................................22
Section 2.08. Outstanding Notes.........................................................................23
Section 2.09. Treasury Notes............................................................................23
Section 2.10. Temporary Notes...........................................................................23
Section 2.11. Cancellation..............................................................................24
Section 2.12. Defaulted Interest........................................................................24
ARTICLE 3. REDEMPTION AND PREPAYMENT............................................................................24
Section 3.01. Notices to Trustee........................................................................24
Section 3.02. Selection of Notes to Be Redeemed.........................................................24
Section 3.03. Notice of Redemption......................................................................25
Section 3.04. Effect of Notice of Redemption............................................................26
Section 3.05. Deposit of Redemption Price...............................................................26
Section 3.06. Notes Redeemed in Part....................................................................26
Section 3.07. Optional Redemption.......................................................................26
Section 3.08. Mandatory Redemption......................................................................27
Section 3.09. Offer to Purchase by Application of Excess Proceeds.......................................27
ARTICLE 4. COVENANTS............................................................................................29
Section 4.01. Payment of Notes..........................................................................29
Section 4.02. Maintenance of Office or Agency...........................................................29
Section 4.03. Reports...................................................................................30
Section 4.04. Compliance Certificate....................................................................30
Section 4.05. Taxes. 31
Section 4.06. Stay, Extension and Usury Laws............................................................31
Section 4.07. Restricted Payments.......................................................................32
</TABLE>
i
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<TABLE>
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Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.................34
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock................................35
Section 4.10. Asset Sales...............................................................................38
Section 4.11. Transactions with Affiliates..............................................................39
Section 4.12. Liens. 39
Section 4.13. Business Activities.......................................................................40
Section 4.14. Corporate Existence.......................................................................40
Section 4.15. Offer to Repurchase Upon Change of Control................................................40
Section 4.16. Sale and Leaseback Transactions...........................................................41
Section 4.17. Limitation on Issuances and Sales of Capital Stock of Wholly Owned Restricted
Subsidiaries......................................................................42
Section 4.18. Designation of a Subsidiary as an Unrestricted Subsidiary.................................42
Section 4.19. Limitation on Status as Investment Company................................................43
Section 4.20. No Senior SUBORDINATED Debt...............................................................43
Section 4.21. No Amendment of Subordination Provisions..................................................44
Section 4.22. Payments for Consent......................................................................44
ARTICLE 5. SUCCESSORS...........................................................................................44
Section 5.01. Merger, Consolidation, or Sale of Assets..................................................44
Section 5.02. Successor Corporation Substituted.........................................................45
ARTICLE 6. DEFAULTS AND REMEDIES................................................................................45
Section 6.01. Events of Default.........................................................................45
Section 6.02. Acceleration..............................................................................47
Section 6.03. Other Remedies............................................................................48
Section 6.04. Waiver of Past Defaults...................................................................48
Section 6.05. Control by Majority.......................................................................48
Section 6.06. Limitation on Suits.......................................................................48
Section 6.07. Rights of Holders of Notes to Receive Payment.............................................49
Section 6.08. Collection Suit by Trustee................................................................49
Section 6.09. Trustee May File Proofs of Claim..........................................................49
Section 6.10. Priorities................................................................................50
Section 6.11. Undertaking for Costs.....................................................................50
ARTICLE 7. TRUSTEE..............................................................................................51
Section 7.01. Duties of Trustee.........................................................................51
Section 7.02. Rights of Trustee.........................................................................52
Section 7.03. Individual Rights of Trustee..............................................................52
Section 7.04. Trustee's Disclaimer......................................................................53
Section 7.05. Notice of Defaults........................................................................53
Section 7.06. Reports by Trustee to Holders of the Notes................................................53
Section 7.07. Compensation and Indemnity................................................................53
Section 7.08. Replacement of Trustee....................................................................54
</TABLE>
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<TABLE>
<S> <C>
Section 7.09. Successor Trustee by Merger, etc..........................................................55
Section 7.10. Eligibility; Disqualification.............................................................55
Section 7.11. Preferential Collection of Claims Against Company.........................................56
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.............................................................56
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance..................................56
Section 8.02. Legal Defeasance and Discharge............................................................56
Section 8.03. Covenant Defeasance.......................................................................56
Section 8.04. Conditions to Legal or Covenant Defeasance................................................57
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions..........................................................58
Section 8.06. Repayment to Company......................................................................59
Section 8.07. Reinstatement.............................................................................59
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.....................................................................60
Section 9.01. Without Consent of Holders of Notes.......................................................60
Section 9.02. With Consent of Holders of Notes..........................................................61
Section 9.03. Compliance with Trust Indenture Act.......................................................62
Section 9.04. Revocation and Effect of Consents.........................................................62
Section 9.05. Notation on or Exchange of Notes..........................................................63
Section 9.06. Trustee to Sign Amendments, etc...........................................................63
ARTICLE 10. SUBORDINATION.......................................................................................63
Section 10.01. Agreement to Subordinate.................................................................63
Section 10.02. Certain Definitions......................................................................63
Section 10.03. Liquidation; Dissolution; Bankruptcy.....................................................64
Section 10.04. Default on Designated Senior Debt........................................................64
Section 10.05. Acceleration of Notes....................................................................65
Section 10.06. When Distribution Must Be Paid Over......................................................65
Section 10.07. Notice by Company........................................................................66
Section 10.08. Subrogation..............................................................................66
Section 10.09. Relative Rights..........................................................................66
Section 10.10. Subordination May Not Be Impaired by Company.............................................66
Section 10.11. Distribution or Notice to Representative.................................................67
Section 10.12. Rights of Trustee and Paying Agent.......................................................67
Section 10.13. Authorization to Effect Subordination....................................................67
ARTICLE 11. GUARANTEES..........................................................................................67
Section 11.01. Unconditional Guarantee..................................................................67
Section 11.02. Subordination of Note Guarantee..........................................................69
Section 11.03. Severability.............................................................................69
Section 11.04. Release of a Guarantor...................................................................69
Section 11.05. Limitation of Guarantor's Liability......................................................69
Section 11.06. Guarantors May Consolidate, etc., on Certain Terms.......................................70
</TABLE>
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<TABLE>
<S> <C>
Section 11.07. Waiver of Subrogation....................................................................70
Section 11.08. Execution of Guarantee...................................................................71
Section 11.09. Additional Subsidiary Guarantees.........................................................71
ARTICLE 12. MISCELLANEOUS.......................................................................................72
Section 12.01. Trust Indenture Act Controls.............................................................72
Section 12.02. Notices..................................................................................72
Section 12.03. Communication by Holders of Notes with Other Holders of Notes............................73
Section 12.04. Certificate and Opinion as to Conditions Precedent.......................................73
Section 12.05. Statements Required in Certificate or Opinion............................................74
Section 12.06. Rules by Trustee and Agents..............................................................74
Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders.................74
Section 12.08. Governing Law............................................................................75
Section 12.09. No Adverse Interpretation of Other Agreements............................................75
Section 12.10. Successors...............................................................................75
Section 12.11. Severability.............................................................................75
Section 12.12. Counterpart Originals....................................................................75
Section 12.13. Table of Contents, Headings, etc.........................................................75
</TABLE>
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit A-1 FORM OF SUBSIDIARY GUARANTEE
Exhibit B FORM OF SUPPLEMENTAL INDENTURE
iv
<PAGE> 6
INDENTURE dated as of April 1, 1998 among Silverleaf Resorts, Inc., a
Texas corporation (the "Company"), and, as guarantors, Silverleaf Hotels, Inc.,
a Texas corporation, Silverleaf Travel, Inc., a Texas corporation, Bull's Eye
Marketing, Inc., a California corporation, Silverleaf Berkshires, Inc., a Texas
corporation, Silverleaf Resort Acquisitions, Inc., a Texas corporation, Database
Research, Inc., a Texas corporation, Villages Land, Inc., a Texas corporation,
Bull's Eye Marketing, Inc., a Delaware corporation, and Condominium Builders,
Inc., a Texas corporation (each a "Guarantor" and collectively, the
"Guarantors"), and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 10 1/2% Senior Subordinated Notes due 2008 (the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Notes" means up to $125.0 million in aggregate principal
amount of Notes (other than the Initial Notes) issued under this Indenture in
accordance with paragraph 4 of the Notes.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
of any assets or rights (including, without limitation, by way of a sale and
leaseback) other than in the ordinary
<PAGE> 7
course of business consistent with past practices (provided that the sale,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company and its Restricted Subsidiaries taken as a whole will be governed
by the provisions of Section 4.15 hereof and/or the provisions of Section 5.01
hereof and not by the provisions of Section 4.10 hereof), and (ii) the issue or
sale by the Company or any of its Restricted Subsidiaries of Equity Interests of
any of the Company's Restricted Subsidiaries, in the case of either clause (i)
or (ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $1.0 million or (b) for net proceeds
in excess of $1.0 million. Notwithstanding the foregoing: (i) a transfer of
assets by the Company to a Wholly Owned Restricted Subsidiary that is a
Guarantor or by a Restricted Subsidiary to the Company or to another Wholly
Owned Restricted Subsidiary that is a Guarantor, (ii) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary to the Company or to another
Wholly Owned Restricted Subsidiary that is a Guarantor, (iii) a Restricted
Payment that is permitted by Section 4.07 hereof and (iv) sales, leases or
contracts for deed in the ordinary course of business of Vacation Intervals or
Mortgages Receivable, will not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the full faith and credit
of the United States government or any
2
<PAGE> 8
agency or instrumentality thereof having maturities of not more than six months
from the date of acquisition, (iii) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500.0 million and a Thompson Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the Principal and his
Related Parties, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is currently exercisable or is exercisable
only upon the occurrence of a subsequent condition), directly or indirectly, of
more than 50% of the Voting Stock of the Company (measured by voting power
rather than number of shares), (iv) the Company consolidates with, or merges
with or into, any Person, or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any Person, or
any Person consolidates with, or merges with or into, the Company, in any such
event pursuant to a transaction in which any of the outstanding Voting Stock of
the Company is converted into or exchanged for cash, securities or other
property, other than any such transaction where the Voting Stock of the Company
outstanding immediately prior to such transaction is converted into or exchanged
for Voting Stock of the surviving or transferee Person constituting a majority
of the outstanding shares of such Voting Stock of such surviving or transferee
Person (immediately after giving effect to such issuance), or (v) the first day
on which a majority of the members of the Board of Directors of the Company are
not Continuing Directors.
"Club" means the owners' associations for any of the Company's resorts
or developments, or of nearby residential or condominium tracts developed by the
Company or its predecessors, and the Master Club.
"Company" means Silverleaf Resorts, Inc., a Texas corporation, and any
and all successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any
3
<PAGE> 9
extraordinary loss plus any net loss realized in connection with an Asset Sale
(to the extent such losses were deducted in computing such Consolidated Net
Income), plus (ii) provision for taxes based on income or profits of such Person
and its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was included in computing such Consolidated Net Income, plus
(iii) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, minus (v) non-cash items
increasing such Consolidated Net Income for such period (excluding any such
non-cash items to the extent they represent a reversal of amounts that were
accrued in prior periods and were then excluded from Consolidated Cash Flow as a
result of the second parenthetical in clause (iv)), plus, (vi) non-cash items
increasing Consolidated Net Income for a prior period which were excluded from
Consolidated Cash Flow in such period due to the application of clause (v), to
the extent such non-cash item is collected in cash in a subsequent period, in
each case, on a consolidated basis and determined in accordance with GAAP. The
recognition of revenue on the accrual basis in accordance with GAAP upon the
sale, lease, or sale by contract for deed of Vacation Intervals shall not be
deemed a non-cash item increasing Consolidated Net Income. Notwithstanding the
foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a Restricted
Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent (and in the same proportion)
that the Net Income of such Person was included in calculating Consolidated Net
Income.
"Consolidated Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Consolidated Interest Expense of
such Person and its Restricted Subsidiaries for such period. In the event that
the Company or any of its Restricted Subsidiaries incurs, assumes, issues
Guarantees, repays, redeems, retires, repurchases or defeases any Indebtedness
or Disqualified Stock (other than revolving credit borrowings) subsequent to the
commencement of the period for which the Consolidated Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation of
the Consolidated Coverage Ratio is made (the "Calculation Date"), then the
Consolidated Coverage Ratio shall be calculated giving pro forma
4
<PAGE> 10
effect to such incurrence, assumption, issuance, Guarantee, repayment,
redemption, retirement, repurchase, or defeasance of Indebtedness or
Disqualified Stock (and in the case of incurrence or issuance, the pro forma
application of the net proceeds thereof) as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Consolidated Interest Expense attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Consolidated Interest Expense will not be
obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date. For purposes of this definition, whenever pro
forma effect is given to an acquisition of assets, the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness incurred in connection therewith shall be
determined in good faith by a responsible financial or accounting officer of the
Company.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the sum, without duplication, of (i) the consolidated interest
expense of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), (ii) the consolidated interest expense of such Person
and its Restricted Subsidiaries that was capitalized during such period, (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Restricted Subsidiaries or secured by a Lien on assets
of such Person or one of its Restricted Subsidiaries (whether or not such
Guarantee or Lien is called upon), and (iv) the product of (a) all dividend
payments, whether or not in cash, on any series of Disqualified Stock of such
Person or any of its Restricted Subsidiaries, other than dividend payments on
Equity Interests payable solely in Equity Interests of the Company, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case on a consolidated basis and in
accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the such Person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income of
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<PAGE> 11
any Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash by the referent Person to the Company
or a Wholly Owned Restricted Subsidiary thereof, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Restricted Subsidiary of
that Net Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date hereof in the
book value of any asset owned by such Person or a consolidated Restricted
Subsidiary of such Person, (y) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Restricted Subsidiaries (except, in
each case, Permitted Investments), and (z) all unamortized debt discount and
expense and unamortized deferred charges as of such date, all of the foregoing
determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date hereof or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Facilities" means those certain credit facilities at the date
hereof between the Company and certain lenders providing for revolving credit on
the security of Mortgages Receivable in an aggregate amount up to $115.0
million, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, in each case as
amended, modified, restated, renewed, increased, supplemented, refunded,
replaced or
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refinanced from time to time, whether with the same or different lenders and in
the same or different amounts.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Notes" means certificated Notes registered in the name of
the Holder thereof and issued in the form of Exhibit A hereto except that such
Note shall not bear the Global Note Legend and shall not have the "Schedule of
Exchanges of Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Senior Debt" means (i) any Indebtedness outstanding under
the Credit Facilities and (ii) any other Senior Debt permitted under this
Indenture, in either case in which the principal amount of which is $25.0
million or more and that has been designated by the Company as "Designated
Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 360 days after the date on which the Notes mature.
"Domestic Restricted Subsidiary" means a Restricted Subsidiary that is
not formed, incorporated or organized in a jurisdiction outside the United
States.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means up to $10.0 million in aggregate
principal amount of Indebtedness of the Company and its Restricted Subsidiaries
(other than Indebtedness under the Credit Facilities) in existence on the date
hereof, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date hereof.
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"Global Note" means a Note in the form of Exhibit A bearing the Global
Note Legend and with the "Schedule of Exchanges of Interests in the Global Note"
attached thereto.
"Global Note Legend" means the legend contained in footnote 1 of
Exhibit A which is to be placed on Global Notes.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America and the payment for which the United
States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) Silverleaf Hotels, Inc., a Texas
corporation, Silverleaf Travel, Inc., a Texas corporation, Silverleaf
Berkshires, Inc., a Texas corporation, Bull's Eye Marketing, Inc., a California
corporation, Condominium Builders, Inc., a Texas corporation, Silverleaf Resort
Acquisitions, Inc., a Texas corporation, Database Research, Inc., a Texas
corporation, and Villages Land, Inc., a Texas corporation and Bull's Eye
Marketing, Inc., a Delaware corporation and (ii) any other Subsidiary that
executes a Subsidiary Guarantee in accordance with the provisions of this
Indenture, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be (i) the
accreted value thereof, in the case of any Indebtedness that does not require
current payments of interest, and (ii) the
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<PAGE> 14
principal amount thereof, together with any interest thereon that is more than
30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Initial Notes" means the first $75.0 million in aggregate principal
amount of Notes issued under this Indenture.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP,
in each case excluding (i) Mortgages Receivable and (ii) receivables from
"Sampler" contracts or lot or condominium sales. If the Company or any
Restricted Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Restricted Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Restricted Subsidiary not sold
or disposed of in an amount determined as provided in the final paragraph of
Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Make-Whole Amount" means, with respect to any Note, an amount equal to
the excess, if any, of (a) the present value of the remaining principal,
premium, and interest payments that would be payable with respect to such Note
if such Note were redeemed on April 1, 2003, computed using a discount rate
equal to the Treasury Rate plus 75 basis points, over (b) the outstanding
principal amount of such Note.
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<PAGE> 15
"Make-Whole Average Life" means, with respect to any date of
acceleration of Notes, the number of years (calculated to the nearest
one-twelfth) from such date to April 1, 2003.
"Make-Whole Price" means, with respect to any Note, the greater of (a)
the sum of the principal amount of and Make-Whole Amount with respect to such
Note, and (b) the redemption price of such Note on April 1, 2003.
"Mortgages Receivable" means the gross principal amount of notes
receivable of the Company and its Restricted Subsidiaries secured by Liens on
Vacation Intervals (including notes receivable secured by Vacation Intervals or
other comparable timeshare interests acquired by the Company and its Restricted
Subsidiaries), determined in accordance with GAAP.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on (or tax benefit from) such gain
or loss, realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain or
loss, together with any related provision for taxes on (or tax benefit from)
such extraordinary or nonrecurring gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than the Credit Facilities or other
revolving Indebtedness if there is no corresponding permanent reduction in
commitments with respect thereto) secured by a Lien on the asset or assets that
were the subject of such Asset Sale and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its
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<PAGE> 16
stated maturity; and (iii) as to which the lenders have been notified in writing
that they will not have any recourse to the stock or assets of the Company or
any of its Restricted Subsidiaries.
"Note Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Notes" means the 10 1/2% Senior Subordinated Notes due 2008, including
the Initial Notes and any Additional Notes, which for all purposes of this
Indenture (including without limitation waivers, amendments, redemptions and
offers to purchase), shall be treated as a single class.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering and sale of the Notes by the Company
pursuant to a prospectus dated as of April 2, 1998, contained in the
Registration Statement.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Restricted Subsidiary of the Company in
a Person, if as a result of such Investment (i) such Person becomes a Wholly
Owned Restricted Subsidiary of the Company and a Guarantor that is engaged in
the same business as the Company and its Restricted Subsidiaries were engaged in
on the date hereof or a Related Business, or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Wholly Owned
Restricted Subsidiary of the Company that is a Guarantor and that is engaged in
the same line of business as the Company and its Restricted Subsidiaries were
engaged in on the date hereof or a Related Business; (d) any Restricted
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof;
(e) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of
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the Company; (f) payroll, travel, and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of business; (g)
loans or advances to employees made in the ordinary course of business
consistent with past practices in an aggregate amount outstanding at any one
time not to exceed $500,000; (h) stock, obligations, or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or a Restricted Subsidiary; (i) any Investment acquired by the Company
or any of its Restricted Subsidiaries (1) in exchange for any other Investment
or receivable held by the Company of any such Restricted Subsidiary in
connection with or as a result of any bankruptcy, workout, reorganization or
recapitalization of the issuer of such other Investment or receivable or (2) as
a result of a foreclosure (or deed in lieu of) by the Company or any of its
Restricted Subsidiaries with respect to any secured Investment or other transfer
of title with respect to any secured Investment in default; (i) Hedging
Obligations permitted under Section 4.09 hereof; (j) all Investments existing on
the date hereof; (k) Investments by the Company or a Restricted Subsidiary in a
Club or Clubs in an aggregate amount outstanding at any one time not to exceed
$2.0 million; and (l) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (l) that are at the time
outstanding, not to exceed $5.0 million.
"Permitted Liens" means (i) Liens existing on the date hereof to the
extent and in the manner such Liens are in effect on such date; (ii) Liens
securing Senior Debt and Liens on assets securing Guarantees of Senior Debt, in
each case permitted to be incurred pursuant to this Indenture, (iii) Liens (if
any) securing the Notes and the Subsidiary Guarantees; (iv) Liens securing
Permitted Refinancing Indebtedness which is incurred to refinance any
Indebtedness which has been secured by a Lien permitted under this Indenture and
which has been incurred in accordance with the provisions of this Indenture,
provided, however, that such Liens are not materially less favorable to the
Holders and are not materially more favorable to the Lien Holder with respect to
such Liens than the Liens in respect of the Indebtedness being refinanced; (v)
Liens in favor of the Company or any Wholly Owned Restricted Subsidiary; (vi)
Liens on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company; (vii) Liens on property
existing at the time of acquisition thereof by the Company or any Restricted
Subsidiary of the Company, provided that such Liens were in existence prior to
the contemplation of such acquisition; (viii) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (ix)
Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (x) Liens on assets of Unrestricted
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<PAGE> 18
Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries; and
(xi) Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company with respect to obligations that do not
exceed $1.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the affected property or
materially impair the use thereof in the operation of business by the Company or
such Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness or
Disqualified Stock of the Company or any of its Restricted Subsidiaries issued
in exchange for, or the net proceeds of which are used to extend, refinance,
renew, replace, defease or refund other Indebtedness of the Company or any of
its Restricted Subsidiaries; provided that: (i) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date the same as or later than the final maturity date of, and
has a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iii) if the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Notes or the Subsidiary Guarantees, as applicable, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes
and the Subsidiary Guarantees, as applicable, on terms at least as favorable to
the Holders of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principal" means Robert E. Mead.
"Registration Statement" means the Registration Statement No. 333-47427
on Form S-1 relating to the Notes initially filed with the Commission on March
6, 1998 and all exhibits, schedules and amendments thereto.
"Related Business" means, at any time, any business related, ancillary
or complementary (as determined in good faith by the Board of Directors) to the
business conducted by the Company and its Restricted Subsidiaries on the date
hereof.
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"Related Party" with respect to the Principal means (A) the spouse or
any immediate family member of the Principal or (B) a trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding an 80% or more controlling interest of which
consist of the Principal and/or such other Persons referred to in the
immediately preceding clause (A).
"Responsible Officer," when used with respect to the Trustee, means any
Officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other Officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
Officers and also means, with respect to a particular corporate trust matter,
any other Officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (i) all Indebtedness outstanding under Credit
Facilities, (ii) any other Indebtedness permitted to be incurred by the Company
or a Restricted Subsidiary under the terms of this Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Notes or
Subsidiary Guarantees, as applicable, and (iii) all Obligations with respect to
the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Debt will not include (w) any liability for federal, state, local or other taxes
owed or owing by the Company, (x) any Indebtedness of the Company or any
Guarantor to the Company or any of their respective Subsidiaries or other
Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in
violation of this Indenture.
"Significant Restricted Subsidiary" of a Person means any Significant
Subsidiary that is a Restricted Subsidiary.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
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"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantees" means, individually and collectively, the
Guarantees given by the Guarantors pursuant to Article 11 hereof, including a
notation in the Notes substantially in the form attached hereto as Exhibit A-1.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Treasury Rate" means, at any time of computation, the yield to
maturity at such time (as compiled by and published in the most recent Federal
Reserve Statistical Release H.15(519), which has become publicly available at
least two business days prior to the date of acceleration of the Notes, or if
such Statistical Release is no longer published, any publicly available source
of similar market data) of United States Treasury securities with a constant
maturity most nearly equal to the Make-Whole Average Life; provided, however,
that if the Make-Whole Average Life is not equal to the constant maturity of the
United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the
Make-Whole Average Life is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (d) has not guaranteed or otherwise
directly or indirectly provided credit
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support for any Indebtedness of the Company or any of its Restricted
Subsidiaries; and (e) has at least one director on its Board of Directors that
is not a director or executive officer of the Company or any of its Restricted
Subsidiaries and has at least one executive officer that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries.
"Vacation Interval" means an interest entitling the holder to use, for
a limited period on an annual or other recurrent basis, a lodging unit, together
with associated privileges and rights, at a Company resort, including, without
limitation, a fee interest, a leasehold, a vendee's interest under a contract of
deed, or other interest based on a floating period or points based system.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction"...................................... 4.11
"Asset Sale Offer"........................................... 3.09
"Authentication Order"....................................... 2.02
"Change of Control Offer".................................... 4.15
"Change of Control Payment".................................. 4.15
"Change of Control Payment Date"............................. 4.15
"Covenant Defeasance"........................................ 8.03
</TABLE>
16
<PAGE> 22
<TABLE>
<S> <C>
"Event of Default"........................................... 6.01
"Excess Proceeds"............................................ 4.10
"incur"...................................................... 4.09
"Legal Defeasance"........................................... 8.02
"Offer Amount"............................................... 3.09
"Offer Period"............................................... 3.09
"Paying Agent"............................................... 2.03
"Permitted Debt"............................................. 4.09
"Purchase Date".............................................. 3.09
"Registrar".................................................. 2.03
"Restricted Payments"........................................ 4.07
</TABLE>
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:
"indenture securities" means the Notes and the Subsidiary Guarantees;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes and the Subsidiary Guarantees means the Company
and the Guarantors, respectively, and any successor obligor upon the Notes and
the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
17
<PAGE> 23
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor sections or rules
adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of
authentication in respect thereof shall be substantially in the form of
Exhibit A hereto, the terms of which are incorporated in and made part
of this Indenture. The Subsidiary Guarantees shall be substantially in
the form of Exhibit A-1, the terms of which are incorporated in and
made part of this Indenture. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Note
shall be dated the date of its authentication. The Notes shall be in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and
the Company, the Guarantors and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby. However, to the extent any
provision of any Note or Subsidiary Guarantee conflicts with the
express provisions of this Indenture, the provisions of this Indenture
shall govern and be controlling.
(b) Global Notes. Notes shall be issued initially in the form
of one or more Global Notes in definitive, fully registered form
without interest coupons, which shall be deposited on behalf of the
purchasers of the Notes represented thereby with the Trustee,
18
<PAGE> 24
at the Corporate Trust Office of the Trustee, as custodian for the
Depositary (or with such other custodian as the Depositary may direct),
and registered in the name of Cede & Co., as nominee of the Depositary,
duly executed by the Company and authenticated and delivered by the
Trustee as hereinafter provided. Each Global Note shall represent such
of the outstanding Notes as shall be specified therein and each shall
provide that it shall represent the aggregate principal amount of the
outstanding Notes from time to time endorsed thereon and that the
aggregate principal amount of outstanding Notes represented thereby may
from time to time be reduced or increased, as appropriate, to reflect
exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate amount of
outstanding Notes represented thereby shall be made by the Trustee or
the Note Custodian, at the direction of the Trustee.
(c) Certificated Securities. Except as provided in Section
2.06(a), owners of beneficial interests in Global Notes will not be
entitled to receive physical delivery of Notes in certificated form.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and may
be in facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company or any of their respective Subsidiaries.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be
presented or surrendered for registration of transfer or for exchange
("Registrar") and an office or agency where Notes may be presented for payment
("Paying Agent"). The Registrar shall keep a register of the Notes and of their
transfer and exchange. The Company may appoint one or more
19
<PAGE> 25
co-registrars and one or more additional paying agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company shall notify the Trustee in writing of the
name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such. The Company or any of its Subsidiaries may act as
Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent in connection with the Notes and to act as Note Custodian with
respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, and premium, if any, or interest on the Notes, and will notify the
Trustee of any default by the Company or any Guarantor 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 and to account for any assets
distributed. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent
(if other than the Company or a Subsidiary) shall have no further liability for
the money. If the Company, a Guarantor or a Subsidiary acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the Holders
or the Trustee all money held by it as Paying Agent. Upon any bankruptcy or
reorganization proceedings relating to the Company or any Guarantor, the Trustee
shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company and/or the Guarantors shall cause the Registrar
to furnish to the Trustee at least seven Business Days before each interest
payment date and at such other times as the Trustee may request in writing, a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of the Holders of Notes and the Company and the
Guarantors shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. Global Notes may
not be transferred as a whole except by the Depositary to a nominee of
the Depositary, by a
20
<PAGE> 26
nominee of the Depositary to the Depositary or to another nominee of
the Depositary, or by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. Global Notes may
be exchanged for Definitive Notes only if (i) the Depositary (x)
notifies the Company that it is unwilling or unable to continue as
depositary for the Global Notes and the Company thereupon fails to
appoint a successor depositary within 90 days or (y) has ceased to be a
clearing agency registered under the Exchange Act, (ii) the Company, in
its sole discretion, determines that the Global Notes (in whole but not
in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee or (iii) there shall have
occurred and be continuing a Default or an Event of Default with
respect to the Notes. Upon the occurrence of any of the preceding
events in (i), (ii) or (iii) above, (x) the Company shall execute and,
upon receipt of an Authentication Order, the Trustee shall authenticate
and deliver, Definitive Notes in an aggregate principal amount equal to
the principal amount of the Global Notes in exchange for such Global
Notes, and (y) Definitive Notes shall be issued in such names and
issued in any approved denominations as the Depositary shall instruct
the Trustee. At such time as all beneficial interests in Global Notes
have been exchanged for Definitive Notes pursuant to this Section
2.06(a), redeemed, repurchased or cancelled, all Global Notes shall be
returned to or retained and cancelled by the Trustee in accordance with
Section 2.11 hereof. Global Notes also may be exchanged or replaced, in
whole or in part, as provided in Sections 2.07 and 2.10 hereof. A
Global Note may not be exchanged for another Note except as provided in
this Section 2.06(a);
(b) Transfer and Exchange of Beneficial Interests in the
Global Notes. Nothing in this Indenture precludes the transfer and
exchange of beneficial interests in the Global Notes by lawful means
and in accordance with any applicable provisions of this Indenture and
any applicable procedures of the Depositary.
(c) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and
exchanges, subject to this Section 2.06, the Company shall
execute and, upon receipt of an Authentication Order, the
Trustee shall authenticate Global Notes and Definitive Notes
upon the Company or the Registrar's request.
(ii) No service charge shall be made to a Holder of a
beneficial interest in a Global Note or to a Holder of a
Definitive Note for any registration of transfer or exchange,
but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange or transfer
pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05
hereof).
(iii) The Registrar shall register the transfer or
make the exchange if its requirements for such transactions
are met; provided, however, that any Note
21
<PAGE> 27
presented or surrendered for registration of transfer or
exchange shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar
and the Trustee duly executed by the Holder thereof or by his
attorney duly authorized in writing.
(iv) All Global Notes and Definitive Notes issued
upon any registration of transfer or exchange of Global Notes
or Definitive Notes shall be the valid Obligations of the
Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or
Definitive Notes surrendered upon such registration of
transfer or exchange.
(v) The Company shall not be required (A) to issue,
to register the transfer of or to exchange any Notes during a
period beginning at the opening of business 15 days before the
day of any selection of Notes for redemption under Section
3.02 hereof and ending at the close of business on the day of
selection or (B) to register the transfer of or to exchange
any Note so selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in
part.
(vi) Prior to due presentment for the registration of
a transfer of any Note, the Trustee, any Agent and the Company
may deem and treat the Person in whose name any Note is
registered as the absolute owner of such Note for the purpose
of receiving payment of principal of and interest on such
Notes and for all other purposes, and none of the Trustee, any
Agent or the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section
2.02 hereof.
(viii) All certifications, certificates and Opinions
of Counsel required to be submitted to the Registrar pursuant
to this Section 2.06 to effect a registration of transfer or
exchange may be submitted by facsimile.
SECTION 2.07. REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
22
<PAGE> 28
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation and those described in this Section as not outstanding. Except as
set forth in Section 2.09 hereof, a Note does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Note; however,
Notes held by the Company or a Subsidiary of the Company shall not be deemed to
be outstanding for purposes of Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
23
<PAGE> 29
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (a) the clause of this Indenture pursuant to
which the redemption shall occur, (b) the redemption date, (c) the principal
amount of Notes to be redeemed and (d) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of
24
<PAGE> 30
partial redemption by lot, the particular Notes to be redeemed shall be
selected, unless otherwise provided herein, not less than 30 nor more than 60
days prior to the redemption date by the Trustee from the outstanding Notes not
previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting
25
<PAGE> 31
that the Trustee give such notice and setting forth the information to be stated
in such notice as provided in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07,
the Company shall not have the option to redeem the Notes pursuant to
this Section 3.07 prior to April 1, 2003. Thereafter, the Company shall
have the option to redeem the Notes, in whole or in part, upon not less
than 30 nor more than 60 days' notice at the redemption prices
(expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest thereon, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning
on April 1 of the years indicated below:
26
<PAGE> 32
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003.......................................................... 105.250%
2004.......................................................... 103.500%
2005.......................................................... 101.750%
2006 and thereafter........................................... 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this
Section 3.07, at any time prior to April 1, 2001, the Company may
redeem up to 33 1/3% of the aggregate principal amount of the Notes
with the net cash proceeds of one or more public offerings of its
common stock at a redemption price equal to 110.5% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to
the redemption date; provided that at least 66 2/3% of the initially
outstanding aggregate principal amount of Notes remains outstanding
immediately after the occurrence of such redemption and provided,
further that such redemption shall occur within 60 days of the date of
the closing of such offering and not prior to June 30, 1998.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.15 hereof, the Company
shall not be required to make mandatory redemption payments with respect to the
Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an offer to all Holders to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
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<PAGE> 33
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.09 and Section 4.10 hereof and the length of time the Asset
Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase
Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment,
any Note accepted for payment pursuant to the Asset Sale Offer shall
cease to accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to
an Asset Sale Offer may only elect to have Notes purchased in integral
multiples of $1,000 only;
(f) that Holders electing to have a Note purchased pursuant to
any Asset Sale Offer shall be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, or transfer by book-entry transfer, to the Company,
a depositary, if appointed by the Company, or a Paying Agent at the
address specified in the notice at least three days before the Purchase
Date;
(g) that Holders shall be entitled to withdraw their election
if the Company, the depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Note the Holder
delivered for purchase and a statement that such Holder is withdrawing
his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Company shall
select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000, or integral multiples thereof, shall
be purchased); and
(i) that Holders whose Notes were purchased only in part shall
be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions
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thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer
Amount has been tendered, all Notes tendered, and shall deliver to the Trustee
an Officers' Certificate stating that such Notes or portions thereof were
accepted for payment by the Company in accordance with the terms of this Section
3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall
promptly (but in any case not later than five days after the Purchase Date) mail
or deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Note, and the Trustee, upon written request
from the Company shall authenticate and mail or deliver such new Note to such
Holder, in a principal amount equal to any unpurchased portion of the Note
surrendered. Any Note not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof. The Company shall publicly announce the
results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess
of the then applicable interest rate on the Notes to the extent lawful; it shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of New
York (or at such other location where the Trustee maintains an office), an
office or agency (which may be an office of the Trustee or an affiliate of the
Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or
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agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York (or at such other location where the Trustee
maintains an office) for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03
hereof.
SECTION 4.03. REPORTS.
Whether or not required by the rules and regulations of the Securities
and Exchange Commission (the "Commission"), so long as any Notes are
outstanding, the Company and the Guarantors shall furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K on behalf
of the Company and the Guarantors were such Forms required to be filed in
consequence of the Notes, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and its consolidated
Subsidiaries (showing in reasonable detail, either on the face of the financial
statements or in the footnotes thereto and in Management's Discussion and
Analysis of Financial Condition and Results of Operations, the financial
condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company), and, with respect to the annual
information only, a report thereon by the Company's independent certified public
accountants, and (ii) all current reports that would be required to be filed
with the Commission on Form 8-K if the Company were required to file such
reports, in each case, within the time periods specified in the SEC's rules and
regulations. In addition, whether or not required by the rules and regulations
of the SEC, the Company shall file a copy of all such information with the
Commission for public availability within the time periods specified in the
SEC's rules and regulations. The Company and the Guarantors shall at all times
comply with TIA ss. 314(a).
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company and each Guarantor (to the extent that such
Guarantor is so required under the TIA) shall deliver to the Trustee,
within 90 days after the end of each fiscal year, an Officers'
Certificate stating that a review of the activities of the Company and
its Subsidiaries during the preceding fiscal year has been made under
the supervision
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of the signing Officers with a view to determining whether the Company
has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has
kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she
may have knowledge and what action the Company is taking or proposes to
take with respect thereto) and that to the best of his or her knowledge
no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the
Notes is prohibited or if such event has occurred, a description of the
event and what action the Company is taking or proposes to take with
respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public
Accountants, the year-end financial statements delivered pursuant to
Section 4.03 above shall be accompanied by a written statement of the
Company's independent public accountants (who shall be a firm of
established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has
come to their attention that would lead them to believe that the
Company has violated any provisions of Article 4 or Article 5 hereof
or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants
shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer
becoming aware of any Default or Event of Default, an Officers'
Certificate specifying such Default or Event of Default and what action
the Company is taking or proposes to take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company and each of the Guarantors covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any
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such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company) or
to the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company and dividends and distributions payable solely to the Company or to
a Guarantor); (ii) purchase, redeem or otherwise acquire or retire for value
(including without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company; (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinate to the Notes or the Subsidiary Guarantees,
except a payment of interest or principal at Stated Maturity; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted Payment
had been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Consolidated Coverage Ratio test set forth in the first
paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date hereof (excluding Restricted
Payments permitted by clause (ii) of the next succeeding paragraph), is
less than the sum of (i) 50% of the Consolidated Net Income of the
Company for the period (taken as one accounting period) from the date
hereof to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of
such Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus (ii) 100% of the
aggregate net cash proceeds received by the Company from the issue or
sale since the date of this Indenture of Equity Interests of the
Company (other than Disqualified Stock) or of Disqualified Stock or
debt securities of the Company that have been converted into or
exchanged for such Equity Interests (other than Equity Interests (or
Disqualified Stock
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or debt securities) sold to a Restricted Subsidiary of the Company and
other than Disqualified Stock or debt securities that have been
converted into or exchanged for Disqualified Stock), plus (iii) to the
extent that any Unrestricted Subsidiary is redesignated as a Restricted
Subsidiary after the date hereof, the fair market value of the
Company's Investment in such Subsidiary as of the date of such
redesignation; provided, however, that the foregoing amount shall not
exceed the amount of Investments made (and treated as a Restricted
Investment) by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary, plus (iv) an amount equal to the net reduction
in Investments (other than Permitted Investments) made by the Company
or any Restricted Subsidiaries in any Person resulting from dividends
or distributions on, or repurchases or redemptions of, such Investments
by such Person, net cash proceeds realized upon the sale of such
Investment to an unaffiliated purchaser, reductions in obligations of
such Person guaranteed by, and repayments of loans or advances or other
transfers of assets by such Person to, the Company or a Restricted
Subsidiary, provided, however, that no amount shall be included under
this clause (iv) to the extent it is already included in Consolidated
Net Income.
The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Company) of, other Equity
Interests of the Company (other than any Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase or other acquisition of subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the
defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness with Excess Proceeds remaining after an Asset Sale Offer; (v) the
payment of any dividend by a Restricted Subsidiary of the Company to the holders
of its respective Equity Interests on a pro rata basis; (vi) repurchases of
Equity Interests of the Company deemed to occur upon exercise of employee
options, warrants or rights if such Equity Interests represent a portion of the
exercise price of or withholding tax due upon exercise of such options, warrants
or rights; (vii) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any Restricted Subsidiary
held by any employee or former employee pursuant to the terms of any of the
Company's or such Restricted Subsidiaries' benefit plans or arrangements;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $1.0 million in any
twelve-month period and $5.0 million in the aggregate and no Default or Event of
Default shall have occurred and be continuing immediately after such
transaction; and (viii) additional Restricted Payments in an amount not to
exceed $5.0 million in the aggregate.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or
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issued by the Company or such Restricted Subsidiary, as the case may be,
pursuant to the Restricted Payment. The fair market value of any non-cash
Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $1.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this Section 4.07 were computed, which
calculations may be based upon the Company's latest available financial
statements, together with a copy of any fairness opinion or appraisal required
by this Indenture.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a)(i) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or
(B) with respect to any other interest or participation in, or measured by, its
profits or (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (b) make loans or advances to the Company or any of its
Restricted Subsidiaries or (c) transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (i) Existing Indebtedness as in
effect on the date of this Indenture, (ii) this Indenture and the Notes, (iii)
applicable law, (iv) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of this Indenture to be incurred, (v) by
reason of customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (vi) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (c) above on the property
so acquired, (vii) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced, (viii) restrictions contained in
security agreements or mortgages to the extent such restrictions restrict the
transfer of the property or assets subject to such security agreements or
mortgages, (ix) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all of the capital stock or assets of such Restricted Subsidiary
pending the closing of the sale of such sale or disposition, or (x) any
restriction in any agreement that is not more restrictive than the restrictions
in the Credit Facilities as in effect on the date of this Indenture and such
restrictions contained in the Credit Facilities on the date of this Indenture.
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SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and that the Company and the Guarantors shall not issue any Disqualified
Stock and the Company shall not permit any of its Restricted Subsidiaries which
are not Guarantors to issue any shares of preferred stock other than to the
Company or to a Wholly Owned Restricted Subsidiary which is a Guarantor,
provided that any subsequent issuance or transfer of Capital Stock that results
in such Guarantor ceasing to be a Wholly Owned Restricted Subsidiary or any
subsequent transfer of such preferred stock (other than to the Company or
another Wholly Owned Restricted Subsidiary which is a Guarantor) will be deemed,
in each case, to be the issuance of such preferred stock by the issuer thereof;
provided, however, that the Company and any Guarantor may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock if the
Consolidated Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2.0 to 1.0,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The foregoing limitations shall not apply to the incurrence of any of
the following items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company or its Restricted
Subsidiaries of Indebtedness secured by Mortgages Receivable
(including pursuant to the Credit Facilities) in an aggregate
principal amount (with letters of credit being deemed to have
a principal amount equal to the maximum potential liability of
the Company and its Restricted Subsidiaries thereunder)
outstanding after giving effect to such incurrence not to
exceed 70% of the Mortgages Receivable of the Company or such
Restricted Subsidiary at the date of incurrence;
(ii) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness represented by Capital
Lease Obligations, mortgage financings or purchase money
obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of
construction or improvement of property, plant, equipment,
land or inventory used or held for sale in the business of the
Company or such Restricted Subsidiary, in an aggregate
principal amount outstanding for the Company and its
Restricted Subsidiaries not to exceed $5.0 million at any time
outstanding;
(iii) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness in connection with the
acquisition of assets or a new
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Restricted Subsidiary; provided that such Indebtedness was
incurred by the prior owner of such assets or such Restricted
Subsidiary prior to such acquisition by the Company or one of
its Restricted Subsidiaries and was not incurred in connection
with, or in contemplation of, such acquisition by the Company
or one of its Restricted Subsidiaries; and provided further
that the principal amount (or accreted value, as applicable)
of such Indebtedness, together with any other outstanding
Indebtedness incurred pursuant to this clause (iii), does not
exceed $5.0 million;
(iv) the incurrence by the Company or any of its
Restricted Subsidiaries of Permitted Refinancing Indebtedness
in exchange for, or the net proceeds of which are used to
refund, refinance or replace Existing Indebtedness or
Indebtedness that was permitted by this Indenture to be
incurred;
(v) the incurrence by the Company or any of its
Restricted Subsidiaries of intercompany Indebtedness between
or among the Company and any of its Restricted Subsidiaries;
provided, however, that (A) if the Company or a Guarantor is
the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of
all Obligations with respect to the Notes and the Subsidiary
Guarantees and (B)(i) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Restricted
Subsidiary and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company
or such Restricted Subsidiary, as the case may be;
(vi) the incurrence by the Company of Hedging
Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture
to be outstanding;
(vii) the guarantee by the Company or any Restricted
Subsidiary of Indebtedness of the Company or a Restricted
Subsidiary that was permitted to be incurred by another
provision of this covenant;
(viii) the incurrence by the Company's Unrestricted
Subsidiaries of Non-Recourse Debt, provided, however, that if
any such Indebtedness ceases to be Non-Recourse Debt of an
Unrestricted Subsidiary, such event shall be deemed an
incurrence of Indebtedness by a Restricted Subsidiary of the
Company;
(ix) the incurrence by the Company and the Guarantors
of Indebtedness represented by the Notes and the Subsidiary
Guarantees thereof and this Indenture in an aggregate
principal amount up to $75.0 million;
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(x) the incurrence by the Company or any of its
Restricted Subsidiaries of Existing Indebtedness of the
Company or any such Restricted Subsidiary;
(xi) the incurrence by the Company or any of its
Restricted Subsidiaries in the ordinary course of business of
Indebtedness (A) in respect of performance, completion, surety
or similar bonds or guarantees (including pursuant to letters
of credit) in connection with new construction, development,
leasing of billboards, or compliance with federal, state or
local law, or (B) in respect of bankers acceptances, letters
of credit, appeal or similar bonds other than pursuant to
clause (A) in an aggregate amount at any time outstanding for
the Company and its Restricted Subsidiaries not to exceed $5.0
million;
(xii) the incurrence of Indebtedness of the Company
or any Restricted Subsidiary arising from agreements providing
for indemnification, adjustment of purchase price or similar
obligations in connection with the disposition of any assets
of the Company or any such Restricted Subsidiary (other than
Guarantees of Indebtedness incurred by any Person acquiring
all or any portion of such assets for the purpose of financing
such acquisition), in principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted
Subsidiary in connection with such disposition; and
(xiii) the incurrence by the Company or any of its
Restricted Subsidiaries of additional Indebtedness in an
aggregate principal amount (or accreted value, as applicable)
at any time (including all indebtedness incurred to replace,
refund or refinance any such indebtedness) outstanding for the
Company and its Restricted Subsidiaries not to exceed $7.5
million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xiii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest, the accretion of accreted
value and the payment of interest in the form of additional Indebtedness will
not be deemed to be an incurrence of Indebtedness for purposes of this Section
4.09.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered
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to the Trustee) of the assets or Equity Interests issued or sold or otherwise
disposed of and (ii) at least 75% of the consideration therefor received by the
Company or such Restricted Subsidiary is in the form of cash; provided that the
amount of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any guarantee thereof) that are assumed by
the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Restricted Subsidiary from further liability
and (y) any securities, notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are promptly converted
by the Company or such Restricted Subsidiary into cash (to the extent of the
cash received), shall be deemed to be cash for purposes of this Section 4.10.
Any Restricted Payment that is permitted by Section 4.07 hereof will not be
deemed to be an Asset Sale.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company (or such Restricted Subsidiary) may apply such Net Proceeds,
at its option, either (a) to repay any Senior Debt of the Company or a
Guarantor, or (b) to the acquisition of a controlling interest in another
business, the making of a capital expenditure or the acquisition of other
long-term assets, in each case, in the same line of business as the Company and
its Restricted Subsidiaries were engaged on the date hereof or in a Related
Business. Pending the final application of any such Net Proceeds, the Company
may temporarily reduce revolving Senior Debt or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
Within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $5.0 million, the Company shall commence a pro rata Asset Sale Offer
pursuant to Section 3.09 hereof to purchase the maximum principal amount of
Notes that may be purchased out of the Excess Proceeds at an offer price in cash
in an amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of repurchase, in accordance with
the procedures set forth in Section 3.09 hereof. To the extent that the
aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use any remaining Excess Proceeds for any
purpose not otherwise prohibited by this Indenture. If the aggregate principal
amount of Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis. Upon completion of such offer to purchase, the amount of Excess Proceeds
shall be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
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Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing; provided that (x) any employment, compensation or indemnity agreement
entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business and consistent with the past practice of the Company
or such Restricted Subsidiary, (y) transactions between or among the Company
and/or its Restricted Subsidiaries and (z) Restricted Payments that are
permitted by Section 4.07 hereof, in each case, shall not be deemed Affiliate
Transactions, and provided further that transactions between the Company or a
Restricted Subsidiary and any Club in the ordinary course of business shall not
be subject to clause (ii)(b) above.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind (other than Permitted Liens) upon any of
their property or assets, now owned or hereafter acquired, or any income or
profits therefrom (or assign or convey any right to receive income therefrom),
which secures Indebtedness or trade payables that rank pari passu with or
subordinate to the Notes or the Subsidiary Guarantees, as applicable, unless (i)
if such Lien secures Indebtedness or trade payables that ranks pari passu with
the Notes or Subsidiary Guarantees, as applicable, the Notes and such Subsidiary
Guarantees are secured on an equal and ratable basis with the obligation so
secured until such time as such obligation is no longer secured by a Lien or
(ii) if such Lien secures Indebtedness or trade payables that is subordinated to
the Notes or Subsidiary Guarantees, as applicable, such Lien shall be
subordinated to a Lien granted to the Holders of Notes and Subsidiary Guarantees
on the same collateral as that securing such Lien to the same extent as such
Indebtedness, as applicable, until such obligation is no longer secured by a
lien.
SECTION 4.13. BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in any business other than the same line of business in
which the Company and its Restricted Subsidiaries are engaged on the date hereof
or a Related Business, except to such extent as would not be material to the
Company and its Restricted Subsidiaries taken as a whole.
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SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Restricted Subsidiaries; provided, however,
that the Company shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of its
Restricted Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries, taken as a whole, and that the loss
thereof is not adverse in any material respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company
shall make an offer (a "Change of Control Offer") to each Holder to
repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of each Holder's Notes at a purchase price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase (the "Change of
Control Payment"). Within ten days following any Change of Control, the
Company shall mail a notice to each Holder stating: (1) that the Change
of Control Offer is being made pursuant to this Section 4.15 and that
all Notes tendered will be accepted for payment; (2) the purchase price
and the purchase date, which shall be no earlier than 30 days and no
later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"); (3) that any Note not tendered will continue to
accrue interest; (4) that, unless the Company defaults in the payment
of the Change of Control Payment, all Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date; (5) that Holders electing to
have any Notes purchased pursuant to a Change of Control Offer will be
required to surrender the Notes, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes completed, to the
Paying Agent at the address specified in the notice prior to the close
of business on the third Business Day preceding the Change of Control
Payment Date; (6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of
business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes
delivered for purchase, and a statement that such Holder is withdrawing
his election to have the Notes purchased; and (7) that Holders whose
Notes are being purchased only in part will be issued new Notes equal
in principal amount to the unpurchased portion of the Notes
surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof. The Company shall
comply with the requirements of Rule 14e-1 under the Exchange Act and
any other
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securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Notes
as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall,
to the extent lawful, (1) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (2)
deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered and (3)
deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the aggregate principal
amount of Notes or portions thereof being purchased by the Company. The
Paying Agent shall promptly mail to each Holder of Notes so tendered
the Change of Control Payment in an amount equal to the purchase price
for the Notes, and the Trustee shall promptly authenticate and mail (or
cause to be transferred by book entry) to each Holder a new Note equal
in principal amount to any unpurchased portion of the Notes surrendered
by such Holder, if any; provided, that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. The Company
shall publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section
4.15, the Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance
with the requirements set forth in this Section 4.15 applicable to a
Change of Control Offer made by the Company and purchases all Notes
validly tendered and not withdrawn under such Change of Control Offer.
(d) Notwithstanding the foregoing, prior to complying with the
provisions of this Section 4.15, but in any event within 90 days
following a Change of Control, the Company will either repay all
outstanding Senior Debt or obtain the requisite consents, if any, under
all agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this Section 4.15.
SECTION 4.16. SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company may enter into a sale and leaseback transaction if (i) the Company
could have (a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the Consolidated
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof and
(b) incurred a Lien to secure such Indebtedness pursuant to Section 4.12 hereof,
(ii) the gross cash proceeds of such sale and leaseback transaction are at least
equal to the fair market value (as determined in good faith by the Board of
Directors and set forth in an Officers' Certificate delivered to the Trustee) of
the property that is the subject of such sale and leaseback transaction, and
(iii) the transfer of assets in such sale and leaseback transaction is permitted
by, and the
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Company applies the proceeds of such transaction in compliance with the
provisions of Section 4.10 hereof.
SECTION 4.17. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY
OWNED RESTRICTED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Wholly Owned
Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly Owned Restricted Subsidiary
of the Company to any Person (other than to the Company or a Wholly Owned
Restricted Subsidiary that is a Guarantor), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of such
Wholly Owned Restricted Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with Section 4.10 hereof, and (ii) will not permit any Wholly Owned Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company that is a Guarantor.
SECTION 4.18. DESIGNATION OF A SUBSIDIARY AS AN UNRESTRICTED SUBSIDIARY.
A Subsidiary is a Restricted Subsidiary unless designated as an
Unrestricted Subsidiary. The Board of Directors of the Company may designate any
Restricted Subsidiary to be an Unrestricted Subsidiary if at the time of such
designation: (a) all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated are deemed to be a Restricted Payment at the time of such designation
(all such outstanding Investments will be deemed to constitute an amount equal
to the greatest of (i) the net book value of such Investments at the time of
such designation, (ii) the fair market value of such Investments at the time of
such designation and (iii) the original fair market value of such Investments at
the time they were made), and such Restricted Payment is permitted at such time
under Section 4.07 hereof; (b) giving pro forma effect thereto as if such
designation had occurred at the beginning of the Company's most recently
completed four fiscal quarters for which internal financial statements are
available preceding the date of such designation, the pro forma Consolidated
Coverage Ratio for such period is greater than the historical Consolidated
Coverage Ratio for such period; (c) no Default or Event of Default shall have
occurred and be continuing immediately preceding such designation and giving pro
forma effect thereto or would occur as a consequence thereof; and (d) such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. In the event that a Restricted Subsidiary becomes an Unrestricted
Subsidiary in accordance with this paragraph, then such Restricted Subsidiary
shall be released from its obligations under its Subsidiary Guarantee in
accordance with Section 11.04 hereof.
The Board of Directors of the Company may redesignate any Unrestricted
Subsidiary to be a Restricted Subsidiary, if at the time of such redesignation:
(x) giving pro forma effect to the redesignation and incurrence of Indebtedness
of the Unrestricted Subsidiary (if any) as if they occurred at the beginning of
the Company's most recently completed four fiscal quarters for
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which internal financial statements are available preceding the date of such
redesignation, (i) any Indebtedness of such Unrestricted Subsidiary (including
any Non-Recourse Debt) could be incurred pursuant to the Consolidated Coverage
Ratio test set forth in the first paragraph of Section 4.09 hereof and (ii) the
pro forma Consolidated Coverage Ratio for such period is greater than the
historical Consolidated Coverage Ratio for such period; (y) the newly
redesignated Domestic Restricted Subsidiary executes and delivers a Subsidiary
Guarantee and an Opinion of Counsel; and (z) no Default or Event of Default
shall have occurred and be continuing immediately preceding such redesignation
and giving pro forma effect thereto or would occur as a consequence thereof.
Any such designation or redesignation by the Board of Directors shall
be evidenced to the Trustee by filing with the Trustee a certified copy of the
board resolution giving effect to such designation or redesignation and an
Officers' Certificate certifying that such designation or redesignation complied
with the foregoing conditions. If any Unrestricted Subsidiary becomes a
Restricted Subsidiary, such Subsidiary shall be subject to the provisions of
Article 11 hereof. If, at any time, any Unrestricted Subsidiary would fail to
meet the definition of an Unrestricted Subsidiary, it shall thereafter cease to
be an Unrestricted Subsidiary for purposes of this Indenture. If the
Unrestricted Subsidiary at such time would not be permitted to be redesignated a
Restricted Subsidiary, the Company shall be in default of this Section 4.18.
SECTION 4.19. LIMITATION ON STATUS AS INVESTMENT COMPANY.
The Company and its Restricted Subsidiaries shall take all actions (and
refrain from taking all actions) necessary to ensure that neither the Company
nor any of its Restricted Subsidiaries will be required to register as an
"investment company" (as that term is defined in the Investment Company Act of
1940, as amended), or will otherwise become subject to regulation under the
Investment Company Act.
SECTION 4.20. NO SENIOR SUBORDINATED DEBT.
Notwithstanding the provisions of Section 4.09 hereof, (i) the Company
shall not incur, create, issue, assume, guarantee or otherwise become liable for
any Indebtedness that is subordinate or junior in right of payment to any Senior
Debt and senior in any respect in right of payment to the Notes, and (ii) no
Guarantor shall incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
any Senior Debt and senior in any respect in right of payment to the Subsidiary
Guarantees. No Indebtedness shall be deemed to be Senior Debt solely because it
is secured and no Indebtedness shall be deemed to be subordinated solely because
it is convertible into Equity Interests.
SECTION 4.21. NO AMENDMENT OF SUBORDINATION PROVISIONS.
Without the consent of the Holders of at least 75% in aggregate
principal amount of the Notes then outstanding, the Company will not amend,
modify or alter the provisions of Article 10 of this Indenture in any way that
will adversely affect the rights of Holders of Notes.
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SECTION 4.22. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or not
the Company is the surviving corporation) or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia, (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company pursuant to a
supplemental indenture under the Notes and this Indenture in a form reasonably
satisfactory to the Trustee, (iii) immediately after such transaction, no
Default or Event of Default exists and (iv) except in the case of a merger of
the Company with or into a Wholly Owned Restricted Subsidiary of the Company,
the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) shall have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) shall, immediately after such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Consolidated Coverage Ratio
test set forth in the first paragraph of Section 4.09 hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with
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which the Company is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted for
(so that from and after the date of such consolidation, merger, sale, lease,
conveyance or other disposition, the provisions of this Indenture referring to
the "Company" shall refer instead to the successor corporation and not to the
Company), and may exercise every right and power of the Company under this
Indenture with the same effect as if such successor Person had been named as the
Company herein; provided, however, that the predecessor Company shall not be
relieved from the obligation to pay the principal of and interest on the Notes
except in the case of a sale of all of the Company's assets that meets the
requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest
on the Notes (whether or not prohibited by the subordination provisions
hereof) and such default continues for a period of 30 days;
(b) the Company defaults in the payment when due of principal
of or premium, if any, on the Notes (whether or not prohibited by the
subordination provisions hereof) when the same becomes due and payable
at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise;
(c) the Company fails to comply for 30 days after notice from
the Trustee or the Holders of at least 25% in principal amount of the
then outstanding Notes with any of the provisions of Section 4.07,
4.09, 4.10, 4.15 or 5.01 hereof;
(d) the Company fails to observe or perform any other
covenant, representation, warranty or other agreement in this Indenture
or the Notes for 60 days after notice to the Company by the Trustee or
the Holders of at least 25% in principal amount of the then outstanding
Notes;
(e) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company
or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries),
whether such Indebtedness or guarantee now exists, or is created after
the date of this Indenture, which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b)
results in the acceleration of such
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Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated,
aggregates $5.0 million or more; provided, that in the case of any such
Payment Default under clause (a) such default continues beyond the
lesser of 30 days or the longest period for cure provided in any such
Indebtedness as to which a Payment Default exists, or in the case of
any acceleration of Indebtedness described in clause (b), such
Indebtedness is not discharged or such acceleration cured, waived,
rescinded or annulled within the lesser of 30 days after acceleration
or the longest period for cure provided in any such Indebtedness which
has been accelerated;
(f) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction
against the Company or any of its Restricted Subsidiaries and such
judgment or judgments remain undischarged for a period (during which
execution shall not be effectively stayed) of 60 days, provided that
the aggregate of all such undischarged judgments exceeds $5.0 million;
(g) except as permitted by this Indenture, any Subsidiary
Guarantee shall be held in any judicial proceeding to be unenforceable
or invalid or shall cease for any reason to be in full force and effect
or any Guarantor, or any Person acting on behalf of any Guarantor,
shall deny or disaffirm its obligations under its Subsidiary Guarantee;
(h) the Company, any Significant Restricted Subsidiary, or any
group of Restricted Subsidiaries that, taken as a whole, would
constitute a Significant Restricted Subsidiary, pursuant to or within
the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case,
(iii) consents to the appointment of a Custodian of
it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of
its creditors, or
(v) generally is not paying its debts as they become
due; or
(i) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company, any
Significant Restricted Subsidiary, or any group of Restricted
Subsidiaries that, taken as a whole, would constitute a
Significant Restricted Subsidiary, in an involuntary case;
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(ii) appoints a Custodian of the Company, any
Significant Restricted Subsidiary, or any group of Restricted
Subsidiaries that, taken as a whole, would constitute a
Significant Restricted Subsidiary, or for all or substantially
all of the property of the Company, any Significant Restricted
Subsidiary, or any group of Restricted Subsidiaries that,
taken as a whole, would constitute a Significant Restricted
Subsidiary; or
(iii) orders the liquidation of the Company, any
Significant Restricted Subsidiary, or any group of Restricted
Subsidiaries that, taken as a whole, would constitute a
Significant Restricted Subsidiary,
and the order or decree remains unstayed and in effect for 60
consecutive days.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (h) or (i) of Section 6.01 hereof) occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately; provided, however,
that so long as any Designated Senior Debt is outstanding, no such acceleration
shall be effective until five business days after the giving of written notice
of such acceleration to the Company and the Representatives (as defined in
Section 10.02) under the Designated Senior Debt at addresses (if any) previously
reported to the Trustee by the Company. Upon any such declaration (and such
period after notice, if applicable), the Notes shall become due and payable
immediately. Notwithstanding the foregoing, if an Event of Default specified in
clause (h) or (i) of Section 6.01 hereof occurs, all outstanding Notes shall be
due and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
If an Event of Default occurs by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding payment of the premium that the Company would have had to pay if the
Company then had elected to redeem the Notes pursuant to, Section 3.07 hereof,
then, upon acceleration of the Notes, an equivalent premium shall also become
and be immediately due and payable, to the extent permitted by law, anything in
this Indenture or in the Notes to the contrary notwithstanding. If an Event of
Default occurs prior to April 1, 2003 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Notes prior to such date, then,
upon acceleration of the Notes, the Make-Whole Price shall become immediately
due and payable to the extent permitted by law.
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SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in principal amount of the then
outstanding Notes by notice to the Trustee may on behalf of the Holders of all
of the Notes waive an existing Default or Event of Default and its consequences
hereunder, except a continuing Default or Event of Default in the payment of the
principal of, and premium, if any, or interest on, the Notes (including in
connection with an offer to purchase) (provided, however, that the Holders of a
majority in principal amount of the then outstanding Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration). Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue
the remedy;
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(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee
a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, and premium, if any, and
interest on the Note, on or after the respective due dates expressed in the Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company or any Guarantor for the
whole amount of principal of, and premium, if any, and interest remaining unpaid
on the Notes and, to the extent lawful, interest on overdue principal and
interest as provided in Section 4.01 and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses,
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disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be secured
by a Lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, and premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes for
principal, and premium, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of
a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
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ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in its
exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined
solely by the express provisions of this Indenture and the
Trustee need perform only those duties that are specifically
set forth in this Indenture and no others, 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.
However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities 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 omits to take in good faith in
accordance with a direction received by it pursuant to Section
6.05 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee
shall be under no obligation to exercise
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any of its rights and powers under this Indenture at the request of any
Holders, unless such Holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by
the proper Person. The Trustee need not investigate any fact or matter
stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of
Counsel. The Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection from liability in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and 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 that it believes to be authorized or within
the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company or any
Guarantor shall be sufficient if signed by an Officer of the Company or
such Guarantor.
(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
or direction of any of the Holders unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
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permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
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 Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, 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 or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA ss. 313(a) (but if no event described in
TIA ss. 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA ss.
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA ss. 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
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The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of a majority
in principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
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(c) a Custodian or public officer takes charge of the Trustee
or its property; or
(d) 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. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10, such Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100.0
million 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), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
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SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed 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 therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
deemed to have been discharged from their obligations with respect to all
outstanding Notes on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that
the Company shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 hereof and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Notes and this Indenture (and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following provisions which
shall survive until otherwise terminated or discharged hereunder: (a) the rights
of Holders of outstanding Notes to receive solely from the trust fund described
in Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, and premium, if any, and interest on such Notes
when such payments are due, (b) the Company's and the Guarantors' obligations
with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company's and the Guarantors' obligations in connection therewith and (d) this
Article 8. Subject to compliance with this Article 8, the Company may exercise
its option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and the Guarantors shall, subject
to the satisfaction of the conditions
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set forth in Section 8.04 hereof, be released from its obligations under the
covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15,
4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 4.22 and 5.01 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 8.04
are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(d) through 6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of, and premium, if any, and interest on the outstanding Notes on the
stated date for payment thereof or on the applicable redemption date,
as the case may be;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that
(A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this
Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
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(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that
the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event
of Default resulting from the incurrence of Indebtedness all or a
portion of the proceeds of which will be used to defease the Notes
pursuant to this Article 8 concurrently with such incurrence) or
insofar as Sections 6.01(h) or 6.01(i) hereof is concerned, at any time
in the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any
material agreement or instrument (other than this Indenture) to which
the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion
of Counsel (which may be subject to customary exceptions) to the effect
that on the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company; and
(h) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may
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determine, to the Holders of such Notes of all sums due and to become due
thereon in respect of principal, premium, if any, and interest, but such money
need not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, and premium, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), 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
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if
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any, or interest on any Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in
place of certificated Notes or to alter the provisions of Article 2
hereof (including the related definitions) in a manner that does not
materially adversely affect any Holder;
(c) to provide for the assumption of the Company's or a
Guarantor's obligations to the Holders of the Notes by a successor to
the Company or a Guarantor pursuant to Article 5 or Article 11 hereof;
(d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights hereunder of any Holder of a Note;
(e) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in
accordance with the limitations set forth in this Indenture as of the
date hereof; or
(g) to allow any Guarantor to execute a supplemental indenture
and/or Subsidiary Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated
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to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided in Section 4.21 and below in this Section 9.02, the
Company and the Trustee may amend or supplement this Indenture (including
Sections 3.09, 4.10 and 4.15 hereof), the Subsidiary Guarantees and the Notes
may be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for, or purchase
of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, and premium, if any, or interest on the Notes,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of this Indenture, the Subsidiary Guarantees or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes voting as a single class
(including consents obtained in connection with a tender offer or exchange
offer, or purchase of, the Notes).
In addition, without the consent of the Holders of at least 66-2/3% in
principal amount of then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for Notes), no waiver or
amendment to this Indenture may make any change in the provisions of Section
4.15 hereof that adversely affects the rights of any Holder of Notes. Section
2.08 hereof shall determine which Notes are considered to be "outstanding" for
purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 4.21, 6.04 and 6.07 hereof, the Holders
of a majority in principal amount of the Notes then outstanding voting as a
single class may
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waive compliance in a particular instance by the Company with any provision of
this Indenture or the Notes. Notwithstanding anything to the contrary herein,
without the consent of each Holder affected, an amendment or waiver under this
Section 9.02 may not (with respect to any Notes held by a non-consenting
Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of
any Note or alter or waive any of the provisions with respect to the
redemption of the Notes, except as provided above with respect to
Sections 3.09, 4.10 and 4.15 hereof;
(c) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in principal amount of the then outstanding Notes and a waiver
of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in
the Notes;
(f) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes
to receive payments of principal of or interest on the Notes;
(g) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions; or
(h) release any Guarantor from any of its obligations under
its Subsidiary Guarantee or this Indenture, except in accordance with
the terms of this Indenture.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective.
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An amendment, supplement or waiver becomes effective in accordance with its
terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01) shall be fully
protected in relying upon, in addition to the documents required by Section
12.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Notes is subordinated in right of payment, to
the extent and in the manner provided in this Article 10, to the prior payment
in full of all Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt.
SECTION 10.02. CERTAIN DEFINITIONS.
"Permitted Junior Securities" means Equity Interests in the Company or
debt securities that are subordinated to all Senior Debt (and any debt
securities issued in exchange for Senior Debt) to substantially the same extent
as, or to a greater extent than, the Notes are subordinated to Senior Debt
pursuant to the Indenture.
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"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
A distribution may consist of cash, securities or other property, by
set-off or otherwise.
SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(1) holders of Senior Debt shall be entitled to receive payment in full
of all Obligations due in respect of such Senior Debt (including interest after
the commencement of any such proceeding at the rate specified in the applicable
Senior Debt) before Holders of the Notes shall be entitled to receive any
payment with respect to the Notes; and
(2) until all Obligations with respect to Senior Debt (as provided in
subsection (1) above) are paid in full, any distribution to which Holders would
be entitled but for this Article 10 shall be made to holders of Senior Debt
(except that Holders of Notes may receive (i) Permitted Junior Securities and
(ii) payments and other distributions made from any defeasance trust created
pursuant to Section 8.04 hereof), as their interests may appear.
SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT.
The Company may not make any payment or distribution to the Trustee or
any Holder in respect of Obligations (other than (i) Permitted Junior Securities
and (ii) payments and other distributions made from any defeasance trust created
pursuant to Section 8.04 hereof) until all principal and other Obligations with
respect to the Senior Debt have been paid in full if:
(i) a default in the payment of the principal of,
premium, if any, or interest on Designated Senior Debt occurs
and is continuing beyond any applicable grace period in the
agreement, indenture or other document governing such
Designated Senior Debt; or
(ii) a default, other than a payment default, on
Designated Senior Debt occurs and is continuing that then
permits holders of the Designated Senior Debt to accelerate
its maturity and the Trustee receives a notice of the default
(a "Payment Blockage Notice") from the Company or the holders
of any Designated Senior Debt. If the Trustee receives any
such Payment Blockage Notice, no subsequent Payment Blockage
Notice shall be effective for purposes of this Section unless
and until (i) at least 360 days shall have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice
and (ii) all scheduled payments of principal, premium, if any,
and interest on the Notes that have come due have been paid in
full in cash. No nonpayment default that existed
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or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis
for a subsequent Payment Blockage Notice unless such default
shall have been waived for a period of not less than 180 days.
The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.04(ii) hereof,
179 days pass after notice is received if the maturity of such Designated Senior
Debt has not been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 10.05. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Debt of the acceleration.
SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes at a time when the Trustee or such Holder,
as applicable, has actual knowledge that such payment is prohibited by Section
10.04 hereof, such payment shall be held by the Trustee or such Holder, in trust
for the benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Debt as their interests may appear or their
Representative under the indenture or other agreement (if any) pursuant to which
Senior Debt may have been issued, as their respective interests may appear, for
application to the payment of all Obligations with respect to Senior Debt
remaining unpaid to the extent necessary to pay such Obligations in full in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
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SECTION 10.07. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article 10.
SECTION 10.08. SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders of Notes shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders of Notes have been applied to the
payment of Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have been made to Holders of Notes is not, as
between the Company and Holders, a payment by the Company on the Notes.
SECTION 10.09. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes, the obligation
of the Company, which is absolute and unconditional, to pay principal of and
interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and creditors of the
Company other than their rights in relation to holders of Senior Debt; or
(3) prevent the Trustee or any Holder of Notes from exercising its
available remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
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SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may do
the same with like rights.
SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes.
ARTICLE 11.
GUARANTEES
SECTION 11.01. UNCONDITIONAL GUARANTEE.
Subject to the provisions of this Article 11, each Guarantor hereby
unconditionally, jointly and severally, on a senior subordinated basis,
guarantees (each such Guarantee being a
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"Subsidiary Guarantee" and all such Guarantees being the "Subsidiary
Guarantees") to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of the Notes or this Indenture, that: (i) the principal of
and interest and premium, if any, on the Notes will be promptly paid in full
when due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise and interest on the overdue principal of, and interest
on, to the extent lawful, the Notes and all other obligations of the Company to
the Holders or the Trustee hereunder or thereunder will be promptly paid in full
or performed all in accordance with the terms hereof and thereof; and (ii) in
case of any extension of time of payment or renewal of any Notes or of any such
other obligations, the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, subject to any
applicable grace period, whether at stated maturity, by acceleration or
otherwise, subject, however, in the case of clauses (i) and (ii) above, to the
limitations set forth in Section 11.05 hereof. Failing payment when due of any
amount so guaranteed or any performance so guaranteed for whatever reason,
subject to Section 11.05 hereof, the Guarantors shall be jointly and severally
obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
Each Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenants that the Subsidiary Guarantees will not be discharged except by
complete performance of the obligations contained in the Notes, this Indenture
and in the Subsidiary Guarantees.
If any Holder of Notes or the Trustee is required by any court or
otherwise to return to the Company, any Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to the Company or any
Guarantor, any amount paid by the Company or any Guarantor to the Trustee or
such Holder of Notes, the Subsidiary Guarantees, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each Guarantor agrees
that they shall not be entitled to any right of subrogation in relation to the
Holders of the Notes in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between each Guarantor, on the
one hand, and the Holders and the Trustee, on the other hand, (x) the maturity
of the obligations guaranteed hereby may be accelerated as provided in Article 6
for the purposes of the Subsidiary Guarantees, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6, such obligations
(whether or not due and payable) shall forthwith become due and payable by each
Guarantor for the purpose of the Subsidiary
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Guarantees. The Guarantors shall have the right to contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under this Guarantee. The Notes will not be guaranteed by
any present or future Subsidiary that is not a Domestic Restricted Subsidiary or
any Unrestricted Subsidiary.
SECTION 11.02. SUBORDINATION OF NOTE GUARANTEE.
The Obligations of each Guarantor under its Note Guarantee pursuant to
this Article 10 shall be junior and subordinated in right of payment to the
rights of holders of the Senior Debt of such Guarantor on the same basis as the
Notes are junior and subordinated to Senior Debt of the Company. For the
purposes of the foregoing sentence, the Trustee and the Holders shall have the
right to receive and/or retain payments by any of the Guarantors only at such
times as they may receive and/or retain payments in respect of the Notes
pursuant to this Indenture, including Article 10 hereof.
SECTION 11.03. SEVERABILITY.
In case any provision of a Subsidiary Guarantee shall be invalid,
illegal or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.04. RELEASE OF A GUARANTOR.
In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, in each case to a
corporation, Person or entity which is not, and giving effect to the transaction
will not be, the Company or a Restricted Subsidiary of the Company, then such
Guarantor (in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) shall
be released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition shall be
applied in accordance with Section 4.10 and the other applicable provisions of
the Indenture. The Trustee shall deliver an appropriate instrument evidencing
such release upon receipt of a request by the Company accompanied by an
Officers' Certificate certifying as to the compliance with Section 4.17 hereof
and this Section 11.04. Any Guarantor not so released remains liable for the
full amount of principal of and interest on the Notes as provided in this
Article 11.
SECTION 11.05. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor and by its acceptance of a Note each Holder confirms
that it is the intention of all such parties that the Subsidiary Guarantee by
such Guarantor pursuant to its Subsidiary Guarantee does not constitute a
fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law. To effectuate the foregoing intention, the Holders
and such
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Guarantor hereby irrevocably agree that the obligations of such Guarantor under
the Subsidiary Guarantees shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such Guarantor
and after giving effect to any collections from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such other Guarantor
under this Article 11, result in the obligations of such Guarantor under the
Subsidiary Guarantees not constituting a fraudulent transfer or conveyance.
SECTION 11.06. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
Subject to the provisions of Section 11.04, no Guarantor may
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another corporation, Person or entity whether or not
affiliated with such Guarantor, or sell or otherwise dispose of all or
substantially all of its assets to or liquidate into any such corporation,
Person or entity, unless:
(i) subject to the provisions of Section 11.05, the
Person formed by or surviving any such consolidation or merger
or acquiring such assets upon such sale, disposition or
liquidation (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such Guarantor
pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee under the Notes, the
Indenture and the Subsidiary Guarantee on the terms set forth
herein or therein;
(ii) immediately after giving effect to such
transaction, no Default or Event of Default exists;
(iii) such Guarantor, or any Person formed by or
surviving any such consolidation or merger or acquiring such
assets upon a sale, disposition or liquidation, would have
Consolidated Net Worth (immediately after giving effect to
such transaction) equal to or greater than the Consolidated
Net Worth of such Guarantor immediately preceding the
transaction; and
(iv) the Company would be permitted by virtue of the
Company's pro forma Consolidated Coverage Ratio, immediately
after giving effect to such transaction, to incur at least
$1.00 of additional Indebtedness pursuant to the Consolidated
Coverage Ratio test set forth in the first paragraph of
Section 4.09 hereof.
SECTION 11.07. WAIVER OF SUBROGATION.
Each Guarantor hereby irrevocably waives, until and unless all of the
Obligations guaranteed hereby are indefeasibly discharged, any claim or other
rights which it may now or hereafter acquire against the Company that arise from
the existence, payment, performance or enforcement of such Guarantor's
obligations under the Subsidiary Guarantees and this Indenture, including,
without limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Notes
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against the Company, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, including, without limitation,
the right to take or receive from the Company, directly or indirectly, in cash
or other property or by set-off or in any other manner, payment or security on
account of such claim or other rights. If any amount shall be paid to any
Guarantor in violation of the preceding sentence and the Notes shall not have
been paid in full, such amount shall have been deemed to have been paid to such
Guarantor for the benefit of, and held in trust for the benefit of, the Holders
of the Notes, and shall forthwith be paid to the Trustee for the benefit of such
Holders to be credited and applied upon the Notes, whether matured or unmatured,
in accordance with the terms of this Indenture. Each Guarantor acknowledges that
it will receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
11.07 is knowingly made in contemplation of such benefits.
SECTION 11.08. EXECUTION OF GUARANTEE.
To evidence its Subsidiary Guarantee to the Holder of Notes specified
in Section 11.01, each Guarantor hereby agrees that a notation of such
Subsidiary Guarantee in the form set forth in Exhibit A-1 hereto shall be
endorsed on each Note ordered to be authenticated and delivered by the Trustee.
Each Guarantor hereby agrees that the Subsidiary Guarantees set forth in Section
11.01 shall remain in full force and effect notwithstanding any failure to
endorse on each Note a notation of the Subsidiary Guarantees. Each such
Subsidiary Guarantee shall be signed on behalf of each Guarantor by two
Officers, or an Officer and an Assistant Secretary, or one Officer shall sign
and one Officer or an Assistant Secretary (each of whom shall, in each case,
have been duly authorized by all requisite corporate actions) shall attest to
such Subsidiary Guarantee prior to the authentication of the Note on which it is
endorsed, and the delivery of such Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of such Subsidiary Guarantee on
behalf of such Guarantor. Such signatures upon the Subsidiary Guarantees may be
by manual or facsimile signature of such Officers and may be imprinted or
otherwise reproduced on the Subsidiary Guarantees, and in case any such Officer
who shall have signed the Subsidiary Guarantees shall cease to be such Officer
before the Note on which such Subsidiary Guarantee is endorsed shall have been
authenticated and delivered by the Trustee or disposed of by the Company, such
Note nevertheless may be authenticated and delivered or disposed of as though
the person who signed the Subsidiary Guarantees had not ceased to be such
Officer of the Guarantor.
SECTION 11.09. ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any of its Subsidiaries shall acquire or create
another Restricted Subsidiary after the date of the Indenture, then such newly
acquired or created Restricted Subsidiary shall become a Guarantor, on a senior
subordinated basis, of the Company's obligations under the Notes and this
Indenture by (i) executing a supplemental indenture to this Indenture in the
form set forth in Exhibit B hereto, (ii) executing a Subsidiary Guarantee in the
form set forth in Exhibit A-1 hereto and (iii) delivering to the Trustee an
Opinion of Counsel, in form reasonably satisfactory to the Trustee, that the
Subsidiary Guarantee and supplemental
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indenture have been duly authorized, executed and delivered by such Restricted
Subsidiary and constitute the valid and binding obligations of such Restricted
Subsidiary and enforceable against such Restricted Subsidiary in accordance with
their respective terms, subject to customary exceptions for bankruptcy and
equitable principles; provided, however, that this Section 11.09 shall not apply
to any Subsidiary during such period as such Subsidiary (y) would not be a
Domestic Restricted Subsidiary or (z) has been properly designated as an
Unrestricted Subsidiary in accordance with this Indenture for so long as it
continues to constitute an Unrestricted Subsidiary.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA ss.318(c), the imposed duties shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address:
If to the Company or any Guarantor:
Silverleaf Resorts, Inc.
1221 Riverbend Drive, Suite 120
Dallas, Texas 75247
Telecopier No.: (214) 905-0514
Attention: Robert E. Mead
With a copy to:
Meadows, Owens, Collier, Reed, Cousins & Blau, L.L.P.
901 Main Street, Suite 3700
Dallas, Texas 75202-3792
Telecopier No: (214) 747-3732
Attention: David N. Reed
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If to the Trustee:
Norwest Bank Minnesota, N.A.
Corporate Trust Department
6th and Marquette
Minneapolis, MN 55479-0069
Telecopier No.: (612) 667-9825
Attention: Corporate Trust Department
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company or any Guarantor mails a notice or communication to
Holders, it shall mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Guarantors, the Trustee, the Registrar and anyone else shall have the protection
of TIA ss. 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company and/or any Guarantor to
the Trustee to take any action under this Indenture, the Company and/or such
Guarantor, as the case may be, shall furnish to the Trustee:
73
<PAGE> 79
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for
in this Indenture relating to the proposed action have been satisfied;
and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss.
314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, Officer, employee, incorporator or
stockholder of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or any Guarantor under the Notes, the
Subsidiary Guarantees, this Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes.
74
<PAGE> 80
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUESTED THEREBY.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture, the Notes, or the Subsidiary Guarantees.
SECTION 12.10. SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture, the
Notes or the Subsidiary Guarantees shall bind the respective successors of the
Company and the Guarantors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
75
<PAGE> 81
SIGNATURES
Dated as of April 1, 1998 SILVERLEAF RESORTS, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Chief Financial Officer,
Treasurer and Assistant
Secretary
Dated as of April 1, 1998 DATABASE RESEARCH, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Vice President, Treasurer and
Assistant Secretary
Dated as of April 1, 1998 CONDOMINIUM BUILDERS, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: President
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Treasurer and Assistant
Secretary
76
<PAGE> 82
Dated as of April 1, 1998 SILVERLEAF HOTELS, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Treasurer and Assistant
Secretary
Dated as of April 1, 1998 SILVERLEAF TRAVEL, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Vice President, Treasurer and
Assistant Secretary
Dated as of April 1, 1998 SILVERLEAF RESORT ACQUISITIONS, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Assistant Secretary
77
<PAGE> 83
Dated as of April 1, 1998 VILLAGES LAND, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: President
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Assistant Secretary
Dated as of April 1, 1998 BULL'S EYE MARKETING, INC. (Calif.)
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Treasurer and Assistant
Secretary
Dated as of April 1, 1998 BULL'S EYE MARKETING, INC. (Del.)
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Treasurer and Assistant
Secretary
Dated as of April 1, 1998 SILVERLEAF BERKSHIRES, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Assistant Secretary
78
<PAGE> 84
Dated as of April 1, 1998 NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By: /s/ JANE Y. SCHWEIGER
-------------------------------------
Name: Jane Y. Schweiger
Title: Corporate Trust Officer
79
<PAGE> 85
================================================================================
EXHIBIT A
(Face of Note)
10 1/2% Senior Subordinated Notes due 2008
No. 001 $75,000,000.00
SILVERLEAF RESORTS, INC.
promises to pay to Cede & Co. CUSIP No. 828395-AA-1
or registered assigns,
the principal sum of Seventy-Five Million
Dollars on April 1, 2008.
Interest Payment Dates: April 1, and October 1
Record Dates: March 15, and September 15
Dated: April 8, 1998
By:
-----------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By:
-----------------------------------
Name: Joe W. Conner
Title: Chief Financial Officer, Treasurer
and Assistant Secretary
(SEAL)
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
Norwest Bank Minnesota, National Association
as Trustee
By:
----------------------------------
================================================================================
A-1
<PAGE> 86
(Back of Note)
10 1/2% Senior Subordinated Notes due 2008
[Insert the Global Note Legend for Global Notes]1
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Silverleaf Resorts, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 10
1/2% per annum until maturity. The Company will pay such interest semi-annually
on April 1 and October 1 of each year, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest Payment Date"). Interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid on the Notes, from the date of issuance;
provided that if there is no existing Default in the payment of interest, and if
this Note is authenticated between a record date referred to on the face hereof
and the next succeeding Interest Payment Date, interest shall accrue from such
next succeeding Interest Payment Date. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is 1%
per annum in excess of the rate then in effect; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace periods) from
time to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the March 15
- ----------------------------
1 "THIS GLOBAL NOTE IS HELD BY THE TRUSTEE (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER
ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS
HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE,
(II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE
MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."
A-2
<PAGE> 87
or September 15 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium, and interest at
the office or agency of the Company maintained for such purpose within or
without the City and State of New York, or, at the option of the Company,
payment of interest may be made by check mailed to the Holders at their
addresses set forth in the register of Holders, and provided that payment by
wire transfer of immediately available funds will be required with respect to
principal of and interest, and premium, if any, on the Global Note and all other
Notes the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank Minnesota, N.A.,
the Trustee under the Indenture, will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of April 1, 1998 ("Indenture") between the Company, its Subsidiaries and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are unsecured obligations of the Company limited to
$200.0 million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to April 1, 2003.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on April 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003......................................................... 105.250%
2004......................................................... 103.500%
2005......................................................... 101.750%
2006 and thereafter.......................................... 100.000%
</TABLE>
A-3
<PAGE> 88
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to April 1, 2001, the Company may redeem up to an
aggregate of 33 1/3% in principal amount of the Notes with the net cash proceeds
of a public offering of its common stock at a redemption price equal to 110.5%
of the principal amount thereof plus accrued and unpaid interest thereon, if
any, to the redemption date; provided that at least 66 2/3% of the initially
outstanding aggregate principal amount of the Notes remain outstanding
immediately after the occurrence of such redemption and provided, further that
such redemption shall occur within 60 days of the date of the closing of such
offering and not prior to June 30, 1998.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest to the date of purchase (a "Change of Control
Payment"). Within ten days following any Change of Control, the Company shall
mail a notice to each Holder setting forth the procedures governing the Change
of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within
five days of each date on which the aggregate amount of Excess Proceeds exceeds
$5.0 million, the Company shall commence a pro rata Asset Sale Offer pursuant to
Section 3.09 of the Indenture to purchase the maximum principal amount of Notes
(including Additional Notes) that may be purchased out of the Excess Proceeds at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date fixed for the
closing of such offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Subsidiary) may use any remaining Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero. Holders of Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Company prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but
A-4
<PAGE> 89
only in whole multiples of $1,000, unless all of the Notes held by a Holder are
to be redeemed. On and after the redemption date interest ceases to accrue on
Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Subsidiary Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes, and any existing default or compliance
with any provision of the Indenture, the Subsidiary Guarantees or the Notes may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes. Without the consent of any Holder of a Note, the
Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes or to alter the
provisions regarding payment and exchange of Notes in a manner that does not
materially adversely affect any Holder, to provide for the assumption of the
Company's or Guarantor's obligations to Holders of the Notes in case of a merger
or consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to allow any Guarantor to execute
a supplemental indenture to the Indenture and/or a Subsidiary Guarantee with
respect to the Notes, or to comply with the requirements of the SEC in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act, to provide for the issuance of Additional Notes in accordance with the
limitations set forth in the Indenture or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or Subsidiary Guarantee with respect
to the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (ii) default in
payment when due of principal of or premium, if any, on the Notes (whether or
not prohibited by the subordination provisions of the Indenture) when the same
becomes due and payable at maturity, upon redemption (including in connection
with an offer to purchase) or otherwise, (iii) failure by the Company to comply
for 30 days after notice
A-5
<PAGE> 90
from the Trustee or the Holders of at least 25% in principal amount of then
outstanding Notes with Section 4.07, 4.09, 4.10, 4.15 or 5.01 of the Indenture;
(iv) failure by the Company for 60 days after notice to the Company by the
Trustee or the Holders of at least 25% in principal amount of then outstanding
Notes to comply with certain other agreements in the Indenture or the Notes; (v)
default under certain other agreements relating to Indebtedness of the Company
which default results in the acceleration of such Indebtedness prior to its
express maturity and such default has not been cured or waived as provided in
the Indenture; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; (vii) except as permitted by the
Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to
be unenforceable or invalid or shall cease to be in full force and effect or any
Guarantor or any Person acting on its behalf shall deny or disaffirm its
obligations under such Guarantor's Subsidiary Guarantee; and (viii) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Material Subsidiaries. If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. SUBSIDIARY GUARANTEES. Payment of principal and interest (including
interest on overdue principal and overdue interest, if lawful) is
unconditionally guaranteed on a senior subordinated basis by certain
subsidiaries of the Company.
14. SUBORDINATION. The payment of principal, premium, if any, and
interest on the Notes is subordinated to the prior payment of Senior Debt on the
terms provided in the Indenture.
15. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
16. NO RECOURSE AGAINST OTHERS. A director, Officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the
A-6
<PAGE> 91
Company under the Notes or the Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
17. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Silverleaf Resorts, Inc.
1221 Riverbend Drive, Suite 120
Dallas, Texas 75247
Telecopier No.: (214) 905-0514
Attention: Sandra Cearley
A-7
<PAGE> 92
EXHIBIT A-1
[FORM OF NOTATION ON NOTE
RELATING TO SUBSIDIARY GUARANTEE]
SUBSIDIARY GUARANTEE
Silverleaf Berkshires, Inc., a Texas corporation, Bull's Eye Marketing,
Inc., a California corporation, Bull's Eye Marketing, Inc., a Delaware
corporation, Silverleaf Resort Acquisitions, a Texas corporation, Silverleaf
Travel, Inc., a Texas corporation, Silverleaf Hotels, Inc., a Texas corporation,
Database Research, Inc., a Texas corporation, Condominium Builders, Inc., a
Texas corporation, and Villages Land, Inc., a Texas corporation (hereinafter
referred to as the "Guarantors", which term includes any successor or additional
Guarantor under the Indenture referred to in the Note upon which this notation
is endorsed), on terms and conditions provided in the Indenture, (i) has
unconditionally guaranteed (a) the due and punctual payment of the principal of
and interest, if any, on the Notes, whether at maturity or interest payment
date, by acceleration, call for redemption or otherwise, (b) the due and
punctual payment of interest on the overdue principal of and (if lawful)
interest on the Notes, (c) the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee, all in accordance with
the terms set forth in the Indenture, and (d) in case of any extension of time
of payment or renewal of any Notes or any of such other obligations, the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise and (ii) has agreed to pay any and all costs and expenses (including
reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing
any rights under this Subsidiary Guarantee. Capitalized terms used herein have
the meanings assigned to them in the Indenture unless otherwise indicated.
No stockholder, Officer, director or incorporator, as such, past,
present or future, of the Guarantors shall have any personal liability under
this Subsidiary Guarantee by reason of his or its status as such stockholder,
Officer, director or incorporator.
This Subsidiary Guarantee shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
<PAGE> 93
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized Officers.
Dated as of April 8, 1998 DATABASE RESEARCH, INC.
By:
------------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By:
------------------------------------------
Name: Joe W. Conner
Title: Vice President, Treasurer and
Assistant Secretary
Dated as of April 8, 1998 CONDOMINIUM BUILDERS, INC.
By:
------------------------------------------
Name: Robert E. Mead
Title: President
By:
------------------------------------------
Name: Joe W. Conner
Title: Treasurer and Assistant Secretary
Dated as of April 8, 1998 SILVERLEAF HOTELS, INC.
By:
------------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By:
------------------------------------------
Name: Joe W. Conner
Title: Treasurer and Assistant Secretary
<PAGE> 94
Dated as of April 8, 1998 SILVERLEAF TRAVEL, INC.
By:
------------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By:
------------------------------------------
Name: Joe W. Conner
Title: Vice President, Treasurer and
Assistant Secretary
Dated as of April 8, 1998 SILVERLEAF RESORT ACQUISITIONS, INC.
By:
------------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By:
------------------------------------------
Name: Joe W. Conner
Title: Assistant Secretary
Dated as of April 8, 1998 VILLAGES LAND, INC.
By:
------------------------------------------
Name: Robert E. Mead
Title: President
By:
------------------------------------------
Name: Joe W. Conner
Title: Assistant Secretary
Dated as of April 8, 1998 BULL'S EYE MARKETING, INC. (Calif.)
By:
------------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By:
------------------------------------------
Name: Joe W. Conner
Title: Treasurer and Assistant Secretary
<PAGE> 95
Dated as of April 8, 1998 BULL'S EYE MARKETING, INC. (Del.)
By:
------------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By:
------------------------------------------
Name: Joe W. Conner
Title: Treasurer and Assistant Secretary
Dated as of April 8, 1998 SILVERLEAF BERKSHIRES, INC.
By:
------------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By:
------------------------------------------
Name: Joe W. Conner
Title: Assistant Secretary
<PAGE> 96
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
---------------------------------------------------------
to transfer this Note 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 face of this Note)
Signature Guarantee.
<PAGE> 97
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$
-----------
Date: Your Signature:
----------------------- -------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No.:
-----------------
Signature Guarantee.
<PAGE> 98
[INSERT FOR GLOBAL NOTE]
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for and interest
in another Global Note or for a Definitive Note have been made:
<TABLE>
<CAPTION>
Date of Exchange Amount of Amount of increase Principal Amount of Signature of
- ---------------- decrease in in Principal at maturity of this authorized Officer
Principal Amount Amount of Global Note of Trustee or Note
of this Global this Global Note following such Custodian
Note ------------------ decrease ------------------
---------------- (or increase)
-------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 99
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of Silverleaf Resorts, Inc. (or its permitted successor), a Texas
corporation (the "Company"), the Company, the other Guarantors (as defined in
the Indenture referred to herein) and Norwest Bank Minnesota, National
Association, as trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of April 1, 1998 providing for
the issuance of an aggregate principal amount of up to $200.0 million of 10 1/2%
Senior Subordinated Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "New Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01(g) of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition shall
have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees as follows:
(a) Along with all Guarantors named in the Indenture, to
jointly and severally guarantee to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its successors and
assigns, irrespective of the validity and enforceability of the
Indenture, the Notes or the obligations of the Company hereunder or
thereunder, that:
(i) the principal of and interest on the Notes will
be promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and
B-1
<PAGE> 100
interest on the overdue principal of and interest on the
Notes, if any, if lawful, and all other obligations of the
Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance
with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that
same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether
at stated maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors
shall be jointly and severally obligated to pay the same
immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes
or the Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any
provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of
a Guarantor.
(c) The following is hereby waived: the benefit or advantage
of any stay, extension or usury law wherever enacted, now or at any
time hereafter in force, diligence, presentment, demand of payment,
filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever.
(d) This New Subsidiary Guarantee shall not be discharged
except by complete performance of the obligations contained in the
Notes and the Indenture, and the Guaranteeing Subsidiary accepts all of
the obligations of a Guarantor under the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, any Guarantor, or any Custodian,
trustee, liquidator or other similar official acting in relation to
either the Company or any Guarantor, any amount paid by the Company or
any Guarantor either to the Trustee or such Holder, this New Subsidiary
Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any
right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.
(g) As between the Guaranteeing Subsidiary, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of
the obligations guaranteed hereby may be accelerated as provided in
Article 6 of the Indenture for the purposes of this New
B-2
<PAGE> 101
Subsidiary Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guaranteeing Subsidiary for the
purpose of this New Subsidiary Guarantee.
(h) The Guarantors shall have the right to seek contribution
from any non-paying Guarantor so long as the exercise of such right
does not impair the rights of the Holders under the Guarantee.
(i) After giving effect to any maximum amount and any other
contingent and fixed liabilities that are relevant under any applicable
Bankruptcy or fraudulent conveyance laws, and after giving effect to
any collections from, rights to receive contribution from or payments
made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under Article 11 of the Indenture,
this New Subsidiary Guarantee shall be limited to the maximum amount as
shall result in the obligations of such Guarantor under its New
Subsidiary Guarantee not constituting a fraudulent transfer or
conveyance.
3. Execution and Delivery. The Guaranteeing Subsidiary agrees that this New
Subsidiary Guarantee shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of this New Subsidiary Guarantee.
4. Guaranteeing Subsidiary may Consolidate, Etc., On Certain Terms.
(a) Subject to Section 11.06 of the Indenture and Section 5
hereof, the Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guaranteeing Subsidiary is the
surviving Person) another corporation, Person or entity whether or not
affiliated with such Guaranteeing Subsidiary or sell or otherwise
dispose of all or substantially all of its assets to or liquidate into
any such corporation, Person or entity, unless:
(i) subject to Section 2(i) hereof, the Person formed
by or surviving any such consolidation or merger or acquiring
such assets upon such sale, disposition or liquidation (if
other than a Guarantor or the Company) unconditionally assumes
all the obligations of such Guaranteeing Subsidiary, pursuant
to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, under the Notes, the Indenture,
the Subsidiary Guarantees and this New Subsidiary Guarantee on
the terms set forth herein or therein;
(ii) immediately after giving effect to such
transaction, no Default or Event of Default exists;
B-3
<PAGE> 102
(iii) such Guaranteeing Subsidiary, or any Person
formed by or surviving any such consolidation or merger, would
have Consolidated Net Worth (immediately after giving effect
to such transaction) equal to or greater than the Consolidated
Net Worth of such Guaranteeing Subsidiary immediately
preceding the transaction; and
(iv) the Company would be permitted by virtue of the
Company's pro forma Consolidated Coverage Ratio, immediately
after giving effect to such transaction, to incur at least
$1.00 of additional Indebtedness pursuant to the Consolidated
Coverage Ratio test set forth in the first paragraph of
Section 4.09 of the Indenture.
(b) In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor corporation, by
supplemental indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the New Subsidiary Guarantee
endorsed upon the Notes and the due and punctual performance of all of
the covenants and conditions of the Indenture to be performed by the
Guaranteeing Subsidiary, such successor corporation shall succeed to
and be substituted for the Guaranteeing Subsidiary with the same effect
as if it had been named herein as a Guarantor. Such successor
corporation thereupon may cause to be signed any or all of the New
Subsidiary Guarantees to be endorsed upon all of the Notes issuable
hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the New Subsidiary Guarantees so
issued shall in all respects have the same legal rank and benefit under
the Indenture as the Subsidiary Guarantees theretofore and thereafter
issued in accordance with the terms of the Indenture as though all of
such New Subsidiary Guarantees had been issued at the date of the
execution hereof.
(c) Except as set forth in Articles 4, 5 and 11 of the
Indenture, and notwithstanding clauses (a) and (b) above, nothing
contained in the Indenture or in any of the Notes shall prevent any
consolidation or merger of the Guaranteeing Subsidiary with or into the
Company or another Guarantor, or shall prevent any sale or conveyance
of the property of the Guaranteeing Subsidiary as an entirety or
substantially as an entirety to the Company or another Guarantor.
5. Releases.
(a) In the event of a sale or other disposition of all of the assets of
the Guaranteeing Subsidiary, by way of merger, consolidation or otherwise, or a
sale or other disposition of all of the capital stock of the Guaranteeing
Subsidiary, in each case to a corporation, Person or entity which is not, and
giving effect to the transaction will not be, the Company or a Restricted
Subsidiary of the Company, then such Guaranteeing Subsidiary (in the event of a
sale or other disposition, by way of merger, consolidation or otherwise, of all
of the capital stock of such Guaranteeing Subsidiary) or the corporation
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guaranteeing Subsidiary) will be
B-4
<PAGE> 103
released and relieved of any obligations under this New Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by the Company to the
Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that
such sale or other disposition was made by the Company in accordance with the
provisions of the Indenture, including without limitation Section 4.10 of the
Indenture, the Trustee shall execute any documents reasonably required in order
to evidence the release of the Guaranteeing Subsidiary from its obligations
under this New Subsidiary Guarantee
(b) Any Guarantor (including the Guaranteeing Subsidiary) not released
from its obligations under its Subsidiary Guarantee or New Subsidiary Guarantee,
as the case may be, shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor under the
Indenture as provided in Article 11 of the Indenture.
6. No Recourse Against Others. No past, present or future director, Officer,
employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as
such, shall have any liability for any obligations of the Company or any
Guarantor under the Notes, any Subsidiary Guarantees, the Indenture or this
Supplemental Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of the Notes by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
7. New York Law to Govern. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. Counterparts. The parties may sign any number of copies of this Supplemental
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
9. Effect of Headings. The Section headings herein are for convenience only and
shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental Indenture
or for or in respect of the recitals contained herein, all of which recitals are
made solely by the Guaranteeing Subsidiary and the Company.
B-5
<PAGE> 104
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: ,
----------------- -----
[GUARANTEEING SUBSIDIARY]
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
SILVERLEAF RESORTS, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
DATABASE RESEARCH, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
B-6
<PAGE> 105
CONDOMINIUM BUILDERS, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
SILVERLEAF HOTELS, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
SILVERLEAF TRAVEL, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
SILVERLEAF RESORT ACQUISITIONS, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
B-7
<PAGE> 106
VILLAGES LAND, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
SILVERLEAF BERKSHIRES, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
BULL'S EYE MARKETING, INC. (CALIF.)
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
BULL'S EYE MARKETING, INC. (DEL.)
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
B-8
<PAGE> 107
NORWEST BANK MINNESOTA, N.A.
as Trustee
By:
--------------------------------
Name:
Title:
B-9
<PAGE> 1
EXHIBIT 4.2
================================================================================
10.5% Senior Subordinated Notes due 2008
No. 001 $75,000,000.00
SILVERLEAF RESORTS, INC.
promises to pay to Cede & Co. CUSIP No. 828395-AA-1
or registered assigns,
the principal sum of Seventy-Five Million
Dollars on April 1, 2008.
Interest Payment Dates: April 1, and October 1
Record Dates: March 15, and September 15
Dated: April 8, 1998
SILVERLEAF RESORTS, INC.
By: /s/ ROBERT E. MEAD
-----------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-----------------------------------------
Name: Joe W. Conner
Title: Chief Financial Officer, Treasurer
and Assistant Secretary
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
Norwest Bank Minnesota, National Association
as Trustee
By: /s/ JANE SCHWEIGER
------------------------------------
================================================================================
<PAGE> 2
10.5% Senior Subordinated Notes due 2008
THIS GLOBAL NOTE IS HELD BY THE TRUSTEE (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO ARTICLE 2 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF
THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Silverleaf Resorts, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
10.5% per annum until maturity. The Company will pay such interest semi-annually
on April 1 and October 1 of each year, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest Payment Date"). Interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid on the Notes, from the date of issuance;
provided that if there is no existing Default in the payment of interest, and if
this Note is authenticated between a record date referred to on the face hereof
and the next succeeding Interest Payment Date, interest shall accrue from such
next succeeding Interest Payment Date. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is 1%
per annum in excess of the rate then in effect; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace periods) from
time to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the March 15 or September 15 next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. The Notes will be payable as to
principal, premium, and interest at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available
<PAGE> 3
funds will be required with respect to principal of and interest, and premium,
if any, on the Global Note and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank Minnesota, N.A., the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
April 1, 1998 ("Indenture") between the Company, its Subsidiaries and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are unsecured obligations of the Company limited to
$200.0 million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to April 1, 2003.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on April 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003......................................................... 105.250%
2004......................................................... 103.500%
2005......................................................... 101.750%
2006 and thereafter.......................................... 100.000%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
at any time prior to April 1, 2001, the Company may redeem up to an aggregate of
33 1/3% in principal amount of the Notes with the net cash proceeds of a public
offering of its common stock at a redemption price equal to 110.5% of the
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the redemption date; provided that at least 66 2/3% of the initially outstanding
aggregate principal amount of the Notes remain outstanding immediately after the
<PAGE> 4
occurrence of such redemption and provided, further that such redemption shall
occur within 60 days of the date of the closing of such offering and not prior
to June 30, 1998.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be required
to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest to the date of purchase (a "Change of Control
Payment"). Within ten days following any Change of Control, the Company shall
mail a notice to each Holder setting forth the procedures governing the Change
of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within five
days of each date on which the aggregate amount of Excess Proceeds exceeds $5.0
million, the Company shall commence a pro rata Asset Sale Offer pursuant to
Section 3.09 of the Indenture to purchase the maximum principal amount of Notes
(including Additional Notes) that may be purchased out of the Excess Proceeds at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date fixed for the
closing of such offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Subsidiary) may use any remaining Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero. Holders of Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Company prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The
<PAGE> 5
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company need not exchange or register the transfer of any Note or portion of
a Note selected for redemption, except for the unredeemed portion of any Note
being redeemed in part. Also, it need not exchange or register the transfer of
any Notes for a period of 15 days before a selection of Notes to be redeemed or
during the period between a record date and the corresponding Interest Payment
Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes, and any existing default or compliance with any
provision of the Indenture, the Subsidiary Guarantees or the Notes may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes. Without the consent of any Holder of a Note, the Indenture,
the Subsidiary Guarantees or the Notes may be amended or supplemented to cure
any ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes or to alter the provisions
regarding payment and exchange of Notes in a manner that does not materially
adversely affect any Holder, to provide for the assumption of the Company's or
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to allow any Guarantor to execute
a supplemental indenture to the Indenture and/or a Subsidiary Guarantee with
respect to the Notes, or to comply with the requirements of the SEC in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act, to provide for the issuance of Additional Notes in accordance with the
limitations set forth in the Indenture or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or Subsidiary Guarantee with respect
to the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest on the Notes (whether or not prohibited
by the subordination provisions of the Indenture); (ii) default in payment when
due of principal of or premium, if any, on the Notes (whether or not prohibited
by the subordination provisions of the Indenture) when the same becomes due and
payable at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise, (iii) failure by the Company to comply for 30 days after
notice from the Trustee or the Holders of at least 25% in principal amount of
then outstanding Notes with Section 4.07, 4.09, 4.10, 4.15 or 5.01 of the
Indenture; (iv) failure by the Company for 60 days after notice to the Company
by the Trustee or the Holders of at least 25% in principal amount of then
outstanding Notes to comply with certain other agreements in the Indenture or
the Notes; (v) default under certain other agreements relating to Indebtedness
of the Company which default results in the acceleration of such Indebtedness
prior to its express maturity and such default has not been cured or waived as
provided in the Indenture; (vi) certain final
<PAGE> 6
judgments for the payment of money that remain undischarged for a period of 60
days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
to be in full force and effect or any Guarantor or any Person acting on its
behalf shall deny or disaffirm its obligations under such Guarantor's Subsidiary
Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to
the Company or any of its Material Subsidiaries. If any Event of Default occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Notes may declare all the Notes to be due and
payable. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, all outstanding Notes
will become due and payable without further action or notice. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. Subject
to certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest. The Holders of a majority in aggregate principal amount of
the Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Notes. The Company is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Company is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
13. SUBSIDIARY GUARANTEES. Payment of principal and interest (including
interest on overdue principal and overdue interest, if lawful) is
unconditionally guaranteed on a senior subordinated basis by certain
subsidiaries of the Company.
14. SUBORDINATION. The payment of principal, premium, if any, and interest
on the Notes is subordinated to the prior payment of Senior Debt on the terms
provided in the Indenture.
15. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
16. NO RECOURSE AGAINST OTHERS. No past, present or future director,
Officer, employee, incorporator or stockholder of the Company or any Guarantor,
as such, shall have any liability for any obligations of the Company or any
Guarantor under the Notes, the Subsidiary Guarantees, the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
<PAGE> 7
17. AUTHENTICATION. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Silverleaf Resorts, Inc.
1221 Riverbend Drive, Suite 120
Dallas, Texas 75247
Telecopier No.: (214) 905-0514
Attention: Sandra Cearley
<PAGE> 8
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Note 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 face of this Note)
Signature Guarantee.
<PAGE> 9
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased: $___________
Date: Your Signature:
----------------------- -------------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No.:
---------------
Signature Guarantee.
<PAGE> 10
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for and interest in
another Global Note or for a Definitive Note have been made:
<TABLE>
<CAPTION>
Date of Exchange Amount of Amount of increase Principal Amount Signature of
- ---------------- decrease in in Principal at maturity of this authorized Officer
Principal Amount Amount of Global Note of Trustee or Note
of this Global this Global Note following such Custodian
Note ---------------- decrease ------------------
---------------- (or increase)
--------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 4.3
SUBSIDIARY GUARANTEE
Silverleaf Berkshires, Inc., a Texas corporation, Bull's Eye Marketing,
Inc., a California corporation, Bull's Eye Marketing, Inc., a Delaware
corporation, Silverleaf Resort Acquisitions, a Texas corporation, Silverleaf
Travel, Inc., a Texas corporation, Silverleaf Hotels, Inc., a Texas corporation,
Database Research, Inc., a Texas corporation, Condominium Builders, Inc., a
Texas corporation, and Villages Land, Inc., a Texas corporation, (hereinafter
referred to as the "Guarantors", which term includes any successor or additional
Guarantor under the Indenture referred to in the Note upon which this notation
is endorsed), on terms and conditions provided in the Indenture, (i) has
unconditionally guaranteed (a) the due and punctual payment of the principal of
and interest, if any, on the Notes, whether at maturity or interest payment
date, by acceleration, call for redemption or otherwise, (b) the due and
punctual payment of interest on the overdue principal of and (if lawful)
interest on the Notes, (c) the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee, all in accordance with
the terms set forth in the Indenture, and (d) in case of any extension of time
of payment or renewal of any Notes or any of such other obligations, the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise and (ii) has agreed to pay any and all costs and expenses (including
reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing
any rights under this Subsidiary Guarantee. Capitalized terms used herein have
the meanings assigned to them in the Indenture unless otherwise indicated.
No stockholder, Officer, director or incorporator, as such, past,
present or future, of the Guarantors shall have any personal liability under
this Subsidiary Guarantee by reason of his or its status as such stockholder,
Officer, director or incorporator.
This Subsidiary Guarantee shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
<PAGE> 2
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized Officers.
Dated as of April 8, 1998 DATABASE RESEARCH, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Vice President, Treasurer and
Assistant Secretary
Dated as of April 8, 1998 CONDOMINIUM BUILDERS, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: President
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Treasurer and Assistant
Secretary
Dated as of April 8, 1998 SILVERLEAF HOTELS, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Treasurer and Assistant
Secretary
<PAGE> 3
Dated as of April 8, 1998 SILVERLEAF TRAVEL, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Vice President, Treasurer and
Assistant Secretary
Dated as of April 8, 1998 SILVERLEAF RESORT ACQUISITIONS, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Assistant Secretary
Dated as of April 8, 1998 VILLAGES LAND, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: President
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Assistant Secretary
Dated as of April 8, 1998 BULL'S EYE MARKETING, INC. (Calif.)
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Treasurer and Assistant
Secretary
<PAGE> 4
Dated as of April 8, 1998 BULL'S EYE MARKETING, INC. (Del.)
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Treasurer and Assistant
Secretary
Dated as of April 8, 1998 SILVERLEAF BERKSHIRES, INC.
By: /s/ ROBERT E. MEAD
-------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
By: /s/ JOE W. CONNER
-------------------------------------
Name: Joe W. Conner
Title: Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,556
<SECURITIES> 0
<RECEIVABLES> 127,714
<ALLOWANCES> 17,876
<INVENTORY> 34,259
<CURRENT-ASSETS> 52,190
<PP&E> 29,380
<DEPRECIATION> 5,470
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<CURRENT-LIABILITIES> 15,031
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0
0
<COMMON> 113
<OTHER-SE> 87,226
<TOTAL-LIABILITY-AND-EQUITY> 185,938
<SALES> 26,239
<TOTAL-REVENUES> 31,029
<CGS> 3,698
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<INCOME-PRETAX> 5,772
<INCOME-TAX> 2,198
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