As filed with the Securities and Exchange Commission May 28, 1999
File No. 333-71091
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Amendment No. 1
IBF VI - PARTICIPATING INCOME FUND
(Exact name of registrant as specified in its charter)
Delaware 52-2139510
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1733 Connecticut Avenue, N.W.
Washington, DC 20009
(202) 588-7500
(Address and telephone number of registrant's principal offices)
Simon A. Hershon
IBF VI - Participating Income Fund
1733 Connecticut Avenue, N.W.
Washington, DC 20009
(202) 588-7500
(Name, address and telephone number of agent for service)
Copies to:
Mark E. Lehman, Esq.
Lehman, Jensen & Donahue, L.C
8 East Broadway, Suite 620
Salt Lake City, UT 84111-2204
(801) 532-7858
(801) 363-1715 fax
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes
effective.
The securities being registered on the Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [X]
CALCULATION OF REGISTRATION FEE
Title of each class of Amount to be Proposed Proposed Amount of
securities to be Registered maximum maximum registration
registered offering price aggregate fee
per certificate price
10% Income Participating $50,000,000 100% $50,000,000 $13,900.00
Notes, Class A
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
Cross-Reference Sheet Pursuant to Rule 404(a)
Cross-reference between Items of Part I of Form SB-2 and the
prospectus filed by the above Company as part of the registration
statement.
Registration Statement Item Prospectus Heading
Number and Heading
1. Front of Registration Statement and
Outside Front Cover of Prospectus FRONT COVER
2. Inside Front and Outside Back Cover INSIDE FRONT COVER and
Pages of Prospectus OUTSIDE BACK COVER
3. Summary Information and Risk Factors PROSPECTUS SUMMARY and
RISK FACTORS
4. Use of Proceeds USE OF PROCEEDS
5. Determination of Offering Price NOT APPLICABLE
6. Dilution NOT APPLICABLE
7. Selling Security Holders NOT APPLICABLE
8. Plan of Distribution PLAN OF DISTRIBUTION
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9. Legal Proceedings BUSINESS
10. Directors, Executive Officers,
Promoters, and Control Persons MANAGEMENT
11. Security Ownership of Certain PROSPECTUS SUMMARY
Beneficial Owners and Management AND MANAGEMENT
12. Description of Securities DESCRIPTION OF THE NOTES
13. Interest of Named Experts and
Counsel EXPERTS and LEGAL MATTERS
14. Disclosure of Commission Position PLAN OF DISTRIBUTION
on Indemnification for Securities
Act Liabilities
15. Organization Within Five Years PROSPECTUS SUMMARY and
BUSINESS
16. Description of Business BUSINESS
17. Management's Discussion and Analysis PLAN OF OPERATION
or Plan of Operation
18. Description of Property BUSINESS
19. Certain Relationships and Related CERTAIN RELATIONSHIPS AND
Transactions RELATED TRANSACTIONS
20. Market For Common Equity NOT APPLICABLE
and Related Stockholder Matters
21. Executive Compensation MANAGEMENT
22. Financial Statements FINANCIAL STATEMENTS
23. Changes in and Disagreements with NOT APPLICABLE
Accountants on Accounting and
Financial Disclosure
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The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
PROSPECTUS [LOGO]
$50,000,000
IBF VI - PARTICIPATING INCOME FUND
CLASS A 10% INCOME PARTICIPATING NOTES
IBF VI - Participating Income Fund is offering its Class A
10% Income Participating Notes. In addition to fixed interest,
you may receive annually additional interest on the notes payable
only out of 5% of the net income of IBF VI. Notes purchased in
1999 are due December 31, 2005, and notes purchased in 2000 are
due December 31, 2006. IBF VI has no arrangement with any broker
or market-maker for establishing a public market for the notes.
Consequently, a public market for the notes may not develop. See
"Description of the Notes."
See "Risk Factors" beginning on page 6 for certain
information you should consider before you purchase notes.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
Price To Sales Proceeds To
Public Commission Company
Per Note 100% 8.0% 92%
Minimum $500,000 $40,000 $460,000
Maximum $50,000,000 $4,000,000 $46,000,000
Coleman & Company Securities, Inc., of New York, New York,
which is an affiliate of IBF VI, is the dealer-manager for the
offering. The Dealer-Manager will organize a selling group
consisting of selected dealers. It is expected that the notes
will be sold primarily through the selected dealers.
Underwriting compensation consists of an eight percent sales
commission, 2.5 percent of the annual net income of IBF VI, a one
percent non-accountable expense allowance, and reimbursement for
certain expenses. See "Plan of Distribution."
The offering is made on a best efforts, $500,000 minimum,
$50,000,000 maximum basis. If less than $500,000 of notes are
sold within three months following the date of this prospectus
(unless extended by IBF VI and Coleman for an additional three
months), all proceeds raised will be promptly returned to
investors with interest. All proceeds from the sale of notes
will be placed in escrow with Continental Stock Transfer & Trust
Company. If the minimum amount of notes is sold within the
minimum offering period, then the offering will continue until
all the notes are sold or terminated by the Company.
The date of this Prospectus is _______________, 1999.
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PROSPECTUS SUMMARY
The Company
IBF VI - Participating Income Fund is a Delaware corporation
formed on June 8, 1998. It is a wholly owned subsidiary of
InterBank Funding Corporation, a Delaware corporation
("InterBank"). The stockholders of InterBank are Simon A.
Hershon and Ehud D. Laska, who are both officers and directors of
IBF VI.
IBF VI will engage primarily in the business of acquiring,
and making loans to, individuals and businesses secured by real
property and other assets. IBF VI will attempt to acquire non-
performing and performing loans that will produce an average
annual return of 18 percent. A loan is non-performing if
principal or interest is not being paid when due or the borrower
has breached other covenants in the loan. It will make loans
with the objective of producing similar returns to borrowers
whom, for a variety of reasons, may be unable to obtain financing
from banks and traditional lending institutions. Management has
extensive loan acquisition and origination experience and has
broad discretion in selecting the loans IBF VI will acquire or
make.
In connection with loans to businesses, IBF VI may have the
opportunity to acquire preferred stock or other forms of equity
as additional compensation for the loans. These equity
investments offer the opportunity for capital appreciation over
and above interest income.
As soon as funds are available from the offering, IBF VI
will purchase three performing loans from InterBank at a total
cost of approximately $4.16 million, which is the outstanding
principal of the loans. IBF VI may participate with other
parties, including InterBank and its affiliates, in acquiring or
making loans. It may make loans to companies controlled by
InterBank.
IBF Management Corp., an affiliate of InterBank, will
receive a fee for certain administrative and support services
rendered to IBF VI. Initially, IBF Management will receive an
organizational fee of 5% of the gross proceeds of the offering to
establish the administrative facilities and systems required for
the business of IBF VI. IBF Management will also receive in each
calendar year a management fee equal to 2% of the gross proceeds
of the offering. The principal offices of IBF VI are located at
the offices of IBF Management and InterBank at 1733 Connecticut
Avenue, N.W., Washington, DC 20009, telephone number (202) 588-
7500.
The Offering
Notes Offered $50,000,000 aggregate principal amount of
Class A 10% Income Participating Notes,
due December 31, 2005. See "Description
of the Notes" for a more detailed
description of the Notes.
Denomination The minimum principal amount of Notes you
can purchase is $5,000. However, the
minimum purchase for Individual Retirement
Accounts and Keogh Plans is $2,000. After
the minimum purchase, sales will be made
in increments of $1,000.
Maturity date Notes purchased in 1999 mature December
31, 2005, and notes purchased in 2000
mature December 31, 2006.
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Interest Interest at the rate of 10% per annum is
payable monthly or quarterly, depending on
the amount of the notes you buy. In
addition, you may receive additional
interest payable only out of 5% of the net
income of IBF VI. Fixed interest will be
paid before payment of management fees to
IBF Management.
Redemption IBF VI may redeem any portion of the notes
from time to time after January 1, 2001.
You may tender your note for redemption
under hardship circumstances, subject to
certain conditions.
Encumbrance on assets IBF VI can pledge its assets as security
on future borrowings.
Rating The notes are not rated.
Registration The note you buy will be registered in
your name and issued in the form of a note
certificate.
Trustee, Payment Continental Stock Transfer & Trust Company
Agent and Registrar
RISK FACTORS
Recently organized company
IBF VI was recently formed and has not engaged in any
business. Consequently, there is no history of operations on
which to predict future operations. See "Business" and "Plan of
Operation."
New venture
IBF VI is a new venture. There is no assurance that IBF VI
will be successful in fully implementing its business plan or
achieving profitable operations. See "Business" and "Plan of
Operation."
Discretionary use of proceeds
IBF VI has broad discretion in applying the net proceeds of
this offering. Although three loan investments totaling $4.16
million are identified in this prospectus, you will make your
investment decision without the opportunity to review the loans
IBF VI will acquire or make in the future. If you chose to
invest, you will be relying upon the ability of management to
acquire and make loans consistent with IBF VI's investment
objectives. See "Business," "Use of Proceeds" and "Plan of
Operation."
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Risks of collateral lending
IBF VI will acquire and make loans primarily on the basis of
the value of the collateral pledged as security, which in most
cases will be real estate. If IBF VI's evaluation of the
collateral is incorrect, it fails for any reason to hold a
perfected security interest, or the collateral loses value, IBF
VI may not be able to recover its loan. See "Business."
Payment of interest
IBF VI intends to make interest payments on the notes out of
revenue on its loans. If the loan business does not produce
sufficient revenue in any period to pay the interest for that
period, interest may be paid from funds raised in this offering
or working capital. This would reduce the amount available for
IBF VI's loan business, which could adversely affect future
operations. If the loan business in not successful, there is no
assurance that IBF VI will be able to make interest or principal
payments when due. See "Business."
Payment of notes at maturity
IBF VI will look for opportunities to liquidate its
portfolio assets beginning in 2004 with a view to having
sufficient capital to pay the notes on maturity. However, the
nature of the loans held in inventory, general economic
conditions, or other factors beyond the control of IBF VI may
inhibit its ability to liquidate its assets without substantial
discounts. In these circumstances, IBF VI might not be able to
meet its payment obligations under the notes. See "Business."
Risks of non-performing loans
A primary objective of IBF VI is to acquire non-performing
loans secured by real estate. To a lesser extent IBF VI may
acquire non-performing loans secured by other assets. Non-
performing loans entail a higher risk of loss. In the event IBF
VI experiences higher losses on non-performing loans than
expected, its earnings will be negatively impacted. See
"Business."
Interest rate fluctuations may adversely affect results of
operations
Unexpected changes in interest rates could adversely affect
the results of operations of IBF VI, because fluctuations in
interest rates will affect its ability to earn a spread between
interest received on its loans and the cost of its operations.
See "Business."
Loan prepayment rates may adversely affect results of operations
Loan prepayment rates vary from time to time as a result of
a number of factors, but mostly due to changes in interest rates.
If loans are prepaid in amounts higher than expected, it is
likely IBF VI will realize less interest income, which will
adversely affect results of operations. See "Business."
Adverse effect of limited offering proceeds
If IBF VI realizes less than $10 million in gross proceeds
from the sale of notes in this offering, it will be limited in
its ability to diversify its loan inventory. This means the
success of its loan business will depend on a small number of
loans, so that the non-performance of any one loan could have a
substantial adverse effect on the financial condition of IBF VI.
See "Plan of Operation."
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Dependence on management
IBF VI will depend on its officers and directors for
selecting the loans it will acquire or make. The officers and
directors of IBF VI, particularly Simon A. Hershon and Ehud D.
Laska, have prior experience in debt financing transactions. The
ability of IBF VI to implement its business will depend on their
continued participation in the business of IBF VI. If any of the
officers and directors become unavailable, there is no assurance
that IBF VI will be able to find a replacement with the same
degree of ability and experience. See "Management."
Conflicts of interest
Simon A. Hershon and Ehud D. Laska, both officers and
directors of IBF VI, are the owners of InterBank, which is the
sole stockholder of IBF VI. There are a number of conflicts of
interest inherent in the relationships between IBF VI and its
affiliates.
* InterBank owns other business entities that acquire and make
loans, so that a potential conflict could arise in allocating
loans between the businesses owned by InterBank.
* IBF VI may make loans to affiliates of InterBank or
management. IBF VI has not established any limit on the amount
of loans that may be made to affiliates. There is a conflict of
interest when management is on both sides of the loan
transaction.
These conflicts of interest may be difficult, if not
impossible, to resolve in all cases in the best interests of IBF
VI, which could adversely affect its business. See "Certain
Relationships and Related Transactions."
Lack of control
You will have no right to participate in the management of
IBF VI. InterBank, as the sole stockholder, has the right to
elect all of the directors. This means Simon A Hershon and Ehud
D. Laska are in control of the management and operations of IBF
VI. See "Certain Relationships and Related Transactions."
Substantial payments to affiliates
In the first year following the offering substantial
payments out of the proceeds of this offering will be made to IBF
Management, which is owned by Simon A. Hershon, an officer and
director of IBF VI. The maximum estimated amount of these
payments assuming all notes are sold is $3.5 million. The
payments will be made for organizational and management fees
arising under an agreement made by IBF VI and IBF Management,
which are affiliated through the common control by Mr. Hershon.
Accordingly, Mr. Hershon will benefit from these payments. These
payments will reduce the funds available to IBF VI for making and
acquiring loans. See "Certain Relationships and Related
Transactions."
Relationship with Coleman
Coleman is the dealer-manager of the offering and an
affiliate of IBF VI due to the fact that Simon A. Hershon and
Ehud D. Laska have an ownership interest in Coleman and Mr. Laska
is Chairman of Coleman. Although IBF VI expects unrelated
selected dealers will place most of the offering and receive most
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of the sales commissions, Coleman will still receive fees for its
services as the dealer-manager. See "Plan of Distribution."
Potential for additional indebtedness
Under the indenture, IBF VI can borrow funds in the future
on a secured or unsecured basis. The interest expense on the
notes and the potential interest expense arising from additional
indebtedness could substantially increase IBF VI's fixed charge
obligation and limit its ability to meet its obligations under
the notes. See "Description of the Notes."
Encumbrances on assets
IBF VI can pledge its loans and other assets as collateral
on future borrowings. If IBF VI defaults on any such future
obligations, then its assets will be used first to pay secured
obligations and second to pay the notes and any other obligations
on an equal footing with the notes. Therefore, there may not be
sufficient assets to pay any or all amounts due on the notes.
See "Description of the Notes."
Limited covenants in the indenture
The covenants in the indenture are limited and are not
designed to protect you in the event of an adverse change in IBF
VI's financial condition or operations. See "Description of the
Notes."
No Investment Company Act protection
The Investment Company Act of 1940 imposes management and
disclosure obligations for the protection of persons investing in
companies that invest and reinvest in securities. IBF VI's
proposed business activities will not render it an "Investment
Company", because a majority of its assets will be represented by
loans secured by real estate. Therefore, you will not benefit
from the protections afforded by that act.
No market for notes
There is no public market for the notes and it is not
expected that a market will develop following the offering.
Accordingly, you should purchase the notes only as a long-term
investment with the expectation of holding the notes until
maturity.
No rating for notes
The notes are not rated by any financial rating organization
and may be characterized as "high-yield" securities. The lack of
a rating will inhibit the development of a public market for the
notes and your ability to sell the notes to anyone else.
Forward-looking statements
You should carefully consider the risk factors set forth
above, as well as the other information contained in this
Prospectus. This Prospectus contains forward-looking statements
regarding events, conditions, and financial trends that may
affect IBF VI's plan of operation, business strategy, operating
results, and financial position. You are cautioned that any
forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties. Actual
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results may differ materially from those included within the
forward-looking statements as a result of various factors.
Cautionary statements in this "Risk Factors" section and
elsewhere in this Prospectus identify important risks and
uncertainties affecting IBF VI's future, which could cause actual
results to differ materially from the forward-looking statements
made in this Prospectus.
USE OF PROCEEDS
If all offered notes are sold, the net proceeds to IBF VI
after all offering costs will be approximately $45.2 million. If
only the minimum amount of notes is sold, net proceeds will be
$305,000. This table shows how IBF VI intends to use the net
proceeds of this offering during the year following sale of the
minimum amount of notes. See "Plan of Operation."
Assuming Minimum Assuming Maximum
Amount of Notes Sold Amount of Notes Sold
Amount ($) Percent Amount ($) Percent
Organization fee to IBF Management 25,000 8.2 2,500,000 5.5
Real estate loans 167,750 55.0 24,860,000 55.0
Other loans and investments 81,750 26.8 13,320,000 29.5
Working capital 30,000 10.0 4,520,000 10.0
Total 305,000 100 45,200,000 100
If more than the minimum, but less than the maximum, amount
of notes is sold, IBF VI will apply the net proceeds in
approximately the same percentages set forth in the table. After
paying organizational expenses, IBF VI will focus primarily on
acquiring non-performing real estate loans and making loans
secured by real estate. See "Business."
IBF VI has identified three loan acquisitions totaling $4.16
million, which it will make as soon as it receives sufficient
capital from this note offering. These loans will be purchased,
at cost, from InterBank, the sole stockholder of IBF VI. If only
the minimum is sold, then IBF VI will use the available proceeds
from the offering and its existing equity capital to make loans
to non-affiliated borrowers yet to be identified.
IBF VI expects to realize revenue from its business activity
during the first year following the offering, to cover its
interest obligation on the notes and fixed costs. The management
fee to IBF Management will not be paid out of the proceeds of the
offering, but only out of revenue of IBF VI. If revenue is not
sufficient to pay all the fixed interest on the notes, IBF VI
will use proceeds allocated to working capital to cover the short
fall. Net proceeds of the offering will be invested in low-risk
liquid investments until used in the loan business.
PLAN OF OPERATION
Proposed operations and capital requirements
IBF VI intends to commit not less than 55 percent of its
total assets to loans secured by real estate. Accordingly, the
primary focus will be on acquiring non-performing loans secured
by real estate and making real estate loans. IBF VI will lend to
persons that may be unable to obtain financing through commercial
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banks and lending institutions because of time constraints or
they might not satisfy the lending criterion of these
institutions. Under these circumstances, IBF VI's loans will
have higher potential yields, but also higher risk of loss. IBF
VI will attempt to mitigate its risk through the underwriting
process and by obtaining collateral for its loans with a fair
value in excess of the amount of the loan.
Management expects that some of the loans made or acquired
by IBF VI with the proceeds of the offering will generate revenue
in the first year following the offering in amounts sufficient to
cover interest expense on the notes and operating expenses.
Revenue will be applied first to payment of interest on the notes
and expenses not covered by the management fee, and second to
payment of the management fee to IBF Management. The management
fee will be deferred if revenue is not sufficient to pay the fee
after paying interest and other expenses.
IBF VI has identified three loan acquisitions totaling $4.16
million, which it will make out of the net proceeds of the
offering. Funds from the offering in excess of this amount will
be invested in loans with a target return to IBF VI of 18 percent
and maturity periods between 3 and 24 months. In general, IBF VI
does not intend to acquire or make loans that do not mature
within two years. Consequently, management expects IBF VI will
generate revenue sufficient to meet its interest and operating
expenses.
If the maximum amount of notes is sold in the offering, IBF
VI will have a minimum of $38.18 million to invest. Fixed
interest expense on the notes in the first year following the
offering will be $5 million, and operating expenses, including
the management fee, are estimated at $1.5 million. If IBF VI is
able to achieve its target return, gross revenue would be
approximately $6.5 million, which is sufficient to meet its
obligations.
If the minimum amount of notes is sold in the offering, IBF
VI will apply $249,500 to loan investments. Fixed interest and
operating expenses in the first year following the offering are
estimated at $70,000, so that IBF VI will need to achieve a
substantially higher return on its investments to cover all such
expenses.
Regardless of the amount of notes sold, management believes
the net proceeds will be adequate to implement its loan business
and generate revenue sufficient to meet the interest and
operating expenses of IBF VI without seeking additional
financing. The effect of selling less, rather than more, notes
in the offering is to increase expenses as a percentage of total
assets and limit the ability of IBF VI to diversify its loan
portfolio, which will increase the risk to you of an investment
in the notes.
Year 2000 Compliance
The Company will rely on the internal computer information
system used by IBF Management, which is Year 2000 compliant. IBF
VI does not expect to incur any costs associated with Year 2000
compliance.
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BUSINESS
General
In 1998 the capital markets placed high values on companies
with annual gross revenue less than $50 million because of the
robust stock market and economy. The stock market volatility
that began in August 1998 greatly diminished the value of these
companies because of investor preference for larger companies
with more stable market values. As a result, the availability of
debt, equity, and real estate capital to companies with less than
$50 million in revenue for expansion or working capital has
decreased leaving debt financing as the most viable alternative.
The competition among smaller companies for debt financing has
increased substantially. As such, banks and similar lending
institutions can impose more stringent underwriting criteria for
their loans. Management believes there is a substantial demand
for financing from smaller companies unable to obtain financing
from traditional lenders. As a result of these market forces,
companies are seeking alternative financing sources and are
willing to pay more for that financing. The goal of IBF VI is
to take advantage of this situation by embarking on a loan
investment program.
IBF VI will engage primarily in the business of acquiring
and making loans. All of the loans will be secured by assets
with a value in excess of the amount of the loans. IBF VI
intends to have at least 55 percent of its total assets invested
at any one time in loans secured by real estate. IBF VI will
also acquire and make commercial loans secured by other assets,
such as equipment, accounts receivable, inventory, securities,
and other personal property. When making a loan, IBF VI may have
the opportunity to acquire the right to purchase equity in the
borrower as additional consideration for the loan. Consequently,
a portion of its total assets may consist of equity securities.
IBF VI's business strategy will involve assuming risks in order
to realize income and capital growth.
In implementing its loan business, IBF VI will prioritize
its investments as follows:
Purchase of real estate loans. IBF VI will focus
primarily on acquiring performing and non-performing
loans secured by real estate.
Originating real estate loans. IBF VI will seek
opportunities to make loans secured by real estate.
Commercial secured loans. Opportunities may arise for
IBF VI to acquire performing and non-performing loans
and making loans secured by personal property.
Other loans and investments. On a selected basis IBF
VI may make loans to meet special needs of borrowers,
such as mezzanine financing for companies that need to
enhance their capital structure for acquisitions and
growth or bridge financing to meet working capital
needs pending the receipt of revenues or permanent
financing. These special needs situations may give IBF
VI the opportunity to acquire equity in the borrower as
partial consideration for the loan.
In pursuing its loan business, IBF VI may participate with
unaffiliated or affiliated parties. IBF VI may also make loans
to affiliates of IBF or management.
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Following its initial transaction, IBF VI may also
participate in subsequent rounds of financing for its borrowers.
Such follow-on investments will depend on the progress of these
companies and availability of funds.
IBF VI anticipates financing opportunities will develop from
InterBank's business relationships with others, such as capital
and investment banking firms, commercial banks, government
agencies, and other sources. Further opportunities may be
presented directly by individuals or firms seeking funds. IBF VI
does not intend to publicly solicit potential borrowers.
Loan acquisitions
IBF VI will purchase non-performing and performing loans
from government agencies and financial institutions. Government
agencies such as the Federal Deposit Insurance Corporation,
Department of Housing and Urban Development, Department of
Agriculture, and The Department of Education have defaulted loan
assets, which are sold at discounts to businesses like IBF VI
that rehabilitate the loans or foreclose on existing collateral.
In addition to government suppliers, government bank regulations
have prompted many traditional lending institutions to sell
defaulted loan assets on the open market, rather than
rehabilitate the loans. Acquiring non-performing loans at
discounts will provide opportunities to generate substantially
higher returns than can be obtained from traditional performing
loans. Accordingly, IBF VI will focus its efforts on locating
and acquiring non-performing loans that meet its criteria.
IBF VI will also seek to acquire performing loans. There is
a well-established market for sale of performing loan packages,
and IBF VI will attempt to acquire performing loans at a discount
that have interest rates high enough to provide a sufficient
return. Generally, a performing loan can be purchased at a
discount from the principal value when fees or other
consideration already received by the original lender make it
possible to negotiate a lower price.
Before acquiring any loan asset, IBF VI will review all loan
documents related to the asset collateral value, payment history,
and the borrowers' financial condition. After completing this
evaluation, IBF VI will determine a bid price for the loan asset.
As a general guideline, IBF VI will bid for non-performing loans
using a 30 percent rate of return, and on performing loans using
an 18 percent rate of return. The guideline return may vary
based on the factors evaluated by IBF VI. For example, if
management believes the value of underlying collateral is high
compared to the debt obligation, a higher bid price at a lower
projected return rate may be acceptable to IBF VI.
Once IBF VI has acquired non-performing loans, it will
attempt to restructure or refinance the loans through workouts
with borrowers. If restructuring or refinancing is not possible,
IBF VI will seek ownership of the underlying collateral through
foreclosure and collection proceedings. Non-performing loans
restructured or refinanced will be serviced by IBF VI and
packaged for sale as performing loans. Assets acquired through
foreclosure will be liquidated.
Loan origination
IBF VI intends to look for opportunities to use the proceeds
of the offering to originate loans secured by real estate. The
targeted market will include borrowers that, because of time
constraints, credit factors, amount of the loan, or other
circumstances, may be unable to obtain similar financing from
traditional lenders. IBF VI will identify these loans through
institutions such as banks, general lenders of corporate
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obligations, mortgage lenders, and real estate and finance
companies. IBF VI will primarily make loans secured by real
estate, and secondarily loans secured by other assets.
Before originating a loan, IBF VI intends to perform a
thorough review of the value of the underlying security.
Independent appraisals will be obtained on all loans secured by
real estate. For loans secured by other personal property, IBF
VI may rely on its own internal evaluation of the value of the
collateral or obtain independent appraisals of the collateral.
As a general guideline, IBF VI will make secured loans at an
interest rate of 18 percent per annum. On all loans made by IBF
VI, it will charge a loan origination fee of not less than one
percent of the total loan, which is normally included in the
amount financed. This means the actual cash outlay at the time
the loan is made is less than the principal amount of the loan
and IBF VI receives interest on this additional amount, all of
which increase the internal rate of return to IBF VI from the
loans it makes.
Typically, repayment will be made from asset sales or
refinancing by the borrower. In those few cases when this method
of repayment becomes unfeasible, IBF VI will attempt to
restructure or refinance the loan. If restructuring or
refinancing is not possible, IBF VI will seek ownership of the
underlying security through sale, liquidation, or collection of
the outstanding collateral.
In limited circumstances, IBF VI may have the opportunity to
acquire preferred stock or options, warrants, or conversion
rights to acquire equity in a borrower as additional
consideration for making a loan. Typically, options, warrants,
and conversion rights have a nominal initial cost, and are
exercised only after IBF VI determines that the value of the
underlying security equals or exceeds the cost of exercise and
there is, or expected to be, an opportunity to liquidate the
investment. IBF VI will only consider investing in preferred
stock when the total projected return on the loan and preferred
stock is acceptable to the Company.
IBF VI will only consider acquiring an equity right or
interest in borrowers that have the potential for significant
capital appreciation. IBF VI will evaluate a number of factors
to determine the capital appreciation potential of borrowers.
These factors include, the asset base of the borrower, operating
history, the market for its products or services, management, the
potential for growth, and other elements that may be evaluated in
specific instances.
Equity investments will require varying lengths of time to
mature but, in general, one to three years or longer may well
elapse before an investment appreciates in value. The ability to
liquidate an investment once it has appreciated in value is
critical to realizing a return on the equity investment.
Realizing the appreciation on equity will also be highly
dependent on general economic and financial market conditions,
which are beyond the control of IBF VI. Methods for liquidating
IBF VI's investment include, repurchase or redemption of the
equity by the borrower, sale or merger of the borrower, and
public or private sale of the equity securities.
Specific loan transactions
IBF VI will use the proceeds of this offering to purchase
three loans from InterBank and its affiliates. The loans are
performing as of the date of this prospectus and will not be
acquired if a default has occurred at the time of purchase.
IBF VI will purchase a loan in the principal amount of $1.8
million made to an unrelated borrower. The purchase price is the
unpaid principal of the loan on the date of purchase. The loan
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bears interest at the rate of 15% per annum and is secured by a
hotel located in Atlanta. The loan matures at the end of June
1999. The loan was used by the borrower to purchase the hotel
property. The borrower paid a fee of $90,000 to the lender for
making the loan, which was included in the principal amount of
the loan.
IBF VI will purchase a $1.52 million loan to a borrower
unrelated to IBF and its affiliates, which was used to acquire a
parcel of undeveloped commercial land in the U.S. Virgin Islands.
The loan bears interest at the rate of 12% per annum, and is
secured by the land purchased with the loan. Interest only is
payable monthly, and all principal is due in September 2000. The
borrower is current on its interest payments. The lender
received a fee of $78,700 for making the loan, which was included
in the loan principal.
The Company will purchase a loan that was made for $840,000
in November 1998, to a corporation controlled by InterBank. The
loan matures in November 1999, and bears interest at the rate of
15% per annum. It is secured by all of the capital stock of the
borrower. Based on the discounted cash flow of the borrower over
a period of three years from the date of the loan, IBF VI places
a value on the borrower of $1.25 million. The loan was used by
the borrower to acquire an employee benefit administration
business located in California. A fee of $85,000 was paid to
InterBank for making the loan and additional consulting fees were
paid to InterBank Capital Group, an affiliate of InterBank, all
of which are included in the principal amount of the loan.
Loan servicing
IBF Management will service all loans acquired or made by
IBF VI. IBF Management will be responsible for evaluating each
proposed loan transaction and submitting a loan analysis to
management of IBF VI for review and action. If a proposed loan
transaction is approved by management, IBF Management will
coordinate preparation of the documents required to effect the
transaction. After the loan transaction is made, IBF Management
will service the loan for IBF VI.
Competition
The finance business of IBF VI is highly competitive. IBF
VI will compete with a number of national, local, and regional
companies that pursue the same loan business. Many of IBF VI's
competitors and potential competitors possess substantially
greater financial, marketing, technical, personnel and other
resources than IBF VI. In addition, IBF VI's future
profitability will be directly related to the availability and
costs of its capital relative to that of its competitors.
Competitors may have access to capital at a lower cost than the
capital available to IBF VI through the notes described in this
prospectus. The lower cost of capital could give competitors an
advantage in making and acquiring loans.
Employees
IBF VI does not have, and does not expect to have, any full
time employees. No salaries will be paid to the executive
officers of IBF VI. All employee support services required for
IBF VI's operations will be provided by IBF Management.
Legal proceedings
IBF VI is not a party to any pending legal proceedings. To
the knowledge of management, no legal proceedings are threatened
against IBF VI.
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Offices
The principal offices of IBF VI will be located at the
offices of InterBank and IBF Management at 1733 Connecticut
Avenue, N.W., Washington, DC 20009. Management believes that
the office space available at this location is adequate for its
foreseeable needs.
Reports to note holders
IBF VI intends to distribute to holders of the notes annual
reports containing audited financial statements. In addition,
IBF VI will distribute to holders any reports required by the
indenture governing the notes and the Trust Indenture Act of
1939.
MANAGEMENT
IBF VI's business will be managed by its officer and
directors and IBF Management. The following persons are the
officers and directors of IBF VI:
Name Age Position
Simon A. Hershon 51 CEO, President and Director
Ehud D. Laska 49 Executive Vice President and Director
Ivan M. Krasner 48 Senior Vice President and Director
David C. Chabut 41 Chief Financial Officer
Laura J. Quinting 26 Vice-President and Secretary
Biographies
The following are brief biographies of the officers and
directors:
Simon A. Hershon has, for the past 22 years, been the
President and C.E.O. of InterBank, InterBank Consultants, Inc.,
InterBank/Brener Brokerage Services, Inc., American Eagle
Funding, LLC, InterBank Capital Group, IBF Securities, Inc., IBF
Management Corp., InterBank Funding Special Purpose Corporation,
IBF Special Purpose Corporation II, IBF Special Purpose
Corporation III, IBF Participating Income Fund, and IBF V -
Alternative Investment Fund. These companies offer financial
advisory, asset management, merchant banking, and investment
services to business, institutions and individuals in the
hospitality, real estate, finance, and communications industries.
Through InterBank Consultants, Inc., Mr. Hershon has been
involved in numerous corporate and bond financings and provided
advisory services in connection with the largest bankruptcy in
Washington, DC history, which totaled over $2.0 billion. Mr.
Hershon was also involved, through InterBank/Brener Brokerage
Services, Inc., in over $5.0 billion of hotel transactions. Mr.
Hershon's education and professional experience combine to
provide InterBank's clientele with an in depth understanding of
institutional and corporate finance, real estate finance and
development, and hospitality turn-arounds. Mr. Hershon graduated
from the U.S. Naval Academy and subsequently served in nuclear
powered submarines in the U.S. Navy. He received both a Masters
and Doctorate in Business Administration from Harvard University
where he concentrated in finance and graduated with honors.
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Ehud D. Laska has served as President of American Eagle
Funding, LLC, and Managing Director of the InterBank Capital
Group since January 1996. Through these firms, Mr. Laska
specializes in building up companies through same industry
consolidation and acquisitions. Mr. Laska has also served as the
Chairman of Coleman & Company Securities, Inc., a member firm of
the National Association of Securities Dealers, Inc., and the
Dealer-Manager for this offering, since May 1996. Mr. Laska has
also served as a director of Headway Corporate Resources, Inc., a
publicly held corporation engaged in human resource management,
since August 1993. From August 1994 to February 1996, Mr. Laska
served as a managing director at the investment-banking firm of
Continuum Capital, Inc. While serving as a Managing Director
with Tallwood Associates, Inc., a boutique investment banking
firm, from May 1992 to August 1994, Mr. Laska founded the Private
Equity Finance Group, which merged with Continuum Capital, Inc.
in August 1994. Prior to 1992, Mr. Laska was a senior investment
banker with the Wall Street firms of CS/First Boston, Drexel
Burnham Lambert, Paine Webber, and Laidlaw Equities. Mr. Laska
graduated from the University of Massachusetts with a B.Sc. in
Engineering and holds an MS degree in engineering from Brown
University and an MBA from Stanford University.
Ivan M. Krasner has been employed since September 1998, by
InterBank Securities, Inc., where he is responsible for managing
the marketing operations of InterBank's business activities. Mr.
Krasner has over 20 years experience in the development,
strategic positioning, and marketing of financial service
products. Most recently, Mr. Krasner was Vice President of
Orbitex Management, a European-based mutual fund group
specializing in global sector funds, from September 1997 to
August 1998. From September 1996 to August 1997, Mr. Krasner was
a founding partner and Senior Vice President of The Net
Collaborative, a consultancy of industry experts bringing
internet solutions to large financial service institutions. From
October 1983 to December 1995, Mr. Krasner was employed in
various positions by PLM International, a major originator of
equipment leasing direct participation programs. Mr. Krasner
graduated from C.W. Post College with a BA in Philosophy and
attended the Strategic Marketing Management Program at the
Harvard Business School.
David C. Chabut is the Chief Financial Officer of IBF VI and
InterBank Capital Group only. He became Chief Financial Officer
of InterBank Capital Group in August 1998. From October 1995 to
May 1998, Mr. Chabut was the Chief Financial Officer of UNIVEC,
Inc., a publicly held medical device manufacturer. Prior to
October 1995, Mr. Chabut was an independent financial consultant.
From February to December 1993, he was Chief Operating Officer of
MediMax, Inc., which participated in accounts receivable
financing for health care providers. For 11 years prior to
February 1993, Mr. Chabut was a senior consultant for Coopers &
Lybrand. Mr. Chabut graduated from the University of Michigan
with a BA and MBA degrees.
Laura J. Quinting has served as a Vice President of IBF
Special Purpose Corporation II since its inception in January
1997, IBF Participating Income Fund since its inception in
January 1998, IBF Special Purpose Corporation III since its
inception in March 1998, and IBF V - Alternative Investment Fund
since its inception in August 1998. In this capacity, Ms.
Quinting provides oversight in the areas of operations, investor
and broker relations and fund management. Through IBF Special
Purpose Corporation III, Ms. Quinting is managing the development
of a residential community, which included the coordination
between joint venture partners, capital sources, builders and
contractors. Ms. Quinting has also been employed since January
1994 as director of marketing for the InterBank, InterBank
Consultants, Inc., InterBank/Brener Brokerage Services, Inc.,
American Eagle Funding, InterBank Capital Group. Ms. Quinting
has also provided asset management services for InterBank/Brener
Brokerage Services, Inc., to the City of Richmond, Virginia since
December 1994. Ms. Quinting graduated from the University of
Delaware with a Bachelor's degree in political science and
economics in June 1994.
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Compensation
IBF Management is a Delaware corporation in which Simon A.
Hershon is the sole officer, director, and stockholder. No
executive compensation will be paid directly by IBF VI to its
officers. IBF Management will bear all costs of operating IBF
VI. IBF Management will receive a one-time organization fee
equal to 5 percent of the gross proceeds of the offering and an
annual management fee for its services equal to 2% of the gross
proceeds of the offering for providing all administrative support
required to operate the Company. The management fee will cover
items such as wages and salaries of employees of IBF Management
responsible for IBF VI's daily operations, fees and expenses of
agents and independent contractors providing administrative
support for IBF VI's operations, office space, and all overhead
expenses. The management fee does not cover IBF VI's legal and
accounting fees, filing fees, investment transaction costs,
taxes, officer and director liability insurance, and other
administrative expenses.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following table describes the amount and nature of
payments that will or may be made by IBF VI to InterBank and its
affiliates.
Payee Amount ($) Purpose
Coleman & Company
Securities, Inc. 90,000 to 4,500,000 Selling costs of this offering (1)
IBF Management Corp. 25,000 to 2,500,000 One time organization fee (2)
IBF Management Corp. 10,000 to 1,000,000 Annual management fee (2)
(1) See "Plan of Distribution."
(2) See "Management - Compensation."
InterBank is the sole stockholder of IBF VI and has the
right to manage the business affairs of IBF VI and to appoint all
directors.
There is no restriction on the ability of IBF VI to make
loans to InterBank and its affiliates. However, loans made to
InterBank or its affiliates will only be made on the same or
similar terms and conditions as loans made to unrelated parties.
InterBank is the sole equity owner of five other companies
engaged in activities similar to the proposed business of IBF VI,
and may participate as a controlling stockholder in other
corporations or partnerships formed in the future to pursue
business activities similar to that of IBF VI. Simon A. Hershon
and Ehud D. Laska, directors and officers of IBF VI, are the
owners of InterBank. Furthermore, Mr. Hershon is the sole owner
of IBF Management, which provides management services to IBF VI.
The Company may participate in loans with one or more affiliates
of InterBank, Mr. Hershon, or Mr. Laska.
Certain conflicts of interest are inherent in the foregoing
relationships, including the selection of loan opportunities for
IBF VI and allocation of management time and resources to the
operations of IBF VI. Although the indenture provides that IBF VI
may not participate in a transaction with an affiliate, except in
good faith and on terms that are no less favorable to IBF VI than
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those that could have been obtained from a person not an
affiliate of IBF VI, no other policy or restriction has been
adopted by management to resolve conflicts of interest that might
arise.
DESCRIPTION OF THE NOTES
The notes will be issued under an indenture between IBF VI
and Continental Stock Transfer & Trust Company as trustee. The
indenture is an exhibit to the Registration Statement of which
this prospectus is a part. The indenture is governed by the
Trust Indenture Act of 1939. The following summary does not
contain all information that may be important to you. You are
welcome to review the indenture by obtaining a copy in the manner
described under "Additional Information", below.
General
The notes are general obligations of IBF VI and are limited
to $50,000,000 aggregate principal amount. Notes purchased in
1999 will mature on December 31, 2005, and notes purchased in
2000 will mature on December 31, 2006. The notes are subject to
redemption in limited circumstances. See "-- Redemption." The
notes will be subordinated to the prior payment in full of fees
and expenses of the trustee.
Fixed interest at the rate of 10% per annum will be paid on
the notes. If you purchase at least $15,000 of notes, the fixed
interest is paid to you monthly or quarterly, as you elect. If
you purchase less than $15,000 of notes, then you will be paid
fixed interest quarterly. The interest payment will be made to
the holder of record as of the close of business on the 10th day
prior to the interest payment date, which is the end of the
applicable monthly or quarterly period. In the event an interest
payment date falls on a day other than a business day, interest
will be paid on the next business day. Interest will be computed
on the basis of a 360-day year consisting of twelve 30-day
months. Principal and interest will be payable at the office of
the trustee in New York, New York.
You will receive additional interest, within 120 days
following the end of each calendar year. Additional interest is
payable only out of five percent of the net income of IBF VI.
Net income is gross revenue from operations, less all operating
and non-operating expenses, including taxes on income and
excluding additional interest, all determined in accordance with
generally accepted accounting principles applied on a consistent
basis. In the event IBF VI has a loss for a calendar year, such
loss will reduce future years' net income for the purpose of
calculating future additional interest.
The notes will be issued in denominations of $1,000 and
integral multiples thereof. The notes will be issued in
certificated form.
IBF VI will furnish to holders of the notes annual reports
containing audited financial statements of IBF VI.
Redemption
After January 1, 2001, IBF VI may redeem any portion of the
notes from time to time on at least 30 days' advance notice to
you. After the redemption date specified in the notice, your
note ceases to accrue fixed interest and additional interest.
Partial redemptions will be allocated among holders of the notes
by lot.
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You may tender your note for redemption under hardship
circumstances beginning in the year 2000. A request for hardship
redemption may only be delivered to IBF VI during the months of
June and December. The request is irrevocable and represents a
binding commitment by you to tender the note for redemption. The
request must provide information on your financial difficulty or
change of circumstances and you must provide any additional
information requested by IBF VI on the hardship situation. IBF
VI has complete discretion on the basis of the information
provided or factors unrelated to your personal circumstances to
accept or reject the request for hardship redemption. Notes will
be redeemed as of the end of the month in which the request for
redemption is made. The amount of notes redeemed in each
calendar year may not exceed 10% of the aggregate principal
amount of the notes outstanding on the first day of each calendar
year. In the event requests for redemption during a year exceed
the 10% limitation, redemption will be made on a "first come -
first served" basis among the holders of the notes requesting
redemption. The indenture does not contain any other provision
that permits you to require that IBF VI redeem your Note.
The redemption value is equal to 100% of the principal
amount of your note plus accrued fixed interest through the date
of redemption. Furthermore, additional interest will be paid on
redemptions by IBF VI and hardship redemptions effected in
December, but not June. Additional interest will be calculated
as of the date of redemption, in the case of IBF VI redemptions,
and the end of the year, in the case of December hardship
redemptions. Payment of principal and fixed interest will be
made on the redemption date with respect to a redemption by IBF
VI. In the case of a hardship redemption, payment of principal
and interest will be made on or before the end of the following
month. For both a redemption by IBF VI and the December hardship
redemption, additional interest will be paid on its scheduled
annual payment date.
Future borrowing
IBF VI may borrow additional funds in the future in an
amount not to exceed the total amount of notes sold in the
offering. IBF VI can pledge all of its assets, including the
assets acquired with the proceeds of the offering, as security on
any future borrowing. In these circumstances, payment of the
notes could be subordinated to payment of future borrowings by
IBF VI. IBF VI has no present plan or arrangement for borrowing
additional funds.
If a default occurs under any senior debt, IBF VI may not
make any principal or interest payments on your note and neither
the trustee nor the holders of the notes may accelerate the
maturity of the notes until the default on the senior debt is
cured or waived, or 180 days has elapsed from the date the
trustee receives notice of default on the senior debt. Upon cure
of the default on the senior debt, payment to you of principal,
fixed interest, and additional interest will resume.
Upon a distribution of assets, dissolution, winding up,
liquidation or reorganization of IBF VI, upon an assignment for
the benefit of creditors, or if the principal of the notes has
been declared due and payable and such declaration has not been
rescinded or annulled, then in any such instance all senior debt
must be repaid in full before any payment of principal or
interest on the notes can be made. Any subordination will not
prevent a default under the indenture. See "--Events of Default;
Notice and Waiver."
Limitation on restricted payments
IBF VI cannot
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(i) declare or pay any dividend, either in cash or property, on
any shares of its capital stock (except dividends or other
distributions payable solely in shares of capital stock of IBF
VI),
(ii) purchase, redeem or retire any shares of its capital stock
or any warrants, rights or options to purchase or acquire any
shares of its capital stock, or
(iii) make any other payment or distribution, either directly
or indirectly, in respect of its capital stock,
if a default will occur after giving effect to the transaction.
Notwithstanding the foregoing, IBF VI may make a previously
declared distribution on its capital stock if at the date of the
declaration the distribution was permitted under this
restriction.
Furthermore, IBF VI cannot pay the management fee to IBF
Management or any of its affiliates to the extent IBF VI has an
accumulated deficit for any period with respect to which the
management fee is payable. As a practical matter, this means
fixed interest on the notes and the other operating expenses will
be paid before the management fee.
Limitations on transactions with affiliates
IBF VI may not participate in a transaction with an
affiliate, except in good faith and on terms that are no less
favorable to IBF VI than those that could have been obtained in a
comparable transaction on an arm's length basis from a person not
an affiliate of IBF VI.
Limitations on mergers, consolidations, etc.
IBF VI may not liquidate or dissolve itself, sell or dispose
of substantially all of its assets except to create liquidity to
pay the notes, or make any material change in its business. IBF
VI may merge or consolidate with another entity; provided that
such merger or consolidation will not materially change the
business of IBF VI, the new entity fully assumes all obligations
of IBF VI, and after giving effect to the transaction no default
shall exist.
Events of default
An event of default under the indenture includes:
(i) failure to pay the principal on the notes when due at
maturity, upon redemption, or upon repayment, as
provided in the indenture;
(ii) failure to pay any interest on the notes when due, which
default continues for 30 days;
(iii) failure to perform any other covenant set forth in the
indenture for 30 days after receipt of written notice from the
trustee or holders of at least 30% in principal amount of the
outstanding notes under the indenture specifying the default and
requiring IBF VI to remedy such default;
(iv) default in the payment of any indebtedness of IBF VI having
an outstanding principal amount of $5,000,000 and such default
results in acceleration of the indebtedness;
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(v) certain events of insolvency, receivership, or
reorganization of IBF VI, and
(vi) entry of a final judgment, decree or order against IBF VI
for the payment of money in excess of $5,000,000 in certain
circumstances.
If an event of default occurs, the trustee may at its
discretion proceed to protect and enforce its rights and the
rights of the holders. The trustee is required to enforce such
rights at the written request of holders of a majority of the
outstanding notes and upon being indemnified to its satisfaction.
If a default occurs, subject to the subordination provisions of
the indenture, either the trustee or the holders of at least 30%
of the outstanding notes may accelerate the maturity of all
outstanding notes. Prior to any judgment or decree for the
payment of money being obtained, the holders of a majority of the
outstanding notes may waive a default resulting in acceleration
of the notes, but only if all defaults have been remedied or
waived.
IBF VI must furnish quarterly, to the trustee an Officers'
Certificate stating whether, to the best of the knowledge of the
officers executing such certificate, IBF VI is in default under
any of the provisions of the indenture and describing any
existing defaults.
A holder will not have any right to institute any proceeding
with respect to the indenture or for any remedy thereunder,
unless
(i) the holder has previously given to the trustee written
notice of a default,
(ii) the holders of at least 30% of the outstanding notes have
made a written request and offered reasonable indemnity to the
trustee to institute such proceedings,
(iii) the trustee has failed to institute such proceeding
within 60 days, and
(iv) the trustee has not received from the holders of a majority
of the outstanding notes a direction inconsistent with such
request.
However, you have an absolute right to receive payment of
principal and interest on your note on or after the due dates and
to institute suit for the enforcement of any such payments.
Modification and waiver
With certain limited exceptions which permit modification of
the indenture by IBF VI and trustee without the consent of any
holders of the notes, the indenture may be modified by IBF VI
with the consent of holders of not less than a majority of the
outstanding notes, if the notes are affected by the modification.
No change can be made without your consent if the effect is to:
(i) change the maturity date of principal or the payment date of
any interest on your note,
(ii) reduce the principal of, or the rate of interest on, your
note,
(iii) change the coin or currency in which any portion of the
principal of, or interest on, your note is payable,
(iv) impair your right to institute suit for the enforcement of
any such payment,
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(v) reduce the percentage of holders of the outstanding notes
necessary to modify the indenture, or
(vi) modify the foregoing requirements or reduce the percentage
of outstanding notes necessary to waive any past default.
The holders of a majority of the outstanding notes may waive
compliance by IBF VI with certain restrictive provisions of the
indenture.
Satisfaction and discharge of indenture
The indenture provides that IBF VI may terminate its
obligations under the indenture with respect to all notes which
have become due and payable by delivering to the trustee, in
trust for such purpose, money and/or Government Obligations
which, through the payment of interest and principal, will
provide money in an amount sufficient to discharge the entire
indebtedness on the notes. Defeasance of the notes is subject to
delivery to the trustee of an opinion of independent counsel that
holders of the outstanding notes will not recognize income, gain
or loss for Federal income tax purposes as a result of such
deposit and termination and certain other conditions.
The Trustee
Continental Stock Transfer & Trust Company is the trustee
under the indenture. Its principal corporate trust office is
located at 2 Broadway, New York, NY 10004. The trustee is not
responsible for any investment decisions of IBF VI and shall not
be held responsible or liable for any such decisions.
PLAN OF DISTRIBUTION
Subject to the conditions set forth in this prospectus and
in accordance with the terms and conditions of the indenture and
the Dealer-Manager Agreement between IBF VI and Coleman & Company
Securities, Inc., IBF VI will offer through Coleman, on a best
efforts basis, a maximum of $50,000,000 in principal amount of
the notes. The minimum subscription is $5,000 ($2,000 for IRAs
and Qualified Plans, including Keogh plans) except in certain
states. See "Investor Suitability And Minimum Investment
Requirements." Coleman is an affiliate of InterBank, the sole
stockholder of IBF VI.
The sales commission paid to Coleman is eight percent of the
gross offering proceeds and an additional amount equal to 2.5
percent of IBF VI's annual net income for each calendar year in
which the notes are outstanding. In addition, IBF VI will pay a
non-accountable expense allowance of one percent of the gross
proceeds of the offering and certain out-of-pocket expenses on an
accountable basis. Coleman may reallow the selling compensation
to selected dealers participating in the offering. It is
expected notes will be sold primarily through the selected
dealers and to a limited extent by Coleman. The Dealer-Manager
Agreement and the Selected Dealer Agreements contain provisions
for the indemnification of Coleman and participating selected
dealers by IBF VI with respect to certain liabilities, including
liabilities arising under the Securities Act. Coleman is an
"underwriter" for purposes of the Securities Act in connection
with this offering. Due to the affiliation between IBF VI and
Coleman, the offering will be conducted under Rule 2720 of the
NASD Rules of Conduct, which imposes certain requirements on the
distribution. One requirement is that a qualified independent
underwriter participate in the offering and assume the
obligations of pricing the offering and conducting due diligence
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on the issuer. Oscar Gruss & Son, Incorporated, of New York
City, New York, is acting as the qualified independent
underwriter for this offering.
Until subscriptions for $500,000 of notes have been accepted
by IBF VI, all funds received by Coleman and selected dealers
from subscriptions for notes will be placed in an escrow account
with Continental Stock Transfer & Trust Company, as escrow agent.
If less than $500,000 of notes are sold within three months
following the date of this prospectus (unless extended by IBF VI
and Coleman for an additional three months), all proceeds raised
will be promptly returned to investors, with interest and without
deducting any sales commissions or expenses of the offering.
Investors will not have the use of their funds and will not be
able to obtain return of funds placed in escrow unless and until
the minimum offering period expires. In the event the minimum
amount of notes is sold within the minimum offering period, the
offering will continue until all notes are sold or terminated by
IBF VI, whichever occurs first. In no event will any notes be
sold to affiliates of IBF VI in order to reach the minimum.
The offering of the notes is made subject to prior sale and
to withdrawal, cancellation, or modification of the offer without
notice. Coleman and IBF VI reserve the right to reject any order
for the purchase of notes.
INVESTOR SUITABILITY AND MINIMUM INVESTMENT REQUIREMENTS;
SUBSCRIPTION PROCEDURES
General Suitability Considerations
Among the reasons for establishing investor suitability
standards and minimum dollar amounts of investment is that there
is no public market for the notes and none is expected to
develop. Accordingly, only persons able to make a long-term
investment and who have adequate financial means and no need for
liquidity with regard to their investment should purchase the
notes. An investment in notes is not appropriate for you if you
must rely on cash distributions with respect to their notes as
your primary, or as an essential, source of income to meet your
necessary living expenses.
Requirements Concerning Minimum Investment and Minimum Investor
Net Worth/Income
Minimum Investment. For investors other than Qualified
Plans and IRAs, the minimum investment is $5,000 in principal
amount of the notes. For Qualified Plans and IRAs, the minimum
investment is $2,000 in principal amount of the notes.
Minimum Net Worth/Income. Except with respect to Qualified
Plans and IRAs, notes will be sold to you only if you represent
in writing:
(i) your net worth is at least $40,000 in excess of the
proposed investment in the notes and you have an annual
gross income of at least $40,000, or
(ii) irrespective of annual gross income, your net worth is at
least $75,000, or
(iii) that you satisfy the suitability standards imposed
by the state in which you reside, if such standards are
more stringent than those set forth above.
All computations of your net worth must exclude the value of
your home, home furnishings, and personal automobiles. All other
assets should be valued at their fair market value.
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<PAGE>
If an investor is a Qualified Plan or an IRA, such investor
must represent (i) that the IRA owner or the participant in the
self-directed Qualified Plan satisfies the foregoing standards,
or (ii) if other than a self-directed Qualified Plan, that the
Qualified Plan satisfies the foregoing suitability standards.
You must execute a copy of the Subscription Agreement, the
form of which is attached as Appendix II to this prospectus, to
evidence your compliance with the foregoing standards and the
requirements of applicable laws.
How to Subscribe
If you meet the suitability standards set forth above you
subscribe to purchase notes. You must personally execute the
Subscription Agreement and deliver to the Dealer-Manager or
Selected Dealer soliciting the investment with payment of the
purchase price for the notes. In the case of IRA and Qualified
Plans, both owners and the plan fiduciary (if any) must sign the
Subscription Agreement. In the case of grantor trusts or other
trusts in which the grantor is the fiduciary, such grantor must
sign the Subscription Agreement. In the case of other fiduciary
accounts in which the donor does not exercise control and is not
a fiduciary, the plan fiduciary alone may sign the Subscription
Agreement.
All subscription payments should be made payable to "CSTTC -
Escrow Account." Subscription payments will be deposited in the
escrow account no later than noon of the next business day
following receipt. After the minimum of $500,000 in principal
amount of notes is sold within the minimum offering period,
subscription payments will continue to be deposited and cleared
through the escrow account.
IBF VI and Dealer-Manager will promptly review, and accept
or reject at their discretion, each subscription. If a
subscription is rejected, the subscription payment will be
promptly refunded, without deduction of any offering expenses and
without payment of interest.
Affiliates of IBF VI, Dealer-Manager, and the Selling
Dealers will have the right, but not the obligation, to subscribe
for and purchase notes for their own account for investment
purposes, subject to the terms and conditions contained herein.
Such affiliates may purchase notes prior to sale of the minimum
$500,000 of notes, which will count toward the achievement of the
minimum requirement. All notes purchased by such parties will be
purchased solely for investment purposes and not with a present
view towards resale or distribution.
SALES MATERIAL
In addition to and apart from this prospectus, IBF VI will
utilize certain sales material in connection with the offering of
notes. This material may include reports describing IBF VI and
its affiliates and a brochure and audio-visual materials or taped
presentations highlighting various features of this offering.
IBF VI and its affiliates may also respond to specific questions
from Selected Dealers and prospective investors. Business reply
cards, introductory letters or similar materials may be sent to
Selected Dealers for customer use, and other information relating
to this offering may be made available to Selected Dealers for
their internal use. However, this offering is made only by means
of this prospectus. Except as described herein or in supplements
hereto, IBF VI has not authorized the use of other sales
materials in connection with this offering. Although the
information contained in such material does not conflict with any
of the information contained in this prospectus, such material
does not purport to be complete and should not be considered as a
part of this prospectus or the registration statement of which
this prospectus is a part, or as incorporated in this prospectus
or the registration statement by reference or as forming the
basis of this offering of notes.
25
<PAGE>
LEGAL MATTERS
The legality of the issuance of the notes offered hereby and
certain other matters will be passed upon for IBF VI by Lehman,
Jensen & Donahue, L.C., Salt Lake City, Utah.
EXPERTS
The balance sheet of IBF VI at April 30, 1999, appearing in
this Prospectus and Registration Statement has been audited by
Radin, Glass & Co., LLP, independent auditors, as set forth in
their reports appearing elsewhere herein, and are included in
reliance upon such reports given upon the authority of said firm
as experts in accounting and auditing.
ADDITIONAL INFORMATION
IBF VI has filed a Registration Statement on Form SB-2 under
the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the notes offered hereby. This Prospectus does
not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further
information with respect to IBF VI and the notes offered hereby,
reference is made to the Registration Statement and the exhibits
and schedules filed therewith. Statements contained in this
Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each
such statement being qualified in all respects by such reference.
A copy of the Registration Statement, and the exhibits and
schedules thereto, may be inspected without charge at the public
reference facilities maintained by the Securities and Exchange
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at
Seven World Trade Center, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and copies of all or any part of the Registration
Statement may be obtained from the Commission upon payment of a
prescribed fee. This information is also available from the
Commission's Internet web site at http://www.sec.gov.
26
<PAGE>
INDEPENDENT AUDITOR'S REPORT
IBF VI - Participating Income Fund
Washington, DC
We have audited the accompanying balance sheet of IBF VI -
Participating Income Fund (A Development Stage Enterprise) as of
April 30, 1999. This financial statement is the responsibility
of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of IBF
VI - Participating Income Fund (A Development Stage Enterprise),
as of April 30, 1999, in conformity with generally accepted
accounting principles.
RADIN, GLASS & CO., LLP
Certified Public Accountants
New York, NY
May 17, 1999
27
<PAGE>
IBF VI - PARTICIPATING INCOME FUND
(A Development Stage Enterprise)
BALANCE SHEET
APRIL 30, 1999
ASSETS
CURRENT ASSETS:
Cash $ 250,000
TOTAL CURRENT ASSETS 250,000
DEBT ISSUANCE COSTS 26,276
$ 276,276
STOCKHOLDER'S EQUITY
Common stock, $1 par value, 1,000 shares authorized,
issued and outstanding $ 1,000
Additional paid-in capital 275,276
$ 276,276
See notes to financial statements.
28
<PAGE>
IBF VI - PARTICIPATING INCOME FUND
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999
1. INITIATION OF BUSINESS
On June 8, 1998, IBF VI - Participating Income Fund (the
"Company") was formed to engage in the business of purchasing,
holding and disposing of debt and equity securities,
instruments, or other ownership interest or assets issued
by/owned by, as the case may be, individuals, corporations and
other entities. The investments will usually take the form of
debt securities or instruments and/or equity securities.
There have been no operations from inception through April 30,
1999.
The Company is a wholly-owned subsidiary of InterBank Funding
Corporation.
2. SIGNIFICANT ACCOUNTING POLICIES
a. Development stage - The Company is a development stage
enterprise and will continue as a development stage enterprise
until such time as it has significant revenues from operations.
b. Debt issuance costs - Debt issuance costs will be charged
against additional paid-in capital upon successful completion of
the Company's proposed public offering. In the event the
offering is not completed, such costs will be charged to expense.
c. Pervasiveness of estimates - The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
d. Fiscal year - The Company has adopted a fiscal year ending
May 31.
3. RELATED PARTY INTERESTS
The Company is wholly-owned by InterBank Funding Corp., an
affiliate of which, IBF Management Corp. ("IMC") will
receive a fee for certain administrative and support
services rendered to the Company. IMC will receive 5%
of the gross proceeds of the offering described below
to establish administrative facilities and systems
required for the Company's business and an annual
management fee equal to 2% of the amount raised in the
offering. The annual management fee will pay for
certain costs of operating the Company for which IMC is
responsible.
4. PROPOSED PUBLIC OFFERING
The Company anticipates offering $50,000,000 of 10% Income
Participating Notes, Class A (the "Notes") of IBF VI,
Participating Income Fund. The Notes may be
29
<PAGE>
subordinated to future Senior Indebtedness of the
Company. Any amount of the Notes is redeemable at the
option of the Company after January 1, 2001. Notes may
be redeemed at the request of the registered holders of
the Notes ("Holders") under limited circumstances. The
redemption value of each Note is equal to 100% of its
principal amount plus accrued Interest and Additional
Interest, if any.
The minimum principal amount of Notes that may be purchased
is $5,000 for all investors, except for Individual
Retirement Accounts and Keogh Plans, for which the
minimum purchase is $2,000.
30
<PAGE>
IBF VI - PARTICIPATING INCOME FUND
SUBSCRIPTION AGREEMENT
_______________________________________________________________________________
INITIAL SUBSCRIPTION:______________________________________________________
ADDITIONAL INVESTMENT: Account Number Previously Assigned:_________________
Name of Investment:___________________________________________________________
INVESTMENT
I desire to purchase $______________ aggregate principal amount of Notes of IBF
VI - Participating Income Fund.
MAKE CHECKS PAYABLE TO:
SUBSCRIBER INFORMATION: Please print name(s) in which Notes are
to be acquired. All checks and correspondence will go to this
address unless another address is listed in the Investor Mailing
or Direct Deposit Address sections.
Name (1st) Mailing address (if different)
Name (2nd) Name
Register in name of Address
Address
City City
State Zip Code State Zip Code
Custodian Account No. Daytime Telephone Number
Occupation ___________________________
U.S. Citizen ___ Resident Alien ___ Foreign Resident ___ Country ____
Check if the Subscriber is a U.S. citizen residing outside the U.S. _____
ALL SUBSCRIBERS: State of Residence of Subscriber (required):
Enter the taxpayer identification number below. For most
individual taxpayers, it is their Social Security number. Note:
If the purchase is in more than one name, the number should be
that of the first person listed. For IRA's, Keoghs, and
qualified plans, enter both the Social Security number and the
taxpayer identification number for the plan.
Taxpayer ID# and/or Social Security # (required)
FORM OF OWNERSHIP: (Circle only one)
Individual Joint Tenants With Right Of
Survivorship (all parties must sign)
Husband And Wife, As Community Property A Married Person/Separate Property
(two signatures required) (one signature required)
Tenants In Common Keogh - H.R.10 (trustee signature
required)
Tenants By The Entirety (two signatures Custodian - custodian signature
required) required
Corporation S Corp Partnership (authorization required)
Non - Profit Organization Pension Plan (trustee signature(s)
required)
IRA (custodian signature required) Profit Sharing Plan - trustee
signature(s) required
SEP (custodian signature required) Custodian UGMA - State of ________
(custodian signature required)
Taxable Trust (trustee signature Custodian UTMA - State of ________
required) (custodian signature required)
Tax - Exempt Trust (trustee Estate (Personal Representative
signature required) signature required)
Irrevocable Trust (trustee signature Revocable Grantor Trust (grantor
required) signature required)
31
<PAGE>
BROKER/DEALER - REGISTERED REPRESENTATIVE INFORMATION (To be completed by
Registered Representative.) PLEASE PRINT
I hereby certify that the investor(s) has read the prospectus and
meets the suitability requirements.
Broker/Dealer Firm Name: ____________________________
Registered Rep _____________________________
Representative's Office Name:
________________________________________________________________________________
(street) (city) (state) (zip) (office phone)
Sales Representative Signature: X_________________________ RR No.
INTEREST DISTRIBUTION: If you are purchasing $15,000 or more of
the Notes, please indicate how you want fixed interest paid
___ monthly ___ quarterly
SUBSCRIBER SIGNATURE: (The undersigned has the authority to enter
into this subscription agreement on behalf of the person(s) or
entity registered above. I (We) certify under penalty of perjury
that this is my (our) correct Social Security Number (or Tax
Identification Number) and that interest income on this account
should be reported on this number. I acknowledge and agree to
the statement on the reverse side hereof.)
X_______________________ Date _________ X______________________ Date ________
Authorized Signature of 1st Subscriber Authorized Signature of 2nd Subscriber
COMPANY'S ACCEPTANCE (To be completed only by an authorized representative of
the Company.)
The Foregoing subscription is accepted this _____ day of _____________, 19___.
________________________________________
Authorized Representative of the Company
32
<PAGE>
[Outside back cover]
=============================== ===============================
Until _____________, 1999, all
dealers that effect
transactions in these
securities, whether or not $50,000,000
participating in this offering,
may be required to deliver a
prospectus. This is in
addition to the dealers'
obligation to deliver a IBF VI - PARTICIPATING INCOME
prospectus when acting as FUND
underwriters and with respect [logo]
to their unsold allotments or
subscriptions.
- ------------------------------- Class A 10% Income
TABLE OF CONTENTS Participating
- ------------------------------
---------------------
PROSPECTUS
---------------------
No dealer, salesperson or other
person has been authorized to
give any information or to make
any representations other than
those contained in this
Prospectus and, if given or
made, such information or
representations must not be
relied upon as having been
authorized by the Company or
the Selling Stockholders or any
Underwriter. This Prospectus ___________________1999
does not constitute an offer to
sell or a solicitation of an
offer to buy any of the
securities offered hereby to
whom it is unlawful to make ===============================
such offer in such jurisdiction
to any person in any
jurisdiction. Neither the
delivery of this Prospectus nor
any sale made hereunder shall,
under any circumstances, create
any implication that
information contained herein is
correct as of any time
subsequent to the date hereof
or that there has been no
change in the affairs of the
Company since such date.
===============================
33
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection
with this Registration Statement. The Company will pay all
expenses of the offering. All of such expenses are estimates,
other than the filing fees payable to the Securities and Exchange
Commission and NASD.
Securities and Exchange Commission Filing Fee $ 13,900.00
NASD Filing Fee 5,500.00
Printing Fees and Expenses 40,000.00
Legal Fees and Expenses 125,000.00
Accounting Fees and Expenses 50,000.00
Blue Sky Fees and Expenses 25,000.00
Trustee's and Registrar's Fees 35,000.00
Miscellaneous 5,600.00
TOTAL $ 300,000.00
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Charter provides that, to the fullest extent
that limitations on the liability of directors and officers are
permitted by the Delaware General Corporation Law (the "DGCL"),
no director or officer of the Company shall have any liability to
the Company or its stockholders for monetary damages. The DGCL
provides that a corporation's charter may include a provision
which restricts or limits the liability of its directors or
officers to the corporation or its stockholders for money damages
except: (1) to the extent that it is provided that the person
actually received an improper benefit or profit in money,
property or services, for the amount of the benefit or profit in
money, property or services actually received, or (2) to the
extent that a judgment or other final adjudication adverse to the
person is entered in a proceeding based on a finding in the
proceeding that the person's action, or failure to act, was the
result of active and deliberate dishonesty and was material to
the cause of action adjudicated in the proceeding. The Company's
Charter and Bylaws provide that the Company shall indemnify and
advance expenses to its currently acting and its former directors
to the fullest extent permitted by the DGCL and that the Company
shall indemnify and advance expenses to its officers to the same
extent as its directors and to such further extent as is
consistent with law.
The Charter and Bylaws provide that the Company will
indemnify its directors and officers and may indemnify employees
or agents of the Company to the fullest extent permitted by law
against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices
with the Company. However, nothing in the Charter or Bylaws of
the Company protects or indemnifies a director, officer, employee
or agent against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office. To the extent that a director has been
successful in defense of any proceeding, the DGCL provides that
he shall be indemnified against reasonable expenses incurred in
connection therewith.
34
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this registration
statement, the Company had only one transaction in which it
issued its securities. In connection with the formation of the
Company, it sold 1,000 shares of its common stock to InterBank
Funding Corporation ("IBF") to obtain $250,000 of initial
capital. IBF is the sole stockholder of the Company, and two of
the Company's officers and directors are the sole owners of IBF.
The transactions was intended to be exempt from the registration
requirements of the Securities Act of 1933, as amended, by virtue
of Section 4(2) thereunder. No underwriters were involved in
connection with the sales of these securities.
ITEM 16. EXHIBITS.
Exhibits.
Exhibit No. SEC Ref. No. Title of Document Location
1 (1) Dealer-Manager Agreement Amend. 1
Page E-1
1(a) (1) Independent Underwriter Agreement Amend. 1
Page E-14
2 (1) Selling Group Agreement Amend. 1
Page E-28
3 (3)(i) Certificate of Incorporation, Initial Filing
as amended Page E-17
3(a) (3)(i) Certificates of Amendment to Amend. 1
Certificate of Incorporation Page E-32
4 (3)(ii) By-Laws Initial Filing
Page E-21
5 (4) Proceeds Escrow Agreement Amend. 1
Page E-34
6 (4) Indenture, with exhibits Amend. 1
Page E-42
7 (10) Management Agreement Amend. 1
Page E-114
8 (10) Amended Loan Agreement,
Consolidated Promissory Note and Initial Filing
Deed to Secure Debt for $1,800,000 Page E-125
loan
9 (10) Amended Loan Agreement, Amended Initial Filing
Promissory Note and Amended Page E-156
Mortgage for $1,520,000 loan
35
<PAGE>
10 (10) Loan Agreement, Promissory Note and Initial Filing
Security Agreement for $840,000 loan Page E-175
11 (5)(23) Opinion and Consent of Lehman, Amend. 1
Jensen & Donahue, L.C. Page E-120
12 (23) Consent of Radin, Glass & Co., LLP Amend. 1
Page E-122
13 (25) Form T-1, Statement of Eligibility Initial Filing
under the Trust Indenture Act of Page E-195
1939
14 (27) Financial Data Schedule *
* Included in electronic filing only.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
provisions described in this Registration Statement or otherwise,
the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling persons of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to provide to
the underwriter at the closing specified in the underwriting
agreements certificates in such denominations and registered in
such names as required by the underwriter to permit prompt
delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to:
36
<PAGE>
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change
in the information in the registration statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end
of the offering.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement or
Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in Washington, DC, on May 24, 1999.
IBF VI - PARTICIPATING INCOME FUND
By /s/ Simon A. Hershon, President
By /s/ David C. Chabut, Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933,
this registration statement or Amendment has been signed below by
the following persons in the capacities and on the dates
indicated.
/s/ Simon A. Hershon, Director May 24, 1999
/s/ Ehud D. Laska, Director May 24, 1999
/s/ Ivan M. Krasner, Director May 24, 1999
38
Exhibit No. 1
IBF VI - Guaranteed Income Fund
Form SB-2, Amend. No. 1
File No. 333-71091
IBF VI - PARTICIPATING INCOME FUND
(A Delaware corporation)
DEALER-MANAGER AGREEMENT
CLASS A 10% INCOME PARTICIPATING NOTES
$50,000,000
Coleman & Company Securities, Inc. _________________, 1999
575 Lexington Avenue, 14th Floor
New York, NY 10022
Gentlemen:
IBF VI - Participating Income Fund (the "Company"), a
Delaware corporation, desires to offer for sale to the public
$50,000,000 in principal amount of its Class A 10% Income
Participating Notes ("Notes"). The Company desires to offer the
Notes for sale through Coleman & Company Securities, Inc. (the
"Dealer-Manager"). The offering will be undertaken by the Dealer-
Manager as agent for the Company on a "best efforts, $500,000
Notes minimum-$50,000,000 Notes maximum" basis so that in the
event $500,000 for the purchase of Notes is not received within
the agreed period, no Notes will be sold, and the Dealer-Manager
will not be entitled to any compensation. On these premises, we
set forth the terms of our proposed agreement as follows:
1. Appointment of Dealer-Manager. The Company hereby
appoints the Dealer-Manager, on all the terms and conditions
hereinafter set forth, as the Company's exclusive agent to use
its best efforts to sell on behalf of the Company the Notes.
2. Representations and Warranties of the Company. As an
inducement to, and to obtain the reliance of, the Dealer-Manager
in connection herewith, the Company represents, warrants, and
agrees with the Dealer-Manager as follows:
(a) The Company has prepared and filed or will prepare
and file with the United States Securities and Exchange
Commission (the "Commission"), a registration statement on
form SB-2, including a prospectus, relating to the Notes in
accordance with section 5 of the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and
regulations of the Commission thereunder. As used in this
Agreement, the term "Registration Statement" means such
Registration Statement, including exhibits, financial
statements, and schedules, as amended, when it becomes
effective, and the term "Prospectus" means the Prospectus
filed with the Registration Statement. (The Registration
Statement and Prospectus, as defined herein, are hereinafter
E-1
<PAGE>
collectively referred to as the "Filing.") The Company will
utilize its best efforts to cause the Filing to become
effective and to maintain its effectiveness during the term
hereof.
(b) The Commission has not issued and, to the
knowledge and belief of the Company, does not have cause to
issue an order preventing or suspending the use of the
Filing; the Filing conforms or shall conform in all material
respects with the requirements of the Securities Act and the
rules and regulations of the Commission promulgated
thereunder (the "Regulations") and does not include any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading; and on the Effective Date (as hereinafter
defined) and at all times subsequent thereto up to the
Termination Date (as hereinafter defined), the Filing and
any amendment or supplement thereto will fully comply with
the provisions of the Securities Act and the Regulations and
will not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the
statements made, in light of the circumstances under which
they are made, not misleading; provided, that the foregoing
representations and warranties shall not apply to statements
in or omissions from the Filing, or any amendments or
supplements thereto, made in reliance on and in conformity
with information furnished herein or in writing to the
Company by or on behalf of the Dealer-Manager expressly for
use therein.
(c) The Company has no subsidiaries.
(d) Except as reflected in or contemplated by the
Filing, since the respective dates as of which information
is given in the Filing, there has not been and on the
Effective Date there will not have been, any material
adverse change in the condition of the Company, financial or
otherwise, or in the results of its operations.
(e) The authorized capital stock of the Company
consists of 1,000 shares of common stock, par value $1.00,
of which 1,000 shares are issued and outstanding. On the
date of issuance, the Notes will be duly and validly
authorized and, when issued and paid for in accordance with
this Agreement and the Indenture dated _______________, 1999
("Indenture"), will be validly issued, fully paid, and non-
assessable, and will conform to the description thereof
contained in the Filing; and the execution and delivery of,
and compliance with, this Agreement and the Indenture and
the issuance of the Notes will not conflict or constitute a
breach of or default under the certificate of incorporation
or bylaws of the Company, any indenture, agreement, or other
instrument by which the Company is bound, any order, decree,
rule, or regulation of any court, or any law or
administrative regulation applicable to the Company.
(f) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the state of Delaware, with an authorized and
outstanding capitalization as set forth in the Filing and
with full corporate power and authority to carry on the
business in which it is now engaged. The Company is
qualified or licensed and in good standing as a foreign
corporation in each jurisdiction in which the ownership or
leasing of any properties or the character of its operations
requires such qualification or licensing. The Company has
all requisite corporate power and authority and all material
and necessary authorizations, approvals, orders, licenses,
certificates, and permits of and from all governmental
regulatory officials and bodies to own or lease its
properties and conduct its business as described in the
Prospectus, and the Company is doing business in strict
compliance with all such authorizations, approvals, orders,
licenses, certificates, and permits and all federal, state,
and local laws, rules, and regulations concerning the
business in which the Company is engaged. The disclosures
in the Filing concerning the effects of federal, state, and
local regulation on the Company's business as currently
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conducted and as contemplated are correct in all material
respects and do not omit to state a material fact. The
Company has all corporate power and authority to enter into
this Agreement and the Indenture and to carry out the
provisions and conditions hereof and thereof, and all
consents, authorizations, approvals, and orders required in
connection therewith have been obtained or will have been
obtained prior to the time of closing as provided in
subparagraph 3(f) hereto. No consent, authorization, or
order of, and no filing with any court, governmental agency,
or other body is required for the issuance of the Notes
pursuant to the Filing, except with respect to applicable
federal and state securities laws.
(g) The Filing contains an audited balance sheet of
the Company as of April 30, 1999, and the related audited
statement of stockholders' equity of the Company, including
the notes thereto, together with the opinion of Radin, Glass
& Co., LLP, independent certified public accountants, with
respect to the audited balance sheet and related audited
statements. Such financial statements have been prepared in
accordance with generally accepted accounting principles
consistently followed throughout the periods indicated,
except as otherwise indicated in the notes thereto. The
balance sheet presents fairly as of its date the financial
condition of the Company. The Company did not have, as of
the date of such balance sheet, except as and to the extent
reflected or reserved against therein (including the notes
thereto), any liabilities or obligations (absolute or
contingent) of a nature customarily reflected in a balance
sheet or the notes thereto prepared in accordance with
generally accepted accounting principles. The statement of
stockholders' equity presents fairly the information that
should be presented therein in accordance with generally
accepted accounting principles.
(h) Except as set forth in the Filing, there is no
action, suit, or proceeding before any court or government
agency, authority, or body pending or, to the knowledge of
the Company, threatened which might result in judgments
against the Company which are not adequately covered by
insurance, or which is pending or, to the knowledge of the
Company, threatened by any public body, agency, or
authority, which might result in any material adverse change
in the condition (financial or otherwise), business, or
prospects of the Company or would materially affect its
properties or assets.
(i) The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated and
compliance with the terms and provisions hereof will not
conflict with, or constitute a breach of, any of the terms,
provisions, or conditions of any agreement or instrument to
which the Company is a party, nor will any one nor any
combination of the foregoing have such a result.
(j) The Company has the legal right, power, and
authority to enter into this Agreement, and the execution,
delivery, and, except as otherwise indicated in this
Agreement, performance thereof by the Company, do not
require the consent or approval of any governmental body,
agency, or authority which has not been obtained.
(k) The Company is not a party to any material
contract (meaning thereby a contract materially affecting
its business or properties) that is not referred to in the
Filing. No default of any material significance exists in
the due performance and observance by the Company of any
term, covenant, or condition of any such contract; all such
contracts are in full force and effect and are binding on
the parties thereto in accordance with their terms; and, to
the knowledge of the Company, no other party to any such
material contract has threatened or instituted any action or
proceeding wherein the Company is alleged to be in default
thereunder.
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(l) No stock options or warrants are or will be
outstanding or issued during the period covered by this
Agreement, except as set forth in the Filing.
(m) The Company is not delinquent in the filing of any
tax return or in the payment of any taxes, knows of no
proposed redetermination or assessment of taxes, and has
paid or provided for adequate reserves for all known tax
liabilities.
3. Employment of the Dealer-Manager. On the foregoing
representations, agreements, and warranties and subject to the
terms and conditions of this Agreement:
(a) The Company hereby employs the Dealer-Manager as
exclusive agent to sell for the Company's account the Notes.
The Dealer-Manager agrees to use its best efforts as agent,
promptly following the receipt of written notice of the
Effective Date of the Registration Statement, to offer for
sale the Notes, subject to the terms, provisions, and
conditions hereinafter set forth.
(b) In the event the Dealer-Manager does not find
subscribers for Notes having a total aggregate purchase
price of $500,000 within three months following the
Effective Date (unless extended by agreement of the Company
and Dealer-Manager for an additional period not to exceed
three months), this Agreement shall terminate, and neither
party to this Agreement shall have any obligation to the
other party hereunder. Appropriate arrangements for placing
the funds received for the Notes in escrow until a total of
$500,000 in cash has been received shall be made prior to
the commencement of the offering hereunder, with provision
for refund to the purchasers as set forth above or for
delivery to the Company of the net proceeds therefrom if
$500,000 or more in cash has been received from the sale of
Notes hereunder within the specified time period.
(c) The Notes shall be offered to the general public
at face value without discount; provided, that the Dealer-
Manager may, at its discretion, waive its commission under
subsection 3(e), below, and offer Notes at face value less
the amount of the commission so waived.
(d) The Dealer-Manager is granted irrevocable
authority as agent for the Company to declare any contract
to purchase Notes offered to the public hereunder in default
if the Notes are not paid for in cash within seven business
days after the contract date. The Dealer-Manager shall
instruct investors to make all checks tendered as payment
for the Notes payable to "CSTTC, Escrow Account" and shall
deposit promptly, but in no event later than noon of the
next business day following receipt, the gross proceeds from
sales of Notes in the account with the escrow agent until
$500,000 (or such other amount as may be required by the
securities commission of any state in which the Notes are
offered and sold) in good funds is received from said sales,
and, thereafter, the escrow account shall continue to be
used as a clearing account into which all checks for the
payment for securities shall likewise be promptly deposited.
Subject to and after the sale of Notes with a minimum public
offering price of $500,000 and the release by the escrow
agent of such funds under the terms of the escrow agreement,
as funds are collected and subscriptions accepted by the
Company, the net proceeds (gross proceeds minus the Dealer-
Manager's sales commissions and non-accountable expense
allowance as provided herein) shall be promptly paid to the
Company and the Dealer-Manager's sales commission and non-
accountable expense allowance shall be paid to it.
(e) As its compensation, and subject to the sale of
$500,000 of Notes, the Dealer-Manager shall be entitled to
receive a commission of 8% of the principal amount of the
Notes sold and for which payment is made to the Company. In
addition, the Dealer-Manager will receive a nonaccountable
expense allowance of 0.775% of the gross proceeds of the
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offering less $5,000 for expenses incurred in connection
with the offering. Finally, the Dealer-Manager shall be
entitled to receive 2.5% of the Company's annual Net Income
for each calendar year through 2005. For purposes of this
provision, Net Income shall be calculated in the same manner
as set forth in the Indenture. In the event the Dealer-
Manager does not find subscribers for Notes having a total
aggregate purchase price of $500,000 within three months
following the Effective Date (unless extended by agreement
of the Company and Dealer-Manager for an additional period
not to exceed three months), the Dealer-Manager will be
reimbursed only for its actual accountable out of pocket
expenses.
(f) The Company agrees to issue or have issued Notes
in such names and denominations as may be specified by the
Dealer-Manager and to deliver certificates representing the
Notes to the purchasers in accordance with the Indenture
against payment of the purchase price of the Notes net of
the Dealer-Manager's sales commissions (including the Dealer-
Manager's expense allowance), as provided herein. Such
payment and delivery shall be at such place and at such date
and time within 21 days following the sale of the minimum
amount of Notes as provided in subsection 3(b) hereof as
shall be agreed on by the Dealer-Manager and the Company
(the "time of closing"). Thereafter, further payments and
deliveries shall be made at such address and at such
subsequent times and dates similarly agreed on so as to
effect the prompt transmittal of funds and of certificates
for Notes to the purchasers (a "subsequent time of
closing"). All requisitions for Notes by the Dealer-Manager
shall be in writing and shall be given to the Company before
the delivery date.
(g) The Dealer-Manager is hereby authorized to
organize a selling group of participating dealers consisting
exclusively of members of the National Association of
Securities Dealers, Inc., or foreign dealers who are not
eligible for membership in said association. Such
participating dealers are to act as agents and shall be
allowed to purchase on an equal basis from the Dealer-
Manager at a price which provides a concession out of the
Dealer-Manager's commissions in such amount as the Dealer-
Manager may determine.
(h) The Company has appointed Continental Stock
Transfer & Trust Company, 2 Broadway, New York, NY 10004, as
Trustee under the Indenture and registrar of the Notes.
4. Representations and Warranties of the Dealer-Manager. As an
inducement to, and to obtain the reliance of, the Company in
connection herewith, the Dealer-Manager represents, warrants, and
agrees with the Company as follows:
(a) The Dealer-Manager is duly registered as a
securities broker-dealer in accordance with the Securities
Exchange Act of 1934, as amended.
(b) The Dealer-Manager will not publish, issue, or
circulate or authorize the publication, issuance, or
circulation of any circular, notice, or advertisement which
offers the Notes for sale which shall not have previously
been approved by the Company and its counsel, except for so-
called "tombstone" advertisements and which has not been
approved by the Commission prior to its use, if such prior
approval is required.
(c) The Dealer-Manager is in good standing and in full
and current compliance in all material respects with the
rules of the National Association of Securities Dealers,
Inc.
(d) The Dealer-Manager shall confirm sales to
customers only in those states in which it is licensed to do
so as a securities broker or dealer and shall ensure that
all participating dealers similarly confirm sales to
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customers only in states in which they are duly licensed to
do so. The Dealer-Manager and participating dealers in the
distribution of the offering will comply with sections 8,
24, 25 and 36 of Article III of the NASD Rules of Fair
Practice and rule 15c2-8 promulgated under the Securities
Exchange Act of 1934, as amended.
5. Covenants by the Company. In further consideration of
the agreements by the Dealer-Manager herein contained, the
Company covenants as follows:
(a) At least 48 hours prior to submission of the
Filing or any amendment thereto to the Commission, the
Dealer-Manager shall be provided with a copy of such Filing
or amendment, and no such Filing will be made to which the
Dealer-Manager shall object within the 48 hour period.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective and will not at
any time, whether before, on, or after the Effective Date,
file any amendments to the Filing or supplement thereto
without first obtaining the Dealer-Manager's approval. Such
approval shall be obtained by compliance with subsection (a)
above. Said Filings or any amendments or supplements
thereto shall be in compliance with the Securities Act and
the Regulations of the Commission to the best of the
Company's knowledge, information, and belief.
(c) As soon as the Company is advised thereof, the
Company will advise the Dealer-Manager and confirm the
advice in writing (i) as to when the Registration Statement
has become effective; (ii) of any request made by the
Commission for amendment of or supplement to the Filing, or
for additional information with respect thereto; and (iii)
of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement
or of any amendment thereto or the initiation, or threat of
initiation, of any proceedings for such purpose, and the
Company will use its best efforts to prevent the issuance of
any such order and to obtain as soon as possible the lifting
thereof, if issued.
(d) The Company will deliver to the Dealer-Manager
prior to the Effective Date, copies of the preliminary
prospectus and, on the Effective Date of the Registration
Statement, without charge and from time to time thereafter,
copies of the Prospectus and amendments thereto as required
by law to be delivered in connection with sales, in such
quantities as the Dealer-Manager may reasonably request.
(e) The Company will deliver to the Dealer-Manager,
without charge, one manually executed copy of the
Registration Statement, together with all required exhibits
as filed and all amendments thereto with exhibits which have
not previously been furnished to the Dealer-Manager, and
will deliver to the Dealer-Manager, without charge, such
reasonable number of copies of the Registration Statement
and Prospectus (excluding exhibits) and all amendments
thereto as the Dealer-Manager may reasonably request.
(f) Prior to the Termination Date if, in the opinion
of the Dealer-Manager, any statements are contained in the
Filing which are misleading or inaccurate in light of the
circumstances under which they are made, the Dealer-Manager
may require the Company to amend or supplement the Filing to
correct said statements and may request such reasonable
number of copies of any amended or supplemented Filing as
may be necessary to comply with the Securities Act and
Regulations.
(g) The Company will have used and will use its best
efforts to secure on or before the Effective Date of the
Registration Statement, and to maintain for such period as
may be required for distribution, such exemptions,
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<PAGE>
registrations and qualifications of the Notes as will permit
the public offering thereof under the "Blue Sky Laws" of
such states as the Dealer-Manager and the Company shall
agree upon; provided, that no such qualification shall be
required if, as a result thereof, the Company would be made
subject to qualify for authority to do business as a foreign
corporation in a jurisdiction where it is not now so subject
or so qualified. The Company's counsel shall furnish copies
of any such filings or other materials submitted in
connection with this subparagraph to the Dealer-Manager and
shall notify the Dealer-Manager, in writing, of those states
in which the Notes may be offered and sold pursuant to the
terms hereof. The Dealer-Manager agrees to cooperate in
securing such exemptions, registrations and qualifications
in accordance with the terms hereof.
(h) The Company will pay all costs and expenses
incident to the performance of its obligations under this
Agreement, including (i) all expenses incident to its
issuance and delivery of the Notes; (ii) the fees and
expenses incident to the preparation, printing, and filing
of the Filing (including all exhibits thereto) with the
Commission, the various "blue sky" agencies and the National
Association of Securities Dealers, Inc.; and (iii) the costs
of furnishing to the Dealer-Manager copies of the Filing and
preliminary and definitive prospectus. The Company shall
not, however, be required to pay for transfer tax stamps on
any sales of the Notes which the Dealer-Manager may make or
to pay for any of the Dealer-Manager's expenses or those of
any other dealers other than as hereinabove set forth.
(i) For a period of six years from the Effective Date,
the Company will furnish the Dealer-Manager (i) all reports
and financial statements, if any, the Company files with or
furnishes to the Commission or any stock exchange on which
the securities of the Company are listed; (ii) such other
periodic and special reports as the Company from time to
time furnishes generally to holders of any class of its
stock; (iii) every press release and every news item and
article with respect to the affairs of the Company which is
released by the Company; and (iv) such additional documents
and information with respect to the affairs of the Company
and any future subsidiaries of the Company as the Dealer-
Manager may from time to time reasonably request.
(j) The Company will mail or otherwise make generally
available to its security holders as soon as practicable,
but in no event more than 15 months after the close of the
fiscal quarter ending after the Effective Date of the
Registration Statement, an earnings statement, which need
not be audited, covering a period of at least 12 months
beginning after the Effective Date of the Registration
Statement.
(k) The Company will, as promptly as practicable after
the end of each fiscal year, release an appropriate report
covering its operations for such year and send to the Dealer-
Manager, to all holders of record of the Company's Notes,
and to recognized statistical services, a report covering
operations for such year, including a balance sheet of the
Company and statements of earnings and of retained earnings,
as examined by the Company's independent accountants.
(l) The Company will apply the net proceeds from the
offering received by it in substantially the manner set
forth in the Prospectus.
(m) The Company will comply with the reporting
requirements to which it is subject pursuant to section
15(d) of the Securities Exchange Act of 1934, as amended.
(n) The Company will, as soon as practicable following
the filing of the Filing with the Commission, make
application for and receive a CUSIP number for its
securities from Standard and Poor's Corporation.
6. Reciprocal Indemnification.
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<PAGE>
6. Reciprocal Indemnification.
(a) The Company agrees to indemnify and hold harmless
the Dealer-Manager and any person who may be deemed to
control the Dealer-Manager within the meaning of section 15
of the Securities Act; and
(b) The Dealer-Manager agrees to indemnify and hold
harmless the Company, its directors, such of its officers as
sign the Registration Statement, and any person who may be
deemed to control the Company within the meaning of the
Securities Act;
against any and all losses, claims, damages, or liabilities
whatsoever (including, but not limited to, any and all legal or
other expenses whatsoever reasonably incurred in investigating,
preparing, or defending against any actions or threatened actions
or claims) based on or arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Filing (as from time to time amended or supplemented) or any
application or other document filed in any state in order to
register, qualify, or obtain an exemption for the Notes under the
laws thereof ("blue sky application"), as the case may be, or any
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or any violation by any of the
indemnifying parties of any provision of the Securities Act or
any Regulation, or of common or statutory law, and against any
and all losses, claims, damages, or liabilities whatsoever to the
extent of the aggregate amount paid in settlement of any action,
commenced or threatened, or of any claim whatsoever based on any
such untrue statement or omission or any such violation
(including, but not limited to, any and all legal or other
expenses whatsoever reasonably incurred in investigating,
preparing, or defending against any such actions or claims) if
such settlement is effected with the written consent of any
indemnifying party. The indemnification by the Dealer-Manager
shall extend only to any such statements or omissions made in
reliance on and in conformity with written information furnished
to the Company by the Dealer-Manager or on behalf of the Dealer-
Manager for use in the remaining statements in or omissions from
the Filing or blue sky applications.
Each of the foregoing indemnifications is expressly
conditioned on the indemnifying party being notified by the
person seeking indemnification, by letter or by telegram
confirmed by letter, of any action commenced against such person,
within a reasonable time after such person shall have been served
with the summons or other first legal process giving information
as to the nature and basis of the claim, and in any event at
least ten days prior to the entry of any judgment in such action,
but the failure to give such notice shall not relieve any
indemnifying party of any liability which such party may have to
such person otherwise than on account of this indemnity
agreement. Any party whose indemnification is being relied on
shall assume the defense of any action or claim, including the
employment of counsel and the payment of all expenses. Any
indemnified party shall have the right to separate counsel in any
such action and to participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment thereof shall have
been specifically authorized by the indemnifying party, or (ii)
the indemnifying party shall have failed to assume the defense
and employ counsel.
The indemnifications contained above in this section 6, and
the representations and warranties of the Company set forth in
this Agreement, will remain operative and in full force and
effect, regardless of any investigations made by or on behalf of
the Dealer-Manager or any controlling person thereof, or by or on
behalf of the Company or its directors or officers and will
survive delivery of and payment for the Notes.
7. Conditions to Obligations of the Company. The
obligation of the Company to deliver the Notes being sold by the
Dealer-Manager hereunder is subject to the conditions that (i)
the Registration Statement shall have become effective not later
than 5:00 p.m., Eastern Time, the twenty-fifth business day
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following the date hereof or such later time and date as is
acceptable to the Company, and (ii) no stop order suspending the
effectiveness of the Registration Statement shall have been
issued and shall be in effect at the time of closing or at each
subsequent time of closing, if any, and no proceeding for that
purpose shall have been initiated or, to the knowledge of the
Company, threatened by the Commission, it being understood that
the Company shall use its best efforts to prevent the issuance of
any such stop order and, if one has been issued, to obtain the
lifting thereof. In the event that the Notes (or any part
thereof) are not delivered by virtue of the provisions of clause
(i) of this paragraph, the Company shall not be liable to the
Dealer-Manager.
8. Conditions to the Obligations of the Dealer-Manager.
The several obligations of the Dealer-Manager hereunder are
subject to the accuracy, as of the date hereof, at the time of
closing and at each subsequent time of closing, if any, of the
representations and warranties made herein by the Company; to the
accuracy in all material respects of the statements of the
officers of the Company made pursuant to the provisions hereof;
to the performance by the Company of its obligations hereunder
required on its part to be performed or complied with prior to or
at such time of closing; and to the following additional
conditions:
(a) The Filing shall have fully complied with the
provisions of the Securities Act and the Regulations and
shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading; provided, however, that statements or omissions
in the Filing in reliance on, and in conformity with,
information furnished in writing by or on behalf of the
Dealer-Manager expressly for use therein shall not be
considered within the scope of this provision.
(b) The Dealer-Manager shall not have advised the
Company that the Filing, or any amendment or supplement
thereto, contains an untrue statement of fact which, in the
opinion of the Dealer-Manager, is material or omits to state
a fact which, in the opinion of the Dealer-Manager, is
material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(c) The Registration Statement shall have become
effective not later than the date specified in section 7, or
such later time and date as is acceptable to the Dealer-
Manager and, prior to the time of closing, no stop order
shall have been issued by the Commission with respect to the
Filing, no proceedings therefor shall have been initiated by
the Commission, and to the knowledge of the Company or the
Dealer-Manager, no such proceedings shall be contemplated by
the Commission.
(d) Each contract to which the Company is a party and
which is filed as an exhibit to the Registration Statement
shall be in full force and effect at such time of closing,
or shall have been terminated, in accordance with its terms;
no party to any such contract shall have given any notice of
cancellation or, to the knowledge of the Company, shall have
threatened to cancel any such contract; and there shall be
no material misstatement in any description of a contract
contained in the Filing.
(e) From the date hereof until the time of closing and
until each subsequent time of closing, if any, no material
litigation or legal proceedings of any nature shall have
been commenced or threatened against the Company, nor any
litigation or legal proceedings which are directed against
the consummation of the transactions herein contemplated and
no substantial change, financial or otherwise, shall have
occurred in or relating to the condition, business, or
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assets of the Company which shall render such condition,
business, or assets substantially less favorable, in the
Dealer-Manager's judgment, than as set forth in the Filing.
(f) The Dealer-Manager shall have been furnished at
the time of closing and at each subsequent time of closing,
if any, with such certificates as the Dealer-Manager may
reasonably request evidencing the continued accuracy in all
material respects of the respective representations and
warranties made herein by the Company and the fulfillment of
the conditions stated above in subsections (a), (c), (d),
and (e) of this section.
(g) The Dealer-Manager shall have received at the time
of closing an opinion of the firm of Lehman, Jensen &
Donahue, L.C., counsel for the Company, dated as of the time
of closing and in a form and substance satisfactory to
counsel for the Dealer-Manager, to the following effect:
(i) The Company has been duly incorporated
and is validly existing as a corporation in good
standing under the laws of Delaware, with power and
authority to own its properties, hold its franchises,
and conduct its business, as described in the
Prospectus, and, to the best of the knowledge and
information of said counsel, is duly qualified to do
business and is in good standing in every other
jurisdiction where the location of its properties or
the conduct of its business makes such qualification
necessary;
(ii) The Notes have been duly and validly
authorized and are fully paid and non-assessable; and
the description of the Notes made in the Filing
accurately sets forth matters respecting such
securities required to be set forth therein;
(iii) This Agreement has been duly
authorized, executed, and delivered by the Company and
constitutes a valid and binding agreement of the
Company (except that counsel need render no opinion as
to the enforceability of the indemnification
provisions);
(iv) The certificates to be issued for the
Notes are in proper form;
(v) The final Registration Statement has
become effective under Securities Act and, to the best
knowledge of such counsel, no stop orders suspending
the effectiveness of the offering have been issued and
no proceeding for that purpose has been instituted or
pending or contemplated under the Securities Act; and
(vi) The Registration Statement and each
amendment or supplement thereto (except for the
financial data included therein and any information
furnished to the Company by or on behalf of the Dealer-
Manager), complies as to form in all material respects
with the requirements of the Securities Act and the
rules and regulations of the Commission promulgated
thereunder.
The Dealer-Manager shall have received, at each
subsequent time of closing, if any, an opinion of such
counsel dated as of the time of such closing and addressed
to the Dealer-Manager, confirming their opinion delivered at
the time of closing as to the matters set forth in
subparagraphs (i), (ii), (iii), (iv), (v), and (vi) of
subsection 8(g).
Such counsel may rely, as to matters of local law, on
opinions of local counsel satisfactory to it, and, as to
matters of fact, on affidavits or certificates of officers
of the Company.
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(h) All proceedings taken and to be taken in
connection with the sale of the Notes pursuant to this
Agreement shall be satisfactory as to legal aspects to the
Dealer-Manager.
(i) If any of the foregoing conditions set forth in
subsections (a), (b), (c), (d), and (e), of this section 8
shall not have been fulfilled as above provided at or prior
to the time of the initial public offering as defined below,
the condition of the securities market or any material
factor, whether of an economic, military, or political
nature or otherwise, bearing on the marketability of the
Notes proposed to be sold shall be such as, in the Dealer-
Manager's reasonable judgment, would seriously affect the
offering, sale, or delivery to the public of the Notes, or
would render such delivery at the initial public offering
price impracticable or inadvisable, the Dealer-Manager shall
have the right to terminate its obligations under this
Agreement forthwith, by written or telegraphic notice to the
Company, without any liability on the part of the Dealer-
Manager. The term "initial public offering" means the first
publication authorized by the Dealer-Manager, following
effectiveness of the Filing, of a newspaper advertisement
relating to the Notes to be offered pursuant to this
Agreement, or the first allotments or confirmations by the
Dealer-Manager of any of the Notes to customers or dealers
or others by letter or telegram, whichever shall occur
first. The Dealer-Manager agrees to notify the Company in
writing immediately after the initial public offering shall
have been made.
(j) If at any time prior to the time of closing (i)
trading in securities on the New York Stock Exchange shall
be suspended, (ii) minimum prices shall be established on
said exchange by action of said exchange or the Commission,
(iii) a bank moratorium shall be declared by federal
authorities, (iv) a significant decline in the United States
or international economies results in a domestic securities
market or other commercial conditions in the opinion of the
Dealer-Manager that are materially adverse or detrimental to
the offering, or (v) there shall be an outbreak of
hostilities between the United States and any foreign power
which has resulted in the declaration of a national
emergency or declaration of war or there shall be an
outbreak of civil disorder within the United States which
has resulted in the declaration of a national emergency, the
Dealer-Manager shall have the right to terminate its
obligations under this Agreement forthwith, by written or
telegraphic notice to the Company, without any liability on
the part of the Dealer-Manager.
If the sale of the Notes as herein contemplated shall not be
carried out because of any of the conditions set forth in
sections 7 or 8 hereof shall not have been fulfilled, then the
Company shall not be liable to the Dealer-Manager for lost
profits or expenses incurred by it in connection herewith.
9. Definitions.
(a) "Effective Date" shall mean the date, following
any required waiting period, when the Commission shall have
declared the Registration Statement effective.
(b) "Termination Date" shall mean the date specified
below which first occurs:
(i) December 31, 2000;
(ii) The date on which the escrow period set
forth in subsection 3(b) expires without the minimum
number of Notes having been subscribed to;
(iii) The date on which all offered Notes
are sold.
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<PAGE>
10. Miscellaneous Provisions.
(a) This Agreement contains the entire agreement of
the parties hereto and cannot be altered, except in a
writing making specific reference hereto.
(b) The representations and warranties contained
herein shall be effective regardless of any investigations
made or participation in the preparation of the Filing, or
any amendment or supplement thereto and shall survive the
Termination Date and the delivery of and payment for the
Notes contemplated herein for a period of three years.
(c) This Agreement has been and is made solely for the
benefit of the Dealer-Manager, the Company, and each's
respective successors, and, to the extent expressly provided
herein, for the benefit of the directors of the Company, the
officers of the Company who signed the Filing or authorized
the same, the persons controlling the Dealer-Manager or the
Company, and each's respective successors and assigns, and
no other person or persons shall acquire or have any right
under or by virtue of this Agreement. The term "successor"
shall not include any purchaser, as such, of any Notes from
the Dealer-Manager.
(d) Each of the parties hereto respectively warrant
and represent that the persons executing this Agreement on
its behalf have full power and authority to execute,
acknowledge, and deliver this Agreement for and on behalf of
such corporation.
(e) Except as otherwise provided herein, all
communications hereunder shall be in writing and, if sent to
the Dealer-Manager, shall be mailed, delivered, or
telegraphed to it at the following address:
Coleman & Company Securities, Inc.
575 Lexington Avenue, 14th Floor
New York, NY 10022
or, if sent to the Company, shall be mailed, delivered, or
telegraphed and confirmed to it at the following address:
IBF VI - Participating Income Fund
1733 Connecticut Avenue, NW
Washington, D.C. 20009
with copies to:
Mark E. Lehman, Esq.
Lehman, Jensen & Donahue, L.C.
8 East Broadway, Suite 620
Salt Lake City, Utah 84111
(f) In the event that any party prevails in any action
or suit brought by them to obtain relief for any default
under the terms hereof, the non-prevailing party shall be
liable to the prevailing party for all costs, including
reasonable attorneys' fees, incurred in connection with such
action or suit.
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<PAGE>
(g) The representations, warranties, and undertakings
herein on the part of the Company and the Dealer-Manager
shall not create any rights in or duties to any person to a
party to this Agreement. It is expressly understood and
agreed that such persons as shall purchase Notes in the
public offering described herein, shall be entitled to rely
solely and only on the statements and representations made
in the Filing.
(h) This Agreement may be executed in one or more
counterparts, which taken together shall constitute one and
the same instrument.
If the foregoing correctly sets forth our understanding,
please so indicate in the space provided below for that purpose,
whereupon this document shall constitute a binding agreement
among us.
Very truly yours,
IBF VI - Participating Income Fund
By____________________________________
Simon A. Hershon, President
The foregoing Dealer-Manager Agreement is accepted as of the
date first above written.
Coleman & Company Securities, Inc.
By____________________________________
Duly Authorized Officer
E-13
Exhibit No. 1(a)
IBF VI - Guaranteed Income Fund
Form SB-2, Amend. No. 1
File No. 333-71091
IBF VI - PARTICIPATING INCOME FUND
(A Delaware corporation)
INDEPENDENT UNDERWRITER AGREEMENT
CLASS A 10% INCOME PARTICIPATING NOTES
$50,000,000
Oscar Gruss & Son Incorporated _________________, 1999
74 Broad Street
New York, NY 10004
Gentlemen:
IBF VI - Participating Income Fund (the "Company"), a
Delaware corporation, desires to offer for sale to the public
$50,000,000 in principal amount of its Class A 10% Income
Participating Notes ("Notes"). The Company desires to offer the
Notes for sale through Coleman & Company Securities, Inc. (the
"Dealer-Manager"). The offering will be undertaken by the Dealer-
Manager as agent for the Company on a "best efforts, $500,000
Notes minimum-$50,000,000 Notes maximum" basis so that in the
event $500,000 for the purchase of Notes is not received within
the agreed period, no Notes will be sold, and the Dealer-Manger
will not be entitled to any compensation. The Dealer-Manager is
an affiliate of the Company. Accordingly, the offering will be
conducted under Rule 2720 of the NASD Rules of Conduct, which
imposes certain requirements on the distribution. One
requirement is that a qualified independent underwriter
participate in the offering and assume the obligations of pricing
the offering and conducting due diligence on the issuer. Oscar
Gruss & Son, Incorporated (the "Independent Underwriter"), is
acting as the qualified independent underwriter for this
offering. On these premises, we set forth the terms of our
proposed agreement as follows:
1. Appointment of Independent Underwriter. The Company
hereby appoints the Independent Underwriter, on all the terms and
conditions hereinafter set forth, as the Company's non-exclusive
agent to use its best efforts to sell on behalf of the Company
the Notes.
2. Representations and Warranties of the Company. As an
inducement to, and to obtain the reliance of, the Independent
Underwriter in connection herewith, the Company represents,
warrants, and agrees with the Independent Underwriter as follows:
(a) The Company has prepared and filed or will prepare
and file with the United States Securities and Exchange
Commission (the "Commission"), a registration statement on
form SB-2, including a prospectus, relating to the Notes in
accordance with section 5 of the Securities Act of 1933, as
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<PAGE>
amended (the "Securities Act"), and the rules and
regulations of the Commission thereunder. As used in this
Agreement, the term "Registration Statement" means such
Registration Statement, including exhibits, financial
statements, and schedules, as amended, when it becomes
effective, and the term "Prospectus" means the Prospectus
filed with the Registration Statement. (The Registration
Statement and Prospectus, as defined herein, are hereinafter
collectively referred to as the "Filing.") The Company will
utilize its best efforts to cause the Filing to become
effective and to maintain its effectiveness during the term
hereof.
(b) The Commission has not issued and, to the
knowledge and belief of the Company, does not have cause to
issue an order preventing or suspending the use of the
Filing; the Filing conforms or shall conform in all material
respects with the requirements of the Securities Act and the
rules and regulations of the Commission promulgated
thereunder (the "Regulations") and does not include any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading; and on the Effective Date (as hereinafter
defined) and at all times subsequent thereto up to the
Termination Date (as hereinafter defined), the Filing and
any amendment or supplement thereto will fully comply with
the provisions of the Securities Act and the Regulations and
will not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the
statements made, in light of the circumstances under which
they are made, not misleading; provided, that the foregoing
representations and warranties shall not apply to statements
in or omissions from the Filing, or any amendments or
supplements thereto, made in reliance on and in conformity
with information furnished herein or in writing to the
Company by or on behalf of the Independent Underwriter
expressly for use therein.
(c) The Company has no subsidiaries.
(d) Except as reflected in or contemplated by the
Filing, since the respective dates as of which information
is given in the Filing, there has not been and on the
Effective Date there will not have been, any material
adverse change in the condition of the Company, financial or
otherwise, or in the results of its operations.
(e) The authorized capital stock of the Company
consists of 1,000 shares of common stock, par value $1.00,
of which 1,000 shares are issued and outstanding. On the
date of issuance, the Notes will be duly and validly
authorized and, when issued and paid for in accordance with
this Agreement and the Indenture dated _______________, 1999
("Indenture"), will be validly issued, fully paid, and non-
assessable, and will conform to the description thereof
contained in the Filing; and the execution and delivery of,
and compliance with, this Agreement and the Indenture and
the issuance of the Notes will not conflict or constitute a
breach of or default under the certificate of incorporation
or bylaws of the Company, any indenture, agreement, or other
instrument by which the Company is bound, any order, decree,
rule, or regulation of any court, or any law or
administrative regulation applicable to the Company.
(f) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the state of Delaware, with an authorized and
outstanding capitalization as set forth in the Filing and
with full corporate power and authority to carry on the
business in which it is now engaged. The Company is
qualified or licensed and in good standing as a foreign
corporation in each jurisdiction in which the ownership or
leasing of any properties or the character of its operations
requires such qualification or licensing. The Company has
all requisite corporate power and authority and all material
and necessary authorizations, approvals, orders, licenses,
certificates, and permits of and from all governmental
regulatory officials and bodies to own or lease its
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<PAGE>
properties and conduct its business as described in the
Prospectus, and the Company is doing business in strict
compliance with all such authorizations, approvals, orders,
licenses, certificates, and permits and all federal, state,
and local laws, rules, and regulations concerning the
business in which the Company is engaged. The disclosures
in the Filing concerning the effects of federal, state, and
local regulation on the Company's business as currently
conducted and as contemplated are correct in all material
respects and do not omit to state a material fact. The
Company has all corporate power and authority to enter into
this Agreement and the Indenture and to carry out the
provisions and conditions hereof and thereof, and all
consents, authorizations, approvals, and orders required in
connection therewith have been obtained or will have been
obtained prior to the time of closing as provided in
subparagraph 3(f) hereto. No consent, authorization, or
order of, and no filing with any court, governmental agency,
or other body is required for the issuance of the Notes
pursuant to the Filing, except with respect to applicable
federal and state securities laws.
(g) The Filing contains an audited balance sheet of
the Company as of April 30, 1999, and the related audited
statement of stockholders' equity of the Company, including
the notes thereto, together with the opinion of Radin, Glass
& Co., LLP, independent certified public accountants, with
respect to the audited balance sheet and related audited
statements. Such financial statements have been prepared in
accordance with generally accepted accounting principles
consistently followed throughout the periods indicated,
except as otherwise indicated in the notes thereto. The
balance sheet presents fairly as of its date the financial
condition of the Company. The Company did not have, as of
the date of such balance sheet, except as and to the extent
reflected or reserved against therein (including the notes
thereto), any liabilities or obligations (absolute or
contingent) of a nature customarily reflected in a balance
sheet or the notes thereto prepared in accordance with
generally accepted accounting principles. The statement of
stockholders' equity presents fairly the information that
should be presented therein in accordance with generally
accepted accounting principles.
(h) Except as set forth in the Filing, there is no
action, suit, or proceeding before any court or government
agency, authority, or body pending or, to the knowledge of
the Company, threatened which might result in judgments
against the Company which are not adequately covered by
insurance, or which is pending or, to the knowledge of the
Company, threatened by any public body, agency, or
authority, which might result in any material adverse change
in the condition (financial or otherwise), business, or
prospects of the Company or would materially affect its
properties or assets.
(i) The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated and
compliance with the terms and provisions hereof will not
conflict with, or constitute a breach of, any of the terms,
provisions, or conditions of any agreement or instrument to
which the Company is a party, nor will any one nor any
combination of the foregoing have such a result.
(j) The Company has the legal right, power, and
authority to enter into this Agreement, and the execution,
delivery, and, except as otherwise indicated in this
Agreement, performance thereof by the Company, do not
require the consent or approval of any governmental body,
agency, or authority which has not been obtained.
(k) The Company is not a party to any material
contract (meaning thereby a contract materially affecting
its business or properties) that is not referred to in the
Filing. No default of any material significance exists in
the due performance and observance by the Company of any
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<PAGE>
term, covenant, or condition of any such contract; all such
contracts are in full force and effect and are binding on
the parties thereto in accordance with their terms; and, to
the knowledge of the Company, no other party to any such
material contract has threatened or instituted any action or
proceeding wherein the Company is alleged to be in default
thereunder.
(l) No stock options or warrants are or will be
outstanding or issued during the period covered by this
Agreement, except as set forth in the Filing.
(m) The Company is not delinquent in the filing of any
tax return or in the payment of any taxes, knows of no
proposed redetermination or assessment of taxes, and has
paid or provided for adequate reserves for all known tax
liabilities.
3. Employment of the Independent Underwriter. On the
foregoing representations, agreements, and warranties and subject
to the terms and conditions of this Agreement:
(a) The Company hereby employs the Independent
Underwriter as non-exclusive agent to sell for the Company's
account the Notes.
(b) In the event the Dealer-Manager does not find
subscribers for Notes having a total aggregate purchase
price of $500,000 within three months following the
Effective Date (unless extended by agreement of the Company
and Dealer-Manager for an additional period not to exceed
three months), this Agreement shall terminate, and neither
party to this Agreement shall have any obligation to the
other party hereunder. Appropriate arrangements for placing
the funds received for the Notes in escrow until a total of
$500,000 in cash has been received shall be made prior to
the commencement of the offering hereunder, with provision
for refund to the purchasers as set forth above or for
delivery to the Company of the net proceeds therefrom if
$500,000 or more in cash has been received from the sale of
Notes hereunder within the specified time period.
(c) The Notes shall be offered to the general public
at face value without discount; provided, that the
Independent Underwriter may, at its discretion, waive its
commission under subsection 3(e), below, and offer Notes at
face value less the amount of the commission so waived.
(d) The Dealer-Manager has irrevocable authority as
agent for the Company to declare any contract to purchase
Notes offered to the public hereunder in default if the
Notes are not paid for in cash within seven business days
after the contract date. The Independent Underwriter shall
instruct investors to make all checks tendered as payment
for the Notes payable to "CSTTC, Escrow Account" and shall
deposit promptly, but in no event later than noon of the
next business day following receipt, the gross proceeds from
sales of Notes in the account with the escrow agent until
$500,000 (or such other amount as may be required by the
securities commission of any state in which the Notes are
offered and sold) in good funds is received from said sale,
and, thereafter, the escrow account shall continue to be
used as a clearing account into which all checks for the
payment for securities shall likewise be promptly deposited.
Subject to and after the sale of Notes with a minimum public
offering price of $500,000 and the release by the escrow
agent of such funds under the terms of the escrow agreement,
as funds are collected and subscriptions accepted by the
Company, the net proceeds (gross proceeds minus the
Independent Underwriter's sales commissions and non-
accountable expense allowance as provided herein) shall be
promptly paid to the Company and the Independent
Underwriter's sales commission and non-accountable expense
allowance shall be paid to it.
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<PAGE>
(e) As its compensation, and subject to the sale of
$500,000 of Notes, the Independent Underwriter shall be
entitled to receive a commission of 8% of the principal
amount of the Notes sold by it and for which payment is made
to the Company. In addition, the Independent Underwriter
will receive an engagement fee of $5,000 plus 0.225% of the
gross proceeds of the offering for expenses incurred in
connection with the offering, and reimbursement of all out-
of-pocket expenses incurred by the Independent Underwriter
on an accountable basis. Finally, the Independent
Underwriter shall be entitled to receive its pro rata share
of 2.5% of the Company's annual Net Income for each calendar
year through 2005 based on the Notes sold by the Independent
Underwriter. For purposes of this provision, Net Income
shall be calculated in the same manner as set forth in the
Indenture. In the event the Dealer-Manager does not find
subscribers for Notes having a total aggregate purchase
price of $500,000 within three months following the
Effective Date (unless extended by agreement of the Company
and the Dealer-Manager for an additional period not to
exceed three months), the Independent Underwriter will be
reimbursed by the Company $5,000 only on a non-accountable
basis.
(f) The Company agrees to issue or have issued Notes
in such names and denominations as may be specified by the
Dealer-Manager and to deliver certificates representing the
Notes to the purchasers in accordance with the Indenture
against payment of the purchase price of the Notes net of
the applicable sales commissions (including the Independent
Underwriter's expense allowance), as provided herein. Such
payment and delivery shall be at such place and at such date
and time within 21 days following the sale of the minimum
amount of Notes as provided in subsection 3(b) hereof as
shall be agreed on by the Dealer-Manager and the Company
(the "time of closing"). Thereafter, further payments and
deliveries shall be made at such address and at such
subsequent times and dates similarly agreed on so as to
effect the prompt transmittal of funds and of certificates
for Notes to the purchasers (a "subsequent time of
closing").
(g) The Company has appointed Continental Stock
Transfer & Trust Company, 2 Broadway, New York, NY 10004, as
Trustee under the Indenture and registrar of the Notes.
4. Representations and Warranties of the Independent
Underwriter. As an inducement to, and to obtain the reliance of,
the Company in connection herewith, the Independent Underwriter
represents, warrants, and agrees with the Company as follows:
(a) The Independent Underwriter is duly registered as
a securities broker-dealer in accordance with the Securities
Exchange Act of 1934, as amended.
(b) The Independent Underwriter will not publish,
issue, or circulate or authorize the publication, issuance,
or circulation of any circular, notice, or advertisement
which offers the Notes for sale which shall not have
previously been approved by the Company and its counsel,
except for so-called "tombstone" advertisements and which
has not been approved by the Commission prior to its use, if
such prior approval is required.
(c) The Independent Underwriter is in good standing
and in full and current compliance in all material respects
with the rules of the National Association of Securities
Dealers, Inc.
(d) The Independent Underwriter shall confirm sales to
customers only in those states in which it is licensed to do
so as a securities broker or dealer and shall ensure that
all participating dealers similarly confirm sales to
customers only in states in which they are duly licensed to
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<PAGE>
do so. The Independent Underwriter and participating
dealers in the distribution of the offering will comply with
sections 8, 24, 25 and 36 of Article III of the NASD Rules
of Fair Practice and rule 15c2-8 promulgated under the
Securities Exchange Act of 1934, as amended.
5. Covenants by the Company. In further consideration of
the agreements by the Independent Underwriter herein contained,
the Company covenants as follows:
(a) At least 48 hours prior to submission of the
Filing or any amendment thereto to the Commission, the
Independent Underwriter shall be provided with a copy of
such Filing or amendment, and no such Filing will be made to
which the Independent Underwriter shall object within the 48
hour period.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective and will not at
any time, whether before, on, or after the Effective Date,
file any amendments to the Filing or supplement thereto
without first obtaining the Independent Underwriter's
approval. Such approval shall be obtained by compliance
with subsection (a) above. Said Filings or any amendments
or supplements thereto shall be in compliance with the
Securities Act and the Regulations of the Commission to the
best of the Company's knowledge, information, and belief.
(c) As soon as the Company is advised thereof, the
Company will advise the Independent Underwriter and confirm
the advice in writing (i) as to when the Registration
Statement has become effective; (ii) of any request made by
the Commission for amendment of or supplement to the Filing,
or for additional information with respect thereto; and
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement
or of any amendment thereto or the initiation, or threat of
initiation, of any proceedings for such purpose, and the
Company will use its best efforts to prevent the issuance of
any such order and to obtain as soon as possible the lifting
thereof, if issued.
(d) The Company will deliver to the Independent
Underwriter prior to the Effective Date, copies of the
preliminary prospectus and, on the Effective Date of the
Registration Statement, without charge and from time to time
thereafter, copies of the Prospectus and amendments thereto
as required by law to be delivered in connection with sales,
in such quantities as the Independent Underwriter may
reasonably request.
(e) The Company will deliver to the Independent
Underwriter, without charge, one manually executed copy of
the Registration Statement, together with all required
exhibits as filed and all amendments thereto with exhibits
which have not previously been furnished to the Independent
Underwriter, and will deliver to the Independent
Underwriter, without charge, such reasonable number of
copies of the Registration Statement and Prospectus
(excluding exhibits) and all amendments thereto as the
Independent Underwriter may reasonably request.
(f) Prior to the Termination Date if, in the opinion
of the Independent Underwriter, any statements are contained
in the Filing which are misleading or inaccurate in light of
the circumstances under which they are made, the Independent
Underwriter may require the Company to amend or supplement
the Filing to correct said statements and may request such
reasonable number of copies of any amended or supplemented
Filing as may be necessary to comply with the Securities Act
and Regulations.
(g) The Company will have used and will use its best
efforts to secure on or before the Effective Date of the
Registration Statement, and to maintain for such period as
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<PAGE>
may be required for distribution, such exemptions,
registrations and qualifications of the Notes as will permit
the public offering thereof under the "Blue Sky Laws" of
such states as the Dealer-Manager and the Company shall
agree upon; provided, that no such qualification shall be
required if, as a result thereof, the Company would be made
subject to qualify for authority to do business as a foreign
corporation in a jurisdiction where it is not now so subject
or so qualified. The Company's counsel shall furnish copies
of any such filings or other materials submitted in
connection with this subparagraph to the Independent
Underwriter and shall notify the Independent Underwriter, in
writing, of those states in which the Notes may be offered
and sold pursuant to the terms hereof. The Independent
Underwriter agrees to cooperate in securing such exemptions,
registrations and qualifications in accordance with the
terms hereof.
(h) The Company will pay all costs and expenses
incident to the performance of its obligations under this
Agreement, including (i) all expenses incident to its
issuance and delivery of the Notes; (ii) the fees and
expenses incident to the preparation, printing, and filing
of the Filing (including all exhibits thereto) with the
Commission, the various "blue sky" agencies and the National
Association of Securities Dealers, Inc.; and (iii) the costs
of furnishing to the Independent Underwriter copies of the
Filing and preliminary and definitive prospectus. The
Company shall not, however, be required to pay for transfer
tax stamps on any sales of the Notes which the Independent
Underwriter may make or to pay for any of the Independent
Underwriter's expenses or those of any other dealers other
than as hereinabove set forth.
(i) For a period of six years from the Effective Date,
the Company will furnish the Independent Underwriter (i) all
reports and financial statements, if any, the Company files
with or furnishes to the Commission or any stock exchange on
which the securities of the Company are listed; (ii) such
other periodic and special reports as the Company from time
to time furnishes generally to holders of any class of its
stock; (iii) every press release and every news item and
article with respect to the affairs of the Company which is
released by the Company; and (iv) such additional documents
and information with respect to the affairs of the Company
and any future subsidiaries of the Company as the
Independent Underwriter may from time to time reasonably
request.
(j) The Company will mail or otherwise make generally
available to its security holders as soon as practicable,
but in no event more than 15 months after the close of the
fiscal quarter ending after the Effective Date of the
Registration Statement, an earnings statement, which need
not be audited, covering a period of at least 12 months
beginning after the Effective Date of the Registration
Statement.
(k) The Company will, as promptly as practicable after
the end of each fiscal year, release an appropriate report
covering its operations for such year and send to the
Independent Underwriter, to all holders of record of the
Company's Notes, and to recognized statistical services, a
report covering operations for such year, including a
balance sheet of the Company and statements of earnings and
of retained earnings, as examined by the Company's
independent accountants.
(l) The Company will apply the net proceeds from the
offering received by it in substantially the manner set
forth in the Prospectus.
(m) The Company will comply with the reporting
requirements to which it is subject pursuant to section
15(d) of the Securities Exchange Act of 1934, as amended.
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<PAGE>
(n) The Company will, as soon as practicable following
the filing of the Filing with the Commission, make
application for and receive a CUSIP number for its
securities from Standard and Poor's Corporation.
6. Reciprocal Indemnification.
(a) The Company will indemnify and hold harmless the
Independent Underwriter, its affiliates and its parent and
its affiliates, and the respective directors, officers,
agents and employees of the Independent Underwriter, its
affiliates and its parent and its affiliates (the
Independent Underwriter and each such entity or person, an
"Indemnified Person") from and against any losses, claims,
damages judgments, assessments, costs and other liabilities
(collectively "Liabilities"), and will reimburse each
Indemnified Person for all fees and expenses (including the
reasonable fees and expenses of counsel) (collectively,
"Expenses") as they are incurred in investigating,
preparing, pursuing or defending any claim, action,
proceeding or investigation, whether or not in connection
with pending or threatened litigation and whether or not any
Indemnified Person is a party (collectively, "Actions"), (i)
caused by, or arising out of or in connection with, any
untrue statements or alleged untrue statement of a material
fact contained in the Filing (including any amendments
thereof and supplements thereto) or by any omission or
alleged omission to state therein a material fact necessary
to make the statements therein, in light of the
circumstances under which they were made, not misleading
(other than untrue statements or alleged untrue statements
in, or omissions or alleged omissions from, information
relating to an Indemnified Person furnished in writing by or
on behalf of such Indemnified Person expressly for use in
the Offering Materials) or (ii) otherwise arising out of or
in connection with advice or services rendered or to be
rendered by any Indemnified Person pursuant to this
Agreement, the transactions contemplated hereby or any
Indemnified Person's actions or inactions in connection with
any advice, services or transactions; provided that, in the
case of clause (ii) only, the Company will not be
responsible for any Liabilities or Expenses of any
Indemnified Person that are determined by a judgment of a
court of competent jurisdiction which is no longer subject
to appeal or further review to have resulted solely from
such Indemnified Person's gross negligence or willful
misconduct in connection with any of the advice, actions
inactions or services referred to above. The Company also
agrees to reimburse each Indemnified Person for all Expenses
as they are incurred in connection with enforcing such
Indemnified Person's right under this Agreement.
(b) Upon receipt by an Indemnified Person of actual
notice of an Action against such Indemnified Person with
respect to which indemnity may be sough under this
Agreement, such Indemnified Person shall promptly notify the
Company in writing; provided that failure so to notify the
Company shall not relieve the Company from any liability
which the Company may have on account of this indemnity or
otherwise, except to the extent the Company shall have been
materially prejudiced by such failure. The Company shall,
if requested by the Independent Underwriter, assume the
defense of any such Action including the employment of
counsel reasonable satisfactory to the Independent
Underwriter. Any Indemnified Person shall have the right to
employ separate counsel in any such Action and participate
in the defense thereof, but the fees and expenses of such
counsel shall be at the expenses of such Indemnified Person,
unless; (i) the Company has filed promptly to assume the
defense and employ counsel or (ii) the named parties to any
such Action (including any impleaded parties) include such
Indemnified Person and the Company, and such Indemnified
Person shall have been advised by counsel that there may be
one or more legal defenses available to it which are
different from or in addition to those available to the
Company; provided that the Company shall not in such event
be responsible hereunder for the fees and expenses of more
than one firm of separate counsel in connection with any
E-21
<PAGE>
Action in the same jurisdiction, in addition to any local
counsel. The Company shall not be liable for any settlement
of any Action effected without its written consent (which
shall not be unreasonably withheld). In addition, the
Company will not, without the prior written consent of the
Independent Underwriter, settle, compromise or consent to
the entry of any judgment in or otherwise seek to terminate
any pending or threatened Action in respect of which
indemnification or contribution may be sought hereunder
(whether or not any Indemnified Person is a party thereto)
unless such settlement, compromise, consent or termination
includes an unconditional release of each Indemnified Person
from all Liabilities arising out of such Action.
(c) In the event that the foregoing indemnity is
judicially determined to be unavailable to an Indemnified
Person (other than in accordance with the terms hereof), the
Company shall contribute to the Liabilities and Expenses
paid or payable by such Indemnified Person in such
proportion as is appropriate to reflect (i) the relative
benefits to the Company and its shareholders, on the one
hand, and to the Independent Underwriter, on the other hand,
of the matters contemplated by this Agreement, or (ii) if
the allocation provided by the immediately proceeding clause
is not permitted by the applicable law, not only such
relative benefits but also the relative fault of the
Company, on one hand, and the Independent Underwriter, on
the other hand, in connection with the matters as to which
such Liabilities or Expenses relate, as well as any other
relevant equitable considerations; provided that in no event
shall the Company contribute less than the amount necessary
to ensure that all Indemnified Persons, in the aggregate,
are not liable for any Liabilities and Expenses in excess of
the amount of fees actually received by Oscar Gruss pursuant
to the Agreement. For purposes of this paragraph, the
relative benefits to the Company and its shareholders, on
the one hand, and to the Independent Underwriter, on the
other hand, of the matters contemplated by this Agreement
shall be deemed to be in the same proportion as (a) the
total value paid or contemplated to be paid or received or
contemplated to be received by the Company or the Company's
shareholders, as the case may be, in the transaction or
transactions that are within the scope of this Agreement,
whether or not any such transaction is consummated, bears to
(b) the fees paid or to be paid to the Independent
Underwriter under this Agreement.
(d) The Company also agrees that no Indemnified Person
shall have any liability (whether direct or indirect in
contract or tort or otherwise) to the Company for or in
connection with advice or services rendered or to be
rendered by any Indemnified Person pursuant to this
Agreement, the transaction contemplated hereby or any
Indemnified Person's actions or inactions in connection with
any such advice, services or transactions except for
Liabilities (and related Expenses) of the Company that are
determined by a judgment of a court of competent
jurisdiction which is no longer subject to appeal or further
review to have resulted solely from such Indemnified
Person's gross negligence or willful misconduct in
connection with any such advice, actions, inactions or
services.
(e) If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in
full force and effect and shall in no way be affected,
impaired or invalidated. The reimbursement, indemnity and
contribution obligation of the Company set forth herein
shall apply to any modification of this Agreement and shall
remain in full force and effect regardless of any
termination of, or the completion of any Indemnified
Person's services under or in connection with, this
Agreement.
E-22
<PAGE>
7. Conditions to Obligations of the Company. The
obligation of the Company to deliver the Notes being sold by the
Independent Underwriter hereunder is subject to the conditions
that (i) the Registration Statement shall have become effective
not later than 5:00 p.m., Eastern Time, the twenty-fifth business
day following the date hereof or such later time and date as is
acceptable to the Company, and (ii) no stop order suspending the
effectiveness of the Registration Statement shall have been
issued and shall be in effect at the time of closing or at each
subsequent time of closing, if any, and no proceeding for that
purpose shall have been initiated or, to the knowledge of the
Company, threatened by the Commission, it being understood that
the Company shall use its best efforts to prevent the issuance of
any such stop order and, if one has been issued, to obtain the
lifting thereof. In the event that the Notes (or any part
thereof) are not delivered by virtue of the provisions of clause
(i) of this paragraph, the Company shall not be liable to the
Independent Underwriter.
8. Conditions to the Obligations of the Independent
Underwriter. The several obligations of the Independent
Underwriter hereunder are subject to the accuracy, as of the date
hereof, at the time of closing and at each subsequent time of
closing, if any, of the representations and warranties made
herein by the Company; to the accuracy in all material respects
of the statements of the officers of the Company made pursuant to
the provisions hereof; to the performance by the Company of its
obligations hereunder required on its part to be performed or
complied with prior to or at such time of closing; and to the
following additional conditions:
(a) The Filing shall have fully complied with the
provisions of the Securities Act and the Regulations and
shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading; provided, however, that statements or omissions
in the Filing in reliance on, and in conformity with,
information furnished in writing by or on behalf of the
Independent Underwriter expressly for use therein shall not
be considered within the scope of this provision.
(b) The Independent Underwriter shall not have advised
the Company that the Filing, or any amendment or supplement
thereto, contains an untrue statement of fact which, in the
opinion of the Independent Underwriter, is material or omits
to state a fact which, in the opinion of the Independent
Underwriter, is material and is required to be stated
therein or is necessary to make the statements therein not
misleading.
(c) The Registration Statement shall have become
effective not later than the date specified in section 7, or
such later time and date as is acceptable to the Independent
Underwriter and, prior to the time of closing, no stop order
shall have been issued by the Commission with respect to the
Filing, no proceedings therefor shall have been initiated by
the Commission, and to the knowledge of the Company or the
Independent Underwriter, no such proceedings shall be
contemplated by the Commission.
(d) Each contract to which the Company is a party and
which is filed as an exhibit to the Registration Statement
shall be in full force and effect at such time of closing,
or shall have been terminated, in accordance with its terms;
no party to any such contract shall have given any notice of
cancellation or, to the knowledge of the Company, shall have
threatened to cancel any such contract; and there shall be
no material misstatement in any description of a contract
contained in the Filing.
(e) From the date hereof until the time of closing and
until each subsequent time of closing, if any, no material
litigation or legal proceedings of any nature shall have
been commenced or threatened against the Company, nor any
litigation or legal proceedings which are directed against
E-23
<PAGE>
the consummation of the transactions herein contemplated and
no substantial change, financial or otherwise, shall have
occurred in or relating to the condition, business, or
assets of the Company which shall render such condition,
business, or assets substantially less favorable, in the
Independent Underwriter's judgment, than as set forth in the
Filing.
(f) The Independent Underwriter shall have been
furnished at the time of closing and at each subsequent time
of closing, if any, with such certificates as the
Independent Underwriter may reasonably request evidencing
the continued accuracy in all material respects of the
respective representations and warranties made herein by the
Company and the fulfillment of the conditions stated above
in subsections (a), (c), (d), and (e) of this section.
(g) The Independent Underwriter shall have received at
the time of closing an opinion of the firm of Lehman, Jensen
& Donahue, L.C., counsel for the Company, dated as of the
time of closing and in a form and substance satisfactory to
counsel for the Independent Underwriter, to the following
effect:
(i) The Company has been duly incorporated
and is validly existing as a corporation in good
standing under the laws of Delaware, with power and
authority to own its properties, hold its franchises,
and conduct its business, as described in the
Prospectus, and, to the best of the knowledge and
information of said counsel, is duly qualified to do
business and is in good standing in every other
jurisdiction where the location of its properties or
the conduct of its business makes such qualification
necessary;
(ii) The Notes have been duly and validly
authorized and are fully paid and non-assessable; and
the description of the Notes made in the Filing
accurately sets forth matters respecting such
securities required to be set forth therein;
(iii) This Agreement has been duly
authorized, executed, and delivered by the Company and
constitutes a valid and binding agreement of the
Company (except that counsel need render no opinion as
to the enforceability of the indemnification
provisions);
(iv) The certificates to be issued for the
Notes are in proper form;
(v) The final Registration Statement has
become effective under Securities Act and, to the best
knowledge of such counsel, no stop orders suspending
the effectiveness of the offering have been issued and
no proceeding for that purpose has been instituted or
pending or contemplated under the Securities Act; and
(vi) The Registration Statement and each
amendment or supplement thereto (except for the
financial data included therein and any information
furnished to the Company by or on behalf of the
Independent Underwriter), complies as to form in all
material respects with the requirements of the
Securities Act and the rules and regulations of the
Commission promulgated thereunder.
The Independent Underwriter shall have received, at
each subsequent time of closing, if any, an opinion of such
counsel dated as of the time of such closing and addressed
to the Independent Underwriter, confirming their opinion
delivered at the time of closing as to the matters set forth
in subparagraphs (i), (ii), (iii), (iv), (v), and (vi) of
subsection 8(g).
E-24
<PAGE>
Such counsel may rely, as to matters of local law, on
opinions of local counsel satisfactory to it, and, as to
matters of fact, on affidavits or certificates of officers
of the Company.
(h) All proceedings taken and to be taken in
connection with the sale of the Notes pursuant to this
Agreement shall be satisfactory as to legal aspects to the
Independent Underwriter.
(i) If any of the foregoing conditions set forth in
subsections (a), (b), (c), (d), and (e), of this section 8
shall not have been fulfilled as above provided at or prior
to the time of the initial public offering as defined below,
the condition of the securities market or any material
factor, whether of an economic, military, or political
nature or otherwise, bearing on the marketability of the
Notes proposed to be sold shall be such as, in the
Independent Underwriter's reasonable judgment, would
seriously affect the offering, sale, or delivery to the
public of the Notes, or would render such delivery at the
initial public offering price impracticable or inadvisable,
the Independent Underwriter shall have the right to
terminate its obligations under this Agreement forthwith, by
written or telegraphic notice to the Company, without any
liability on the part of the Independent Underwriter. The
term "initial public offering" means the first publication
authorized by the Dealer-Manager following effectiveness of
the Filing of a newspaper advertisement relating to the
Notes to be offered pursuant to this Agreement, or the first
allotments or confirmations by the Independent Underwriter
of any of the Notes to customers or dealers or others by
letter or telegram, whichever shall occur first.
(j) If at any time prior to the time of closing (i)
trading in securities on the New York Stock Exchange shall
be suspended, (ii) minimum prices shall be established on
said exchange by action of said exchange or the Commission,
(iii) a bank moratorium shall be declared by federal
authorities, (iv) a significant decline in the United States
or international economies results in a domestic securities
market or other commercial conditions in the opinion of the
Independent Underwriter that are materially adverse or
detrimental to the offering, or (v) there shall be an
outbreak of hostilities between the United States and any
foreign power which has resulted in the declaration of a
national emergency or declaration of war or there shall be
an outbreak of civil disorder within the United States which
has resulted in the declaration of a national emergency, the
Independent Underwriter shall have the right to terminate
its obligations under this Agreement forthwith, by written
or telegraphic notice to the Company, without any liability
on the part of the Independent Underwriter.
If the sale of the Notes as herein contemplated shall not be
carried out because of any of the conditions set forth in
sections 7 or 8 hereof shall not have been fulfilled, then the
Company shall not be liable to the Independent Underwriter for
lost profits or expenses incurred by it in connection herewith.
9. Definitions.
(a) "Effective Date" shall mean the date, following
any required waiting period, when the Commission shall have
declared the Registration Statement effective.
(b) "Termination Date" shall mean the date specified
below which first occurs:
(i) December 31, 2000;
(ii) The date on which the escrow period set
forth in subsection 3(b) expires without the minimum
number of Notes having been subscribed to;
E-25
<PAGE>
(iii) The date on which all offered Notes
are sold.
10. Miscellaneous Provisions.
(a) This Agreement contains the entire agreement of
the parties hereto and cannot be altered, except in a
writing making specific reference hereto.
(b) The representations and warranties contained
herein shall be effective regardless of any investigations
made or participation in the preparation of the Filing, or
any amendment or supplement thereto and shall survive the
Termination Date and the delivery of and payment for the
Notes contemplated herein for a period of three years.
(c) This Agreement has been and is made solely for the
benefit of the Independent Underwriter, the Company, and
each's respective successors, and, to the extent expressly
provided herein, for the benefit of the directors of the
Company, the officers of the Company who signed the Filing
or authorized the same, the persons controlling the
Independent Underwriter or the Company, and each's
respective successors and assigns, and no other person or
persons shall acquire or have any right under or by virtue
of this Agreement. The term "successor" shall not include
any purchaser, as such, of any Notes from the Independent
Underwriter.
(d) Each of the parties hereto respectively warrant
and represent that the persons executing this Agreement on
its behalf have full power and authority to execute,
acknowledge, and deliver this Agreement for and on behalf of
such corporation.
(e) Except as otherwise provided herein, all
communications hereunder shall be in writing and, if sent to
the Independent Underwriter, shall be mailed, delivered, or
telegraphed to it at the following address:
Oscar Gruss & Son Incorporated
74 Broad Street
New York, NY 10004
or, if sent to the Company, shall be mailed, delivered, or
telegraphed and confirmed to it at the following address:
IBF VI - Participating Income Fund
1733 Connecticut Avenue, NW
Washington, D.C. 20009
with copies to:
Mark E. Lehman, Esq.
Lehman, Jensen & Donahue, L.C.
8 East Broadway, Suite 620
Salt Lake City, Utah 84111
(f) In the event that any party prevails in any action
or suit brought by them to obtain relief for any default
under the terms hereof, the non-prevailing party shall be
liable to the prevailing party for all costs, including
reasonable attorneys' fees, incurred in connection with such
action or suit.
E-26
<PAGE>
(g) The representations, warranties, and undertakings
herein on the part of the Company and the Independent
Underwriter shall not create any rights in or duties to any
person to a party to this Agreement. It is expressly
understood and agreed that such persons as shall purchase
Notes in the public offering described herein, shall be
entitled to rely solely and only on the statements and
representations made in the Filing.
(h) This Agreement may be executed in one or more
counterparts, which taken together shall constitute one and
the same instrument.
If the foregoing correctly sets forth our understanding,
please so indicate in the space provided below for that purpose,
whereupon this document shall constitute a binding agreement
among us.
Very truly yours,
IBF VI - Participating Income Fund
By____________________________________
Simon A. Hershon, President
The foregoing Independent Underwriter Agreement is accepted
as of the date first above written.
Oscar Gruss & Son Incorporated
By____________________________________
Duly Authorized Officer
The foregoing Independent Underwriter Agreement is approved
as of the date first above written.
Coleman & Company Securities, Inc.
By____________________________________
Duly Authorized Officer
E-27
Exhibit No. 2
IBF VI - Guaranteed Income Fund
Form SB-2, Amend. No. 1
File No. 333-71091
SELLING GROUP AGREEMENT
$50,000,000
CLASS A 10% INCOME PARTICIPATING NOTES
IBF VI - Participating Income Fund
_________________, 1999
Gentlemen:
We have agreed to act as the agent of IBF VI - Participating
Income Fund, a Delaware corporation (the "Company"), pursuant to
an Dealer-Manager Agreement between the Company and us (the
"Dealer-Manager"), which may be obtained from us on written
request, for the sale to the public of $50,000,000 in principal
amount of the Company's Class A 10% Income Participating Notes
("Notes"). The Notes and certain of the terms on which they are
being purchased and offered are more fully described in the
enclosed prospectus, subject to the following further terms:
1. We invite your participation as a member of the selling
group ("Selling Group Member") in offering to the public a part
of the Notes. As a Selling Group Member, you will be allowed,
subject to the sale of $500,000 of Notes in the public offering,
a concession on all Notes sold by you in the offering as set
forth on Exhibit A attached hereto. Subject to the sale of
$500,000 of Notes, payment of such concession will be made within
five business days after each closing contemplated by the Dealer-
Manager Agreement. The Notes will be offered to the public on a
"best efforts" basis, subject to the approval of certain legal
matters by us and subject to certain other terms and conditions.
We reserve the right to withdraw, cancel, or modify any offer.
2. You confirm that you are a Selling Group Member who is
actually engaged in the investment banking or securities business
and who is a member in good standing of the National Association
of Securities Dealers, Inc. (the "NASD"). In making sales, you
hereby agree to comply with the provisions of rule 15c2-8
promulgated by the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the provisions of Article III
of the Rules of Fair Practice of the NASD, particularly the
interpretation of the Board of Governors of the NASD respecting
"free-riding" and "withholding" and sections 8, 24, 25, and 36
thereof.
3. All orders will be strictly subject to confirmation,
and we reserve the right in our uncontrolled discretion to reject
any order, in whole or in part, to accept or reject orders in the
order of their receipt or otherwise, and to allot. Neither you
nor any other person is authorized by the Company or us to give
any information or make any representations other than those
contained in the prospectus in connection with the sale of any of
the Notes. No Selling Group Member is authorized to act as agent
for us when offering the Notes to the public or otherwise.
4. You shall instruct all customers to make all checks
payable to the escrow agent as set forth below. Payment at the
initial offering price for Notes purchased by your customers
shall be made, with respect to payments by checks, by
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<PAGE>
transmitting your customers' checks payable to "CSTTC, Escrow
Account," Continental Stock Transfer & Trust Company, 2 Broadway,
New York, NY 10004, or, with respect to cash payments or customer
account credit balances, by wire transfer to such account, all by
noon of the next business day following receipt in accordance
with the provisions of rules 15c2-4 and 15c3-1 promulgated by the
Commission pursuant to the Exchange Act. Certificates for the
Notes to be purchased by your customers shall be delivered
promptly against payment to the Company of the net proceeds of
sale after each closing contemplated by the Dealer-Manager
Agreement, subject to the sale of the minimum amount of Notes.
In addition, there shall be provided to the escrow agent and us,
with the proceeds from your customers, a written account of each
sale, which account shall set forth the name and address of the
purchasers, the amount of Notes purchased by each, the amount
paid therefor, and whether the amount paid was in the form of
cash or evidenced by a check. Furthermore, you will
simultaneously forward to the Company and us the form of purchase
agreement adopted by the Company for use in the offering.
5. This Agreement shall terminate contemporaneously with
the termination of the Dealer-Manager Agreement, unless earlier
terminated at any time by us by written or telegraphic notice to
you.
6. You agree to indemnify us and to hold us harmless, and
each person, if any, who controls us, within the meaning of
section 15 of the Securities Act, against any and all losses,
claims, damages, or liabilities to which we may become subject as
a result of your breach of this Agreement or of your failure to
perform any of the promises contained herein, and will also
reimburse us, or any controlling person thereof, for any legal or
other expenses reasonably incurred in connection with
investigating or defending such action or claim.
7. You are not authorized to give any information or to
make any statements other than those contained in the prospectus
or any amendments thereto.
8. We shall have full authority to take such action as we
may deem advisable in respect of all matters pertaining to the
offering. We shall be under no liability to you, except for lack
of good faith and for obligations expressly assumed by us in this
Agreement. Nothing contained in this section is intended to
operate as, and the provisions of this section shall not in any
way whatsoever, constitute a waiver by you of compliance with any
provision of the Securities Act or Exchange Act, or of the rules
and regulations of the Commission issued thereunder.
9. On application to us, we shall inform you as to the
jurisdictions in which we believe the Notes have been qualified
for sale under, or are exempt from the requirements of, the
respective securities laws of such jurisdictions, but we assume
no responsibility or obligation as to your right to sell Notes in
any jurisdiction.
10. You confirm that you are familiar with rule 15c2-8
under the Exchange Act relating to the distribution of
preliminary and final prospectuses and confirm that you have
complied therewith and will comply therewith.
11. We hereby confirm that we will make available to you
such number of copies of the prospectus (as amended or
supplemented) as you may reasonably request for the purposes
contemplated by the Securities Act or the Exchange Act or the
rules and regulations of the Commission thereunder.
12. Any notice from us to you shall be deemed to have been
duly given if mailed or telegraphed to you at the address to
which this Agreement is mailed.
E-29
<PAGE>
Please confirm your agreement hereto by signing and
returning to us by fax and overnight courier at Coleman & Company
Securities, Inc., 575 Lexington Avenue, 14th Floor, New York, New
York 10022, the enclosed duplicate of this Agreement. On receipt
thereof, this Agreement and such signed duplicate copy will
evidence the understanding between us.
Very truly yours,
Coleman & Company Securities, Inc.
By____________________________________
Duly Authorized Officer
Selling Group Member's Allocation: __________ Notes.
AGREED AND ACCEPTED as of the date first-above written.
Selling Group Member:
________________________________________
By____________________________________
Duly Authorized Officer
Address of Selling Group Member
_______________________________________
_______________________________________
_______________________________________
E-30
<PAGE>
Exhibit A
COMPENSATION TERMS
1. Concession. Selling Group Member will receive a concession
equal to _______% of the gross sale price of Notes offered and
sold by the Selling Group Member.
2. Additional Compensation. Selling Group Member is entitled
to the following additional compensation:
E-31
Exhibit No. 3(a)
IBF VI - Guaranteed Income Fund
Form SB-2, Amend. No. 1
File No. 333-71091
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
IBF VI - ASSURED INCOME FUND
IBF VI - ASSURED INCOME FUND, a corporation organized and
existing under the General Corporation Law of the State of
Delaware (the "Corporation"), does hereby certify that:
The amendment to the Corporation's Certificate of
Incorporation set forth below was duly adopted by resolutions
approved by the Corporation's Board of Directors and stockholders
in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware:
Amendment. The Certificate of Incorporation of the
corporation is amended by striking Article I in its entirety and
replacing therefor:
ARTICLE I
NAME
The name of the Corporation is IBF VI - Participating Income
Fund.
IN WITNESS WHEREOF, IBF VI - Assured Income Fund has caused
this Certificate to be signed by its duly authorized officer this
17th day of May, 1999.
IBF VI - ASSURED INCOME FUND
By: /s/ Simon A. Hershon, President
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<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
IBF VI - GUARANTEED INCOME FUND
IBF VI - GUARANTEED INCOME FUND, a corporation organized and
existing under the General Corporation Law of the State of
Delaware (the "Corporation"), does hereby certify that:
The amendment to the Corporation's Certificate of
Incorporation set forth below was duly adopted by resolutions
approved by the Corporation's Board of Directors and stockholders
in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware:
Amendment. The Certificate of Incorporation of the
corporation is amended by striking Article I in its entirety and
replacing therefor:
ARTICLE I
NAME
The name of the Corporation is IBF VI - Assured Income Fund.
IN WITNESS WHEREOF, IBF VI - Guaranteed Income Fund has
caused this Certificate to be signed by its duly authorized
officer this 13th day of April, 1999.
IBF VI - GUARANTEED INCOME FUND
By: /s/ Simon A. Hershon, President
E-33
E-41
Exhibit No. 5
IBF VI - Guaranteed Income Fund
Form SB-2, Amend. No. 1
File No. 333-71091
PROCEEDS ESCROW AGREEMENT
PROCEEDS ESCROW AGREEMENT ("Agreement") dated as of
________________, 1999, by and between IBF VI - Participating
Income Fund, a Delaware corporation (the "Company"), Coleman &
Company Securities, Inc., a ______________ corporation (the
"Dealer-Manager"), and Continental Stock Transfer & Trust Company
("Escrow Agent").
Recitals
WHEREAS, the Company intends to engage in a public offering
of certain of its securities (the "Offering"), which Offering
contemplates minimum aggregate offering proceeds of $1,00,000 and
maximum aggregate offering proceeds of $50,000,000;
WHEREAS, there will be deposited into an escrow account with
Escrow Agent from time to time funds from prospective investors
who wish to subscribe for securities offered in connection with
the Offering ("Subscribers"), which funds will be held in escrow
and distributed in accordance with the terms hereof; and
WHEREAS, the Escrow Agent is willing to act as an escrow
agent in respect of the Escrow Funds (as hereinafter defined)
upon the terms and conditions set forth herein;
Agreement
NOW, THEREFORE, for good and valuable considerations, the
receipt and adequacy of which are hereby acknowledged by each of
the parties hereto, the parties hereto hereby agree as follows:
1. Appointment of Escrow Agent. The Company hereby
appoints the Escrow Agent as escrow agent in accordance with the
terms and conditions set forth herein, and the Escrow Agent
hereby accepts such appointment.
2. Delivery of Escrow Funds.
(a) The Dealer-Manager and all selected dealers
participating in the Offering shall deliver to the Escrow Agent
checks or wire transfers made payable to the order of "CSTTC,
Escrow Account" representing subscriptions for the securities of
the Company, together with the Subscriber's mailing address and
social security number or tax identification number (if the
aforesaid information is not provided, the check will be returned
or the amount of the wire transfer refunded), no later than noon
of the next business day following receipt. The funds delivered
to the Escrow Agent shall be deposited by the Escrow Agent into
an interest bearing account at Continental Stock Transfer & Trust
Company, 2 Broadway, New York, NY 10004, entitled CSTTC, Escrow
Account for IBF VI - Participating Income Fund (the "Escrow
Account") and shall be held and distributed by the Escrow Agent
in accordance with the terms hereof. The collected funds
deposited into the Escrow Account are referred to herein as the
"Escrow Funds." The Escrow Agent shall acknowledge receipt of
all Escrow Funds by notifying the Company of deposits into the
Escrow Account. The Escrow Agent shall give such notice, in
substantially the form attached hereto as Exhibit A, via
facsimile on the next business day following the business day on
which the Escrow Funds are deposited into the Escrow Account.
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<PAGE>
(b) The Escrow Agent shall have no duty or responsibility
to enforce the collection or demand payment of any funds
deposited into the Escrow Account. If, for any reason, any check
deposited into the Escrow Account shall be returned unpaid to the
Escrow Agent, the sole duty of the Escrow Agent shall be to
return the check to the Dealer-Manager.
3. Release of Escrow Funds. The Escrow Funds shall be
paid by the Escrow Agent in accordance with the following:
(a) Provided that the Escrow Funds total at least $500,000
at or before 2:00 P.M., New York City time, on ________________,
1999, or on any date prior thereto, the Escrow Funds (or any
portion thereof) shall be paid to the Company or as otherwise
instructed by the Company and the Dealer-Manager , within one (1)
business day after the Escrow Agent receives a written release
notice in substantially the form of Exhibit B attached hereto (a
"Release Notice") signed by an authorized person of the Company,
and thereafter, the Escrow Account will remain open for the
purpose of depositing therein the subscription prices for
additional securities sold by the Company in the Offering, which
additional Escrow Funds shall be paid to the Company and Dealer-
Manager (or as otherwise instructed by the Company and Dealer-
Manager) upon receipt by the Escrow Agent of a Release Notice as
described above.
(b) If the Escrow Agent has not received a Release Notice
from the Company at or before 2:00 P.M., New York City time, on
_________________, 1999, and the Escrow Funds do not total at
least $500,000 at such time and date, then the Escrow Funds shall
be returned to Subscribers, with interest.
In the event that at any time the Escrow Agent shall receive from
the Company written instructions signed by an individual who is
identified on Exhibit C attached hereto as a person authorized to
act on behalf of the Company, requesting the Escrow Agent to
refund to an individual or entity the amount of a collected check
or other funds received by the Escrow Agent from said individual
or entity and deposited into the Escrow Account, the Escrow Agent
shall comply with such instructions provided that said funds are
in the Escrow Account and have not been paid by the Escrow Agent.
4. Acceptance by Escrow Agent. The Escrow Agent hereby
accepts and agrees to perform its obligations hereunder, provided
that:
(a) The Escrow Agent may act in reliance upon any signature
believed by it to be genuine, and may assume that any person who
has been designated by the Company to give any written
instructions, notice or receipt, or make any statements in
connection with the provisions hereof has been duly authorized to
do so. The Escrow Agent shall have no duty to make inquiry as to
the genuineness, accuracy or validity of any statements or
instructions or any signatures on statements or instructions.
The names and true signatures of each individual authorized to
act on behalf of the Company are set forth in Exhibit C attached
hereto.
(b) The Escrow Agent may act relative hereto in reliance
upon advice of counsel in reference to any matter connected
herewith. The Escrow Agent shall not be liable for any mistake
of fact or error of judgment or law, or for any acts or omissions
of any kind, unless caused by its willful misconduct or gross
negligence.
(c) The Company agrees to indemnify and hold the Escrow
Agent harmless from and against any and all claims, losses,
costs, liabilities, damages, suits, demands, judgments or
expenses (including but not limited to reasonable attorneys'
fees) claimed against or incurred by Escrow Agent arising out of
or related, directly or indirectly, to this Agreement.
E-35
<PAGE>
(d) In the event that the Escrow Agent shall be uncertain
as to its duties or rights hereunder, the Escrow Agent shall be
entitled to refrain from taking any action other than to keep
safely the Escrow Funds until it shall be directed otherwise by a
court of competent jurisdiction.
(e) The Escrow Agent shall have no duty, responsibility or
obligation to interpret or enforce the terms of any agreement
other than Escrow Agent's obligations hereunder, and the Escrow
Agent shall not be required to make a request that any monies be
delivered to the Escrow Account, it being agreed that the sole
duties and responsibilities of the Escrow Agent shall be (i) to
accept wire transfers, checks or other instruments for the
payment of money delivered to the Escrow Agent for the Escrow
Account and deposit the Escrow Funds into the Escrow Account, and
(ii) to disburse or refrain from disbursing the Escrow Funds as
stated above, provided that the funds received by the Escrow
Agent have been collected and are available for withdrawal.
5. Fees. The Escrow Agent shall be entitled to receive
from the Company a total of $_____ in fees for the services to be
rendered by the Escrow Agent hereunder, and the Escrow Agent
hereby acknowledges receipt of such amount from the Company as
payment in full of such fees.
6. Resignation. The Escrow Agent may resign at any time
by giving 30 days' notice of such resignation to the Company.
Upon providing such notice, the Escrow Agent shall have no
further obligations hereunder except to hold the Escrow Funds
which it has received as of the date on which it provided the
notice of resignation as depositary. In such event, the Escrow
Agent shall not take any action until the Company and Dealer-
Manager have designated a banking corporation, trust company,
attorney or other person as successor. Upon receipt of such
written instructions signed by the Company and Dealer-Manager,
the Escrow Agent shall promptly deliver the Escrow Funds to such
successor and shall thereafter have no further obligations
hereunder. If such instructions are not received within 30 days
following the effective date of such resignation, then the Escrow
Agent may deposit the Escrow Funds and any other amounts held by
it pursuant to this Agreement with a clerk of a court of
competent jurisdiction pending the appointment of a successor.
In either case provided for in this Section 6, the Escrow Agent
shall be relieved from all liability thereafter arising with
respect to the Escrow Funds.
7. Termination. The Company may terminate the appointment
of the Escrow Agent hereunder upon written notice signed by an
individual on behalf of the Company, each of whose name and
signature are included in Exhibit C attached hereto, specifying
the date upon which such termination shall take effect. In the
event of such termination, the Company and Dealer-Manager shall,
within 30 days of such notice, appoint a successor escrow agent
and the Escrow Agent shall, upon receipt of written instructions
signed by the Company and Dealer-Manager, turn over to such
successor escrow agent all of the Escrow Funds. Upon receipt of
the Escrow Funds, the successor escrow agent shall become the
Escrow Agent hereunder and shall be bound by all of the
provisions hereof and the Escrow Agent shall be relieved of all
further obligations and released from all liability thereafter
arising with respect to the Escrow Funds.
8. Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder, shall
be in writing and shall be deemed to have been duly given when
delivered personally, on the next business day after delivery to
a recognized overnight courier or mailed first class (postage
prepaid) or when sent by facsimile to the parties (which
facsimile copy shall be followed, in the case of notices or other
communications sent to the Escrow Agent, by delivery of the
original) at the following addresses (or to such other address as
a party may have specified by notice given to the other parties
pursuant to this provision).
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<PAGE>
if to the Company:
IBF VI - Participating Income Fund
1733 Connecticut Avenue, NW
Washington, DC 20009
Attention: Simon A. Hershon, President
Fax: (202) 588-5088
with a copy to:
Lehman, Jensen & Donahue, L.C.
620 Judge Building
8 East Broadway
Salt Lake City, UT 84111
Attention: Mark E. Lehman, Esq.
Fax: (801) 363-1715
if to the Dealer-Manager:
Coleman & Company Securities, Inc.
575 Lexington Avenue, 14th Floor
New York, New York 10022
Attention: __________________
Fax: (212) ________________
if to the Escrow Agent:
Continental Stock Transfer & Trust Company
2 Broadway
New York, NY 10004
Attention: Corporate Trust Department
Fax: (212) 509-4000
9. General.
(a) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York
applicable to agreements made and to be entirely performed within
such state.
(b) This Agreement sets forth the entire agreement and
understanding of the parties in respect to the matters contained
herein or covered hereby and supersedes all prior agreements,
arrangements and understandings related thereto.
(c) All of the terms and conditions of this Agreement shall
be binding upon, and inure to the benefit of and be enforceable
by, the parties hereto.
(d) This Agreement may be amended, modified, superseded or
cancelled, and any of the terms or conditions hereof may be
waived, only by a written instruction executed by each party
hereto or, in the case of a waiver, by the party waiving
compliance. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner
affect its right at a later time to enforce the same. No waiver
of any party of any condition, or of the breach of any term
E-37
<PAGE>
contained in this Agreement, whether by conduct or otherwise, in
any one or more instances shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach or a
waiver of any other condition or of the breach of any other term
of this Agreement. No party may assign any rights, duties or
obligations hereunder unless all other parties have given their
prior written consent.
(e) If any provision included in this Agreement proves to
be invalid or unenforceable, it shall not affect the validity of
the remaining provisions.
(f) This Agreement may be executed in several counterparts
or by separate instruments and all of such counterparts and
instruments shall constitute one agreement, binding on all of the
parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first set forth above.
IBF VI - PARTICIPATING INCOME FUND
By____________________________________
Duly Authorized Officer
COLEMAN & COMPANY SECURITIES, INC.
By____________________________________
Duly Authorized Officer
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By____________________________________
Duly Authorized Officer
E-38
<PAGE>
EXHIBIT A
Forms of Receipt of Funds by Escrow Agent
[Date]
IBF VI - Participating Income Fund
1733 Connecticut Avenue, NW
Washington, DC 20009
Attention: Simon A. Hershon, President
Dear Sirs:
Pursuant to Section 2(a) of the Escrow Agreement dated as of
___________, 1999, we confirm receipt of the amount of
$_____________________ today for deposit into the Escrow Fund.
Very truly yours,
_______________________________________
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<PAGE>
EXHIBIT B
Form of Release Notice
Continental Stock Transfer & Trust Company
2 Broadway
New York, NY 10004
Attention: Corporate Trust Department
Dear Sirs:
The undersigned hereby authorize and instruct Continental Stock
Transfer & Trust Company, as escrow agent, to release
$__________________ of Escrow Funds from the Escrow Account and
to deliver such funds as follows:
[Insert Delivery Instructions]
Executed as of this ____ day of _______________, 1999.
IBF VI - PARTICIPATING INCOME FUND
By____________________________________
Duly Authorized Officer
COLEMAN & COMPANY SECURITIES, INC.
By____________________________________
Duly Authorized Officer
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<PAGE>
EXHIBIT C
Authorized Personnel
The Escrow Agent is authorized to accept instructions and
notices signed or believed by the Escrow Agent to be signed by
any one of the following, each of whom is authorized to act on
behalf of the Company:
On Behalf of IBF VI - PARTICIPATING INCOME FUND:
Name Title Signature
On Behalf of COLEMAN & COMPANY SECURITIES, INC.
Name Title Signature
E-41
Exhibit No. 6
IBF VI - Guaranteed Income Fund
Form SB-2, Amend. No. 1
File No. 333-71091
IBF VI - PARTICIPATING INCOME FUND, as Issuer
And
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Trustee
INDENTURE
Dated as of _________________, 1999
$50,000,000
Class A 10% Income Participating Notes
Due December 31, 2005 and 2006
E-42
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE 1
SECTION 1.01 Definitions 1
SECTION 1.02 Incorporation by Reference of TIA 11
SECTION 1.03 Rules of Construction 11
ARTICLE II. THE SECURITIES 12
SECTION 2.01 Form and Dating 12
SECTION 2.02 Execution and Authentication 13
SECTION 2.03 Registrar and Paying Agent 13
SECTION 2.04 Paying Agent to Hold Assets in Trust 14
SECTION 2.05 Securityholder Lists 14
SECTION 2.06 Transfer and Exchange 15
SECTION 2.07 Replacement Securities 16
SECTION 2.08 Outstanding Securities 16
SECTION 2.09 Treasury Securities 16
SECTION 2.10 Temporary Securities 17
SECTION 2.11 Cancellation 17
SECTION 2.12 Defaulted Interest 17
SECTION 2.13 Deposit of Monies 18
SECTION 2.14 CUSIP Number 18
SECTION 2.15 Restrictive Legends 18
SECTION 2.16 Book Entry Provisions for Global Security 18
SECTION 2.17 Special Transfer Provisions 19
SECTION 2.18 Interest and Payment Terms 19
ARTICLE III. REDEMPTION 20
SECTION 3.01 Notices to Trustee 20
SECTION 3.02 Notice of Redemption 21
SECTION 3.03 Effect of Notice of Redemption 22
SECTION 3.04 Deposit of Redemption Price 22
SECTION 3.05 Securities Redeemed in Part 22
ARTICLE IV. COVENANTS 23
SECTION 4.01 Payment of Securities 23
SECTION 4.02 Maintenance of Office or Agency 23
SECTION 4.03 Corporate Existence 23
SECTION 4.04 Payment of Taxes and Other Claims 24
SECTION 4.05 Maintenance of Properties and Insurance 24
SECTION 4.06 Compliance Certificates; Notice of Default 25
SECTION 4.07 Compliance with Laws 25
SECTION 4.08 SEC Reports and Other Information 26
SECTION 4.09 Waiver of Stay Extension or Usury Laws 26
SECTION 4.10 Limitation on Indebtedness 26
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<PAGE>
SECTION 4.11 Limitation on Restricted Payments 28
SECTION 4.12 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries 29
SECTION 4.13 Limitation on Liens 29
SECTION 4.14 Limitation on Investments, Loans and Advances 30
SECTION 4.15 Limitation on Transactions with Affiliates 30
SECTION 4.16 Limitation on Liquidations, Dissolutions,
Mergers and Consolidation 30
SECTION 4.17 ERISA Compliance 31
SECTION 4.18 Limitation on Acquisitions 32
SECTION 4.19 Limitation on Hedging Obligations 32
ARTICLE V. SUCCESSOR CORPORATION 32
SECTION 5.01 Consolidation, Merger, Conveyance, Transfer
or Lease 32
SECTION 5.02 Successor Entity Substituted 33
ARTICLE VI. DEFAULT AND REMEDIES 33
SECTION 6.01 Events of Default 33
SECTION 6.02 Acceleration 35
SECTION 6.03 Other Remedies 35
SECTION 6.04 Waiver of Past Defaults 36
SECTION 6.05 Control by Required Holders 36
SECTION 6.06 Limitation on Suits 36
SECTION 6.07 Rights of Holders to Receive Payment 37
SECTION 6.08 Collection Suit by Trustee 37
SECTION 6.09 Trustee May File Proofs of Claim 37
SECTION 6.10 Priorities 38
SECTION 6.11 Undertaking for Costs 38
SECTION 6.12 Rights and Remedies Cumulative 38
SECTION 6.13 Delay or Omission Not Waiver 38
ARTICLE VII. TRUSTEE 39
SECTION 7.01 Duties of Trustee 39
SECTION 7.02 Rights of Trustee 40
SECTION 7.03 Individual Rights of Trustee 41
SECTION 7.04 Trustee's Disclaimer 41
SECTION 7.05 Notice of Default 41
SECTION 7.06 Reports by Trustee to Holders 41
SECTION 7.07 Compensation and Indemnity 42
SECTION 7.08 Replacement of Trustee 42
SECTION 7.09 Successor Trustee by Merger, Etc. 44
SECTION 7.10 Eligibility: Disqualification 44
SECTION 7.11 Preferential Collection of Claims Against
Company 44
E-44
<PAGE>
ARTICLE VIII. DISCHARGE OF INDENTURE; DEFEASANCE 44
SECTION 8.01 Discharge of Indenture 44
SECTION 8.02 Legal Defeasance and Convenat Defeasance 45
SECTION 8.03 Application of Trust Money 48
SECTION 8.04 Repayment to Company 48
SECTION 8.05 Reinstatement 49
SECTION 8.06 Acknowledgment of Discharge by Trustee 49
ARTICLE IX. AMENDMENTS, SUPPLEMENTS AND WAIVERS 49
SECTION 9.01 Without Consent of Holders 49
SECTION 9.02 With Consent of Holders 50
SECTION 9.03 Compliance with TIA 51
SECTION 9.04 Revocation and Effect of Consent 51
SECTION 9.05 Notation on or Exchange of Securities 52
SECTION 9.06 Trustee to Sign Amendments, Etc. 52
ARTICLE X. SUBORDINATION 52
SECTION 10.01 Securities Subordinated to Senior Indebtedness 52
SECTION 10.02 Suspension of Payment on Securities in
Certain Events 53
SECTION 10.03 Securities Subordinated to Prior Payment of
All Senior Indebtedness on Dissolution,
Liquidation or Reorganization of Company 54
SECTION 10.04 Holders to be Subrogated to Rights of Holders
of Senior Indebtedness 55
SECTION 10.05 Obligations of the Company Unconditional 56
SECTION 10.06 Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice 56
SECTION 10.07 Application by Trustee of Assets Deposited
with It 57
SECTION 10.08 No Waiver of Subordination Provisions 57
SECTION 10.09 Holders Authorize Trustee to Effectuate
Subordination of Notes 58
SECTION 10.10 Right of Trustee to Hold Senior Indebtedness 58
SECTION 10.11 This Article X Not to Prevent Events of
Default 59
SECTION 10.12 No Fiduciary Duty of Trustee to Holders of
Senior Indebtedness 59
ARTICLE XI. MISCELLANEOUS 59
SECTION 11.01 TIA Controls 59
SECTION 11.02 Notices 59
SECTION 11.03 Communications by Holders with Other Holders 60
SECTION 11.04 Certificate and Opinion as to Conditions
Precedent 60
SECTION 11.05 Statements Required in Certificate or Opinion 61
SECTION 11.06 Rules by Trustee, Paying Agent, Registrar 61
SECTION 11.07 Legal Holidays 61
SECTION 11.08 Governing Law 61
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<PAGE>
SECTION 11.09 No Adverse Interpretation of Other Agreements 62
SECTION 11.10 No Recourse Against Others 62
SECTION 11.11 Successors 62
SECTION 11.12 Counterparts 62
SECTION 11.13 Severability 63
SECTION 11.14 Table of Contents, Headings, Etc. 63
Reconciliation and tie between the Trust Indenture
Act of 1939 and this Indenture, dated as of ______________, 1999:
Trust Indenture Initially
Act Section Reflected in
Indenture
Section
309 (b)(9) 7.10
310 (a)(1) 7.10
(a)(2) 7.10
(a)(5) 7.10
(b) 7.10
311 (a) 7.11
(b) 7.11
312 (a) 2.05
(b) 11.03
(c) 11.03
313 (a) 7.06
(b) 7.06
(c) 7.06
(d) 4.08
314 (a) 11.02
(c)(3) 5.01
315 (b) 11.02
316 (b) 9.04
E-46
<PAGE>
INDENTURE, dated as of ______________, 1999, between IBF VI
- - PARTICIPATING INCOME FUND, a Delaware corporation (the
"Company"), and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, a
________________ corporation, as Trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders
of the Company's Class A 10% Income Participating Notes Due
December 31, 2005 and 2006:
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"Acquisition" means the acquisition of (i) a controlling
equity or other ownership interest in another Person (including
the purchase of an option, warrant or convertible, exchangeable
or similar type security to acquire such a controlling interest
at the time it becomes exercisable, convertible or exchangeable
by the holder thereof), whether by purchase of such equity or
other ownership interest or upon exercise of an option or warrant
for, or conversion or exchange of securities into, such equity or
other ownership interest, or (ii) assets of another Person which
constitute all or any material part of the assets of such Person
or of a line or lines of business conducted by such Person.
"Affiliate" means, with respect to any specified Person, any
other Person whom directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, such specified Person. The term "control" means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing.
"Affiliate Transaction" means the conduct of business or any
transactions or series of transactions by the Company or any of
its Subsidiaries with or for the benefit of any of their
respective Affiliates.
"Additional Interest" means interest, in addition to Fixed
Interest, payable on the Securities on a pro rata basis only out
of five percent of the Consolidated Net Income of the Company for
each year ending December 31, determined without taking into
account payment of the Additional Interest but reduced by the
amount of any net loss of the Company for a prior year determined
in the same manner as Consolidated Net Income.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.16.
E-47
<PAGE>
"Bankruptcy Law" means Title 11 of the U.S. Code or any
similar Federal, state or foreign law for the relief of debtors.
"Board of Directors" means, with respect to any Person, the
board of directors or other applicable governing body of such
Person or any committee of the board of directors or of such
other governing body of such Person duly authorized, with respect
to any particular matter, to exercise the power of the board of
directors or other applicable governing body of such Person.
"Board Resolution" means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant
Secretary of such Person, to have been duly adopted by the Board
of Directors of such Person and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
"Book-Entry Security" means a Security represented by a
Global Security and registered in the name of the nominee of the
Depository.
"Business Day" means any day that is not a Legal Holiday.
"Capital Stock" means, with respect to any Person, any and
all shares, interests, participations, rights in, or other
equivalents (however designated and whether voting or non-voting)
of such Person's capital stock or any form of membership
interest, as applicable, whether outstanding on the Issue Date or
issued after the Issue Date, and any and all rights, warrants or
options exercisable or exchangeable for or convertible into such
capital stock.
"Cash Equivalents" means at any time (i) any evidence of
Indebtedness with a maturity of 180 days or less issued or
directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less
than $500,000,000; (iii) commercial paper with a maturity of 180
days or less issued by a corporation (except an Affiliate of the
Company) organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by
Standard & Poor's Corporation or at least P-1 by Moody's
Investors Service, Inc.; (iv) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations
issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full
faith and credit of the United States, in each case maturing
within one year from the date of acquisition; provided, however,
that the terms of such agreements comply with the guidelines set
forth in the Federal Financial Agreements of Depository
Institutions with Securities Dealers and Others, as adopted by
the Comptroller of the Currency; and (v) money market funds
investing principally in the types of securities described in
clauses (i) and (ii) above.
"Company" means the party named as such in this Indenture
until a successor replaces it pursuant to the terms and
conditions of this Indenture and thereafter means such successor.
E-48
<PAGE>
"Company Order" means a written order or request signed in
the name of the Company by its President or a Vice President, and
by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
"Consistent Basis" in reference to the application of GAAP
means the accounting principles observed in the period referred
to are comparable in all material respects to those applied in
the preparation of the audited financial statements of the
Company in prior periods.
"Consolidated Net Income (Loss)" means, for any period of
computation thereof, the gross revenues from operations of the
Company and its Subsidiaries (including payments received by the
Company and its Subsidiaries of (i) interest income, and (ii)
dividends and distributions made in the ordinary course of their
businesses by Persons in which investment is permitted pursuant
to this Indenture and not related to an extraordinary event),
less all operating and non-operating expenses of the Company and
its Subsidiaries including taxes on income, all determined on a
consolidated basis in accordance with GAAP applied on a
Consistent Basis; but excluding as income: (a) net gains on the
sale, conversion or other disposition of capital assets, (b) net
gains on the acquisition, retirement, sale or other disposition
of Capital Stock and other securities of the Company or its
Subsidiaries, (c) net gains on the collection of proceeds of life
insurance policies, (d) any write-up of any asset, and (e) any
other net gain or credit of an extraordinary nature as determined
in accordance with GAAP applied on a Consistent Basis.
"Custodian" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy
Law.
"Default" means any event that is, or after notice or the
passage of time or both would be an Event of Default.
"Default Amount" shall have the meaning set forth in Section
6.02.
"Default Rate" means the rate payable by the Company upon
the occurrence of an Event of Default, which shall be equal to
fifteen percent (15%) per annum.
"Depository" means, with respect to the Securities issuable
or issued in one or more Book-Entry Securities, the Person
specified in Section 2.02 as the Depository with respect to the
Securities until the successor shall have been appointed and
becomes such pursuant to the applicable provisions of this
Indenture, and, thereafter, "Depository" shall mean or include
such successor.
"Disqualified Stock" means with respect to any Person, any
Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable, in each case, at the option of the holder thereof),
or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise,
or is exchangeable for Indebtedness, or is redeemable at the
option of the holder thereof, in whole or in part, on or prior to
the Maturity Date.
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<PAGE>
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC
thereunder.
"Financing Documents" means this Indenture and any other
document executed by or on behalf of the Company in connection
with the consummation of the sale by the Company of the
Securities.
"Fiscal Quarter" means a three month quarter of a Fiscal
Year and when followed by reference to a year, means the first,
second, third or fourth quarter of such Fiscal Year, as
indicated.
"Fiscal Year" means the twelve-month fiscal period of the
Company and its Subsidiaries commencing on January 1 of each
calendar year and ending on December 31 of such calendar year.
"Fixed Interest" means interest payable on the Securities at
the rate of 10% per annum or, upon the occurrence of an Event of
Default, at the Default Rate, that accrues from the most recent
Interest Payment Date and subject to compounding pursuant to
Section 2.18.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date hereof and
as such principles may be amended from time to time, including,
without limitation, those 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 may be approved by
a significant segment of the accounting profession of the United
States, which are applicable as of the date of determination.
"Global Security" means a Security evidencing all or a part
of the Securities to be issued as Book-Entry Securities, issued
to the Depository in accordance with Section 2.02 and bearing the
legend prescribed in Exhibit B to this Indenture.
"Hedging Obligations" means any and all obligations of the
Company or any of its Subsidiaries, whether absolute or
contingent and howsoever and whenever created, arising, evidenced
or acquired (including all renewals, extensions and modifications
thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least
one of the parties thereto from the fluctuations of interest
rates, exchange rates (including without limitation commodity
exchange rates) or forward rates applicable to such party's
assets, liabilities or exchange transactions, including, but not
limited to, U.S. dollar-denominated or cross-currency interest
rate exchange agreements, forward currency exchange agreements,
commodity exchange agreements, interest rate cap or collar
E-50
<PAGE>
protection agreements, forward rate currency or interest rate
options, puts, warrants and those commonly known as interest rate
"swap" agreements; and (ii) any and all cancellations, buybacks,
reversals, terminations or assignments of any of the foregoing.
"Holder" or "Securityholder" means the person in whose name
a Security is registered on the Registrar's books.
"Indebtedness" means, with respect to any person, without
duplication, (i) any liability, contingent or otherwise, of such
Person (a) for borrowed money (whether or not the recourse of the
lender is to the whole of the Property of such Person or only to
a portion thereof), (b) evidenced by bonds, notes, debentures or
similar instruments or representing the balance deferred and
unpaid of any part of the purchase price of Property or other
assets (including Investments) or for the cost of Property or
other assets constructed or of improvements thereto (including
any obligation under or in connection with any letter of credit
related thereto), (c) under or in connection with any letter of
credit issued for the account of such Person, and all drafts
drawn, reimbursement obligations or demands for payment
thereunder, or (d) for the payment of money relating to any
capitalized lease obligations; (ii) any liability of others of
the kind described in the preceding clause (i) which the Person
has guaranteed or which is otherwise its legal liability; (iii)
any liability, contingent or otherwise, secured by any Lien in
respect of Property of such Person, whether or not the
obligations secured thereby shall have been assumed by or shall
otherwise be such Person's legal liability, provided, that,
solely in the case of any Indebtedness of the type described in
this clause (iii), recourse for the payment of which is limited
to such Property, the amount of such Indebtedness shall be deemed
to be the lesser of the fair market value of such Property or the
amount of the obligation so secured; and (iv) any and all
deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any liability of the kind
described in any of the preceding clauses (i), (ii) and (iii).
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations
as described above.
"Indenture" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"interest" when used with respect to any Security means any
one or more of Fixed Interest and Additional Interest, as the
context dictates.
"Interest Payment Date" means the stated maturity of an
installment of Fixed Interest or Additional Interest on the
Securities.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time
hereafter.
"Investment" means, with respect to any Person, any direct
or indirect advance, loan or other extension of credit to
(including any guarantee of a loan or other extension of credit)
or investment in, capital contribution to (by means of any
transfer of cash or other Property to others or any payment for
Property for the account or use of others or otherwise including,
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without limitation, amounts paid in advance on account of the
purchase price of merchandise or equipment to be delivered within
one year of the date of advance), or purchase of Capital Stock,
bonds, notes, debentures or other securities issued by, any other
Person.
"Issue Date" means the date of first issuance of the
Securities under this Indenture.
"Legal Holiday" means, with respect to a particular place of
payment, a Saturday, a Sunday or a day on which banking
institutions in New York, New York or at such place of payment
are authorized or obligated by law, executive order or
governmental decree to be closed.
"Lien" means any mortgage, lien, pledge, charge, security
interest, encumbrance, claim, hypothecation, assignment for
security, deposit arrangement or preference or other security
agreement of any kind or nature whatsoever, whether or not filed,
recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement and any
lease deemed to constitute a security interest). For purposes
hereof, a Person shall be deemed to own subject to a Lien any
Property which it has acquired or holds subject to the interest
of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement.
"Material Subsidiary" means, with respect to any person, any
Subsidiary of such person, which would be a "significant
subsidiary" pursuant to Article 1-02 of Regulation S-X.
"Maturity Date" means December 31, 2005, for all Securities
with respect to which payment is made in 1999, and means December
31, 2006, for all Securities with respect to which payment is
made in 2000.
"Multiemployer Plan" means a plan described in Section 3(37)
of ERISA.
"Net Proceeds" means, with respect to any Person (a) in the
case of any sale of Capital Stock by such Person or common equity
contribution to such Person, the aggregate net proceeds received
by such Person after payment of expenses, commissions and the
like, if any, incurred in connection therewith, (b) in the case
of the issuance of any Indebtedness by such Person, the aggregate
net proceeds received by such Person, after payment of expenses,
commissions and the like incurred in connection therewith, or (c)
in the case of any exchange, exercise, conversion or surrender of
outstanding securities of any kind of the Company for or into
shares of Capital Stock of the Company which is not Disqualified
Stock, the net proceeds received by the Company upon such
exchange, exercise, conversion or surrender (plus, with respect
to the issuance of any such securities after the Issue Date, the
net proceeds received by such Person upon the issuance of such
securities), less any and all payments made to the holders, e.g.,
on account of fractional shares, and less all expenses,
commissions and the like incurred by the Company in connection
therewith.
"Obligations" means all obligations for principal, premium,
Fixed Interest, Additional Interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
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"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, any Vice
President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, the Controller, the Secretary or the
Assistant Secretary of such Person.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Officers (one of who shall be the Chief
Financial Officer) or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of such Person and otherwise
complying with the requirements of Sections 11.04 and 11.05.
"Opinion of Counsel" means a written opinion from legal
counsel complying with the requirements of Sections 11.04 and
11.05. Unless otherwise required by the TIA, the legal counsel
may be an employee of or counsel to the Company.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Acquisition" means each Acquisition effected with
the consent and approval of the Board of Directors of the Person
being acquired, and with the duly obtained approval of such
shareholders or other holders of equity or other ownership
interest as such Person may be required to obtain, so long as (i)
immediately prior to and immediately after the consummation of
such Acquisition, no Default or Event of Default has occurred and
is continuing, (ii) substantially all of the sales and operating
profits generated by such Person (or assets) so acquired or
invested are derived from a line or lines of business that are
part of, or complimentary to, the business of the Company
described in the Prospectus, (iii) the Acquisition is incidental
to the business of the Company described in the Prospectus (iv)
an audited consolidated balance sheet and audited statements of
income, cash flow and stockholders' equity of the Person being
acquired, in each case as of its most recent fiscal year end are
delivered to the Trustee not less than five (5) Business Days
prior to the consummation of such Acquisition, (v) in the event
the Person so acquired is not a Wholly-Owned Subsidiary, the
Company is permitted to make such Acquisition pursuant to Section
4.14, and (iv) any Indebtedness included in the cost of the
Acquisition otherwise qualifying as a Permitted Acquisition
hereunder shall be permitted to be incurred pursuant to Section
4.10 hereof.
"Permitted Investments" means (i) obligations of the United
States government due within one year; (ii) certificates of
deposit or Eurodollar deposits due within one year with a
financial institution that is a member of the Federal Reserve
System having combined capital and surplus and undivided profits
of at least $500,000,000 or more; (iii) commercial paper rated at
least A-1 by Standard & Poor's Corporation or at least P-1 by
Moody's Investors Service, Inc.; (iv) debt of any state or
political subdivision that is rated among the two highest rating
categories obtainable from either Standard & Poor's Corporation
or Moody's Investors Service, Inc. and is due within one year;
(v) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or
unconditionally guaranteed by the United States Government or
issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one
year from the date of acquisition; provided, however, that the
terms of such agreements comply with the guidelines set forth in
the Federal Financial Agreements of Depository Institutions with
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Securities Dealers and Others, as adopted by the Comptroller of
the Currency; and (vi) Investments represented by Hedging
Obligations permitted to be made pursuant to Section 4.19.
"Permitted Liens" means, with respect to any Person, any
Lien arising by reason of (a) any judgment, decree or order of
any court, so long as such Lien is being contested in good faith
and is adequately bonded, and any appropriate legal proceedings
which may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated
or the period within which such proceedings may be initiated
shall not have expired; (b) Liens arising by operation of law for
taxes, assessments, governmental charges or claims not yet
delinquent or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently
conducted and if a reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall have been
made therefore and enforcement is stayed and which Liens are not
yet enforceable against other creditors; (c) security for payment
of workers' compensation or other insurance or social security
legislation; (d) security for the performance of tenders,
contracts (other than contracts for the payment of money) or
leases incurred in the ordinary course of business; (e) deposits
to secure public or statutory obligations, or in lieu of surety,
performance or appeal bonds, entered into in the ordinary course
of business; (f) Liens arising by operation of law in favor of
carriers, warehousemen, landlords, mechanics, materialmen,
laborers, employees or suppliers, incurred in the ordinary course
of business for sums which are not yet delinquent or are being
contested in good faith by negotiations or by appropriate
proceedings which suspend the collection thereof and if a reserve
or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor and which
Liens are not yet enforceable against other creditors; (g)
easements, rights-of-way, zoning and similar covenants and
restrictions and other similar encumbrances or title defects
which, in the aggregate, are not substantial in amount, and which
do not in any case materially detract from the value of the
Property subject thereto or materially interfere with the
ordinary conduct of the business of the Company or any of its
Subsidiaries; (h) Liens arising in the ordinary course of
business in favor of custom and revenue authorities to secure
payment of custom duties; (i) Liens existing as of the Issue
Date; and (j) Liens securing the Indebtedness of the Company and
its Subsidiaries incurred as permitted by Section 4.10 hereof.
"Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust,
unincorporated organization or any other entity or organization
including a government or political subdivision or any agency or
instrumentality thereof.
"Physical Securities" has the meaning set forth in Section
2.02.
"Plan" means an employment benefit plan within the meaning
of Section 3(3) of ERISA.
"Principal" of any Indebtedness (including the Securities)
means the principal of such Indebtedness plus the premium, if
any, on such Indebtedness.
"Property" or "property" means any assets or property of any
kind or nature whatsoever, real, personal or mixed (including
fixtures), whether tangible or intangible.
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"Prospectus" has the meaning set forth in Section 4.14.
"Record Date" means the Record Dates specified in the
Securities; provided that if any such date is a Legal Holiday,
the Record Date shall be the first day immediately preceding such
specified day that is not a Legal Holiday.
"Redemption Date" when used with respect to any Security to
be redeemed, means the date fixed for such redemption pursuant to
this Indenture and the Securities.
"Redemption Price" when used with respect to any Security to
be redeemed, means: (1) with respect to a redemption effected at
the option of the Company, an amount equal to that portion of the
principal amount to be redeemed, plus accrued Fixed Interest and
Additional Interest, if any, to the Redemption Date (subject to
the right of Holders of record on relevant Record Dates to
receive interest due on an Interest Payment Date); (2) with
respect to a redemption effected at the request of a Holder in
June during a calendar year an amount equal to the principal
amount of the Security plus accrued Fixed Interest to the
Redemption Date (subject to the right of Holders of record on
relevant Record Dates to receive interest due on an Interest
Payment Date); and (3), with respect to a redemption effected at
the request of a Holder in December during a calendar year an
amount equal to the principal amount of the Security plus accrued
Fixed Interest and Additional Interest, if any, to the Redemption
Date (subject to the right of Holders of record on relevant
Record Dates to receive interest due on an Interest Payment
Date).
"Registrar" has the meaning provided in Section 2.03.
"Representative" means the trustee, agent or representative
in respect of any Senior Indebtedness; provided, however, that
if, and for so long as, any Senior Indebtedness lacks such a
representative, then the Representative for such Senior
Indebtedness shall at all times constitute the holders of a
majority in outstanding principal amount of such Senior
Indebtedness in respect of any Senior Indebtedness.
"Required Holders" means the Holders of at least a majority
of the aggregate principal amount of the outstanding Securities.
"Restricted Payment" means any of the following: (i) the
declaration or payment of any dividend or any other distribution
on Capital Stock of the Company or any of its Subsidiaries or any
payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company or any of its
Subsidiaries (other than (x) dividends or distributions payable
solely in Capital Stock (other than Disqualified Stock) or in
options, warrants or other rights to purchase Capital Stock
(other than Disqualified Stock), and (y) in the case of
Subsidiaries of the Company, dividends or distributions payable
to the Company or to a Wholly-Owned Subsidiary of the Company),
(ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company or any of its
Subsidiaries, (iii) the making of any principal payment on, or
the purchase, defeasance, repurchase, redemption or other
acquisition or retirement for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment,
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of any Indebtedness of the Company which is subordinated in right
of payment to the Securities (other than Indebtedness of the
Company acquired in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition), and (iv) the
making of any payment of any management or similar fee to any
Affiliate of the Company for any period in an amount equal to any
Consolidated Net Loss of the Company for such period.
"SEC" means the Securities and Exchange Commission.
"Securities" means, the Company's Class A 10% Income
Participating Notes due December 31, 2005, as amended or
supplemented from time to time in accordance with the terms
hereof, that are issued pursuant to the terms and conditions of
this Indenture.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
"Senior Debt Other Default: has the meaning provided in
Section 10.02 hereof.
"Senior Debt Payment Default" has the meaning provided in
Section 10.02 hereof.
"Senior Indebtedness" means all Indebtedness and other
amounts permitted by Section 4.10(c) or 4.10(d) or any
refinancing, refunding, replacement or extension thereof, and all
amounts owing the Trustee under Section 7.07.
"Subsidiary" means with respect to any Person (i) a
corporation a majority of whose Capital Stock with voting power,
under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by such Person, by one or more
Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person or (ii) any other Person (other than
a corporation) in which such Person, one or more Subsidiaries of
such Person or such Person and one or more subsidiaries of such
Person, directly or indirectly, individually or with another
Person, at the date of determination thereof, has (a) at least a
majority ownership interest or (b) the power to elect or direct
the election of a majority of the directors or other governing
body of such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. SS
77aaa-77bbbb), as amended, as in effect on the date of the
execution of this Indenture.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions
of this Indenture and thereafter means such successor.
"Trust Officer" means any officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"U.S. Government Obligations" means direct non-callable
obligations of, or non-callable obligations guaranteed by, the
United States of America for the payment of which obligation or
guarantee the full faith and credit of the United States of
America is pledged.
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"U.S. Legal Tender" means such coin or currency of the
United States of America, as at the time of payment shall be
legal tender for the payment of public and private debts.
"voting power" means with respect to any Person, the power
under ordinary circumstances, pursuant to the ownership of shares
of any class or classes of Capital Stock, to elect at least a
majority of the board of directors, managers or trustees of such
Person (irrespective of whether or not, at the time, stock of any
other class or classes shall have, or might have, voting power by
reason of the happening of any contingency).
"Wholly-Owned Subsidiary" means with respect to any Person
any Subsidiary of such person, 100% of the Capital Stock of which
(other than shares of Capital Stock representing any director's
qualifying shares or investments by foreign nationals mandated by
applicable law) is owned by such Person, by a Wholly-Owned
Subsidiary of such Person or by such Person and one or more
Wholly-Owned Subsidiaries of such Person.
SECTION 1.02 Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA,
such provision is incorporated by reference in, and made a part
of, this Indenture. The following TIA terms used in this
Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a Security
holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company or
any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined
by the TIA, defined by TIA reference to another statute or
defined by SEC rule and not otherwise defined herein have the
meanings assigned to them therein.
SECTION 1.03 Rules of Construction.
(a) Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
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(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and
words in the plural include the singular;
(v) provisions apply to successive events and
transactions;
(vi) the words "include" and "including" shall be
deemed to mean "include, without limitation," and
"including, without limitation";
(vii) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(viii) references to Sections or Articles means
references to such Section or Article in this Indenture,
unless stated otherwise; and
(ix) references to sections of or rules under the
Securities Act shall be deemed to include substitute,
replacement or successor sections or rules adopted by the
SEC from time to time.
ARTICLE II.
THE SECURITIES
SECTION 2.01 Form and Dating.
The Securities and the Trustee's certificate of
authentication with respect thereto shall be substantially in the
form of Exhibit A hereto, which is hereby incorporated in and
expressly made a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock
exchange rules, usage or agreement to which the Company is
subject, including without limitation the legend set forth in
Exhibit B hereto. The Company and the Trustee shall approve the
form of the Securities and any notation, legend or endorsement on
them. Each Security shall be dated the date of its
authentication, shall bear interest from the Issue Date and shall
be payable on the Interest Payment Dates and the Maturity Date.
The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound
thereby.
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SECTION 2.02 Execution and Authentication.
One Officer shall sign (who shall have been duly authorized
by all requisite corporate actions) the Securities for the
Company by manual or facsimile signature. If an Officer whose
signature is on a Security was an Officer at the time of such
execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall nevertheless be
valid. A Security shall not be valid until an authorized
signatory of the Trustee manually signs the certificate of
authentication on the Security. The signature shall be
conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate Securities for original issue
up to an aggregate principal amount of Fifty Million dollars
($50,000,000) upon a written order of the Company in the form of
an Officers' Certificate to a Trust Officer directing the Trustee
to authenticate the Securities and certifying that all conditions
precedent to the issuance of the Securities contained herein have
been complied with. Upon the written order of the Company in the
form of an Officers' Certificate, the Trustee shall authenticate
Securities in substitution of Securities issued on the Issue Date
to reflect any name change of the Company. The aggregate
principal amount of Securities outstanding at any time may not
exceed Fifty Million dollars ($50,000,000) except as provided in
Section 2.07 hereof.
The Principal and interest on Book-Entry Securities shall be
payable to the Depository or its nominee, as the case may be, as
the sole registered owner and the sole holder of the Book-Entry
Securities represented thereby. The Principal of and interest on
Securities in certificated form ("Physical Securities") shall be
payable at the office of the Paying Agent.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless
otherwise provided in the appointment, an authenticating agent
may authenticate Securities whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent
has the same rights as an Agent to deal with the Company and
Affiliates of the Company.
The Securities shall be issuable only in registered form
without coupons in denominations of $1,000 and any integral
multiple in excess thereof.
If the Securities are to be issued in the form of one or
more Global Securities, then the Company shall execute and the
Trustee shall authenticate and deliver one or more Global
Securities that (i) shall represent and shall be in minimum
denominations of $1,000, (ii) shall be registered in the name of
the Depository for such Global Security or Securities or the
nominee of such Depository, (iii) shall be delivered to the
Trustee as custodian for such Depository or pursuant to such
Depository's instructions, and (iv) shall bear the legend set
forth in Exhibit B.
SECTION 2.03 Registrar and Paying Agent.
The Company shall maintain an office or agency in the
Borough of Manhattan, The City of New York, where (a) Securities
may be presented or surrendered for registration of transfer or
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for exchange (the "Registrar"), (b) Securities may be presented
or surrendered for payment (the "Paying Agent"), and (c) notices
and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The Company may also from time
to time designate one or more other offices or agencies where the
Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations
provided, however, that no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain
an office or agency in the Borough of Manhattan, The City of New
York, for such purposes. Neither the Company nor any Affiliate
of the Company shall act as Paying Agent. The Registrar shall
keep a register of the Securities and of their transfer and
exchange. The Company, upon notice to the Trustee, may appoint
one or more co-Registrars and one or more additional paying
agents reasonably acceptable to the Trustee. The term "Paying
Agent" includes any additional paying agent. The Company
initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices or demands in connection with the
Securities and this Indenture until such time as the Trustee has
resigned or a successor has been appointed. Securities, notices
and demands may be delivered to the Trustee at 2 Broadway, New
York, New York 10004, Attn: Corporate Trust Department.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which agreement
shall incorporate the provisions of the TIA. The agreement shall
implement the provisions of this Indenture that relate to such
Agent. The Company shall promptly notify the Trustee of the name
and address of any such Agent. If the Company fails to maintain
a Registrar or Paying Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation in accordance with
Section 7.07 hereof.
SECTION 2.04 Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in
trust for the benefit of the Holders or the Trustee all assets
held by the Paying Agent for the payment of Principal of, or
interest on, the Securities (whether such assets have been
distributed to it by the Company or any other obligor on the
Securities), and shall notify the Trustee of any Default by the
Company (or any other obligor on the Securities) in making any
such payment. The Trustee may at any time during the continuance
of any Default by the Company in making any such payment, upon
written request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account
for any assets distributed. The Company at any time may require
a Paying Agent to distribute all assets held by it to the Trustee
and account for any assets disbursed. Upon distribution to the
Trustee of all assets that shall have been delivered by the
Company to the Paying Agent, the Paying Agent shall have no
further liability for such assets.
SECTION 2.05 Securityholder 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 the Holders and shall otherwise comply
with TIA 312(a). If the Trustee is not the Registrar, the
Company shall furnish to the Trustee five (5) days before each
Record Date and at such other times as the Trustee may request in
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writing a list as of such date and in such form as the Trustee
may reasonably require of the names and addresses of the Holders,
which list may be conclusively relied upon by the Trustee, and
the Company shall otherwise comply with TIA 312(a).
SECTION 2.06 Transfer and Exchange.
When Securities in certificated form are presented to the
Registrar or a co-Registrar with a request from the Holder
thereof to register the transfer of such Securities or to
exchange such Securities for an equal principal amount of
Securities of other authorized denominations, the Registrar or co-
Registrar, as the case may be, shall register the transfer or
make the exchange as requested if its requirements for such
transaction are met; provided, however, that the Securities
surrendered for registration of transfer or exchange shall be
duly endorsed or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Registrar, or co-
Registrar, as the case may be, duly executed by the Holder
thereof or such Holder's attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company
shall execute by manual or facsimile signature and issue, and the
Trustee shall authenticate new Securities evidencing such
transfer or exchange at the Registrar's or co-Registrar's
request, as the case may be. The Company may require payment of
customary transfer fees of the Registrar or co-Registrar and a
sum sufficient to cover any transfer tax or similar governmental
charge payable in connection with transfer (other than any such
transfer taxes or similar governmental charge payable upon
exchanges or transfers pursuant to Section 2.02, 2.07, 2.10,
3.06, 4.16, 4.17 or 9.05). The Registrar or co-Registrar shall
not be required to register the transfer of or exchange of any
Security (i) during a period beginning at the opening of business
fifteen (15) days before the mailing of a notice of redemption of
Securities and ending at the close of business on the day of such
mailing and (ii) selected for redemption in whole or in part
pursuant to Article III, except the unredeemed portion of any
Security being redeemed in part.
Notwithstanding any other provision of this Section 2.06, a
Global Security representing Book-Entry Securities may not be
transferred in whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any
such nominee to a successor depository or a nominee of such
successor depository.
Notwithstanding the foregoing, no Global Security shall be
registered for transfer or exchange, or authenticated and
delivered, whether pursuant to this Section 2.06, Section 2.07,
2.10 or 3.06 or otherwise, in the name of a person other than the
Depository for such Global Security or its nominee until (i) the
Depository notifies the Company that it is unwilling or unable to
continue as Depository for such Global Security or if at any time
the Depository ceases to be a clearing agency registered under
the Exchange Act, and a successor depository is not appointed by
the Company within thirty (30) days, (ii) the Company executes
and delivers to the Trustee a Company Order that all such Global
Securities shall be exchangeable or (iii) there shall have
occurred and be continuing an Event of Default.
Except as provided above, any Security authenticated and
delivered upon registration of transfer or, or in exchange for,
or in lieu of, any Global Security, whether pursuant to this
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Section 2.06, Section 2.07, 2.10 or 3.06 or otherwise, shall also
be a Global Security and bear the legend specified in Exhibit B.
SECTION 2.07 Replacement Securities.
If a mutilated Security is surrendered to the Trustee or the
Registrar or if the Company and the Trustee receive evidence to
their satisfaction of the destruction, loss or theft of any
Security, the Company shall issue and the Trustee, upon receipt
of a Company Order, shall authenticate a replacement Security if
the Trustee's requirements are met. If required by the Trustee
or the Company, such Holder must provide an indemnity bond or
other indemnity, sufficient in the judgment of both the Company
and the Trustee, to protect the Company, the Trustee or any Agent
from any loss which any of them may suffer if a Security is
replaced. The Company and the Trustee may charge such Holder for
their respective reasonable, out-of-pocket expenses in replacing
a Security, including reasonable fees and expenses of counsel.
Every replacement Security shall constitute an additional
obligation of the Company and shall be entitled to all benefits
of this Indenture equally and proportionately with all other
Securities duly issued hereunder.
SECTION 2.08 Outstanding Securities.
Securities outstanding at any time are all the Securities
that have been authenticated by the Trustee except those canceled
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, a Security does not cease to be outstanding because
the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other
than a mutilated Security surrendered for replacement), it ceases
to be outstanding unless the Trustee receives proof satisfactory
to it that the replaced Security is held by a bona fide
purchaser. A mutilated Security ceases to be outstanding upon
surrender of such Security and replacement thereof pursuant to
Section 2.07.
If the principal amount of any Security is considered paid
under Section 4.01 hereof, it ceases to be outstanding and
interest on it ceases to accrue.
If on a Redemption Date or the Maturity Date the Paying
Agent holds U.S. Legal Tender sufficient to pay all of the
Principal and interest due on the Securities payable on that date
and is not prohibited from paying such Principal and interest due
on such date, then on and after such date such Securities cease
to be outstanding and interest on them ceases to accrue.
SECTION 2.09 Treasury Securities.
In determining whether the Holders of the required principal
amount of Securities have concurred in any declaration of
acceleration or notice of default or direction, waiver or consent
or any amendment, modification or other change to this Indenture,
the Securities owned by the Company or an Affiliate of the
Company shall be disregarded as though they were not outstanding,
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except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or
consent, only Securities that the Trustee knows are so owned
shall be disregarded.
SECTION 2.10 Temporary Securities.
Until definitive Securities are prepared and ready for
delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities upon receipt of a written order
of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary
Securities to be authenticated and the date on which the
temporary Securities are to be authenticated. Temporary
Securities shall be substantially in the form of definitive
Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable
delay, the Company shall prepare and the Trustee shall
authenticate, upon receipt of a written order of the Company
pursuant to Section 2.02, definitive Securities in exchange for
temporary Securities. Until such exchange, Holders of temporary
Securities shall be entitled to the same rights, benefits and
privileges as definitive Securities.
SECTION 2.11 Cancellation.
The Company at any time may deliver Securities to the
Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them
for registration of transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying
Agent (other than the Company or a Subsidiary), and no one else,
shall cancel and, pursuant to a Company Order, shall dispose of
all Securities surrendered for registration of transfer,
exchange, payment, replacement or cancellation and certification
of their destruction (subject to the record retention
requirements of the Exchange Act) shall be delivered to the
Company unless, by a Company order, the Company shall direct that
canceled Securities be returned to it. Subject to Section 2.07,
the Company may not issue new Securities to replace Securities
that it has paid or delivered to the Trustee for cancellation.
If the Company shall acquire any of the Securities, such
acquisition shall not operate as a redemption or satisfaction of
the Indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancellation pursuant
to this Section 2.11.
SECTION 2.12 Defaulted Interest.
If the Company defaults in a payment of interest on the
Securities, it shall, unless the Trustee fixes another Record
Date pursuant to Section 6.10, pay the defaulted interest, plus
(to the extent lawful) any interest payable on the defaulted
interest to the persons who are Holders on a subsequent special
Record Date, which date shall be a Business Day at least five (5)
Business Days prior to the payment date, in each case at the rate
provided in the Securities and this Indenture. The Company shall
fix or cause to be fixed such special Record Date and payment
date in a manner reasonably satisfactory to the Trustee. At
least fifteen (15) days before the subsequent special Record
Date, the Company shall mail or cause to be mailed to each
Holder, with a copy to the Trustee, a notice that states the
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subsequent special Record Date, the payment date and the amount
of defaulted interest, and interest payable on such defaulted
interest, if any, to be paid. The Company may also pay defaulted
interest in any other lawful manner.
SECTION 2.13 Deposit of Monies.
On or before 10:00 a.m. on each Interest Payment Date and
the Maturity Date, as the case may be, the Company shall deposit
or cause to be deposited with the Paying Agent, in immediately
available funds, U.S. Legal Tender sufficient to make cash
payments, if any, due on such Interest Payment Date or the
Maturity Date, as the case may be, in a timely manner that
permits the Trustee to remit payment to the Holders on such
Interest Payment Date or the Maturity Date, as the case may be.
SECTION 2.14 CUSIP Number.
The Company in issuing the Securities may use one or
more CUSIP numbers, and if so, the Trustee shall use the CUSIP
numbers in notices of redemption or exchange as a convenience to
Holders; provided that any such notice may state that no
representation is made as to the correctness or accuracy of the
CUSIP number printed in the notice or on the Securities, and that
reliance may be placed only on the other identification numbers
printed on the Securities.
SECTION 2.15 Restrictive Legends.
Each Global Security shall also bear the legend as set forth
in Exhibit B.
SECTION 2.16 Book Entry Provisions for Global Security.
(a) Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect
to any Global Security held on their behalf by the Depository, or
the Trustee as its custodian, or under the Global Securities, and
the Depository may be treated by the Company, the Trustee and any
Agent of the Company or the Trustee as the absolute owner of such
Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee
or any Agent of the Company or the Trustee from giving effect to
any written certification, proxy or other authorization furnished
by the Depository or impair, as between the Depository and its
Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Transfers of a Global Security shall be limited to
transfers in whole, but not in part, to the Depository, its
successors or their respective nominees. Interests of beneficial
owners in a Global Security may be transferred or exchanged for
Physical Securities in accordance with the rules and procedures
of the Depository and the provisions of Section 2.17. In
addition, Physical Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in a
Global Security if (i) the Depository notifies the Company that
it is unwilling or unable to continue as Depository for the
Global Securities and a successor depositary is not
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appointed by the Company within ninety (90) days of such notice or (ii) an
Event of Default has occurred and is continuing and the Registrar
has received a written request from the Depository to issue
Physical Securities.
(c) In connection with any transfer or exchange of a
portion of the beneficial interest in a Global Security to
beneficial owners pursuant to paragraph (b) of this Section 2.16,
the Registrar shall (if one or more Physical Securities are to be
issued) reflect on its books and records the date and a decrease
in the principal amount of such Global Securities in an amount
equal to the principal amount of the beneficial interest in the
Global Security to be transferred, and the Company shall execute
and the Trustee shall authenticate and deliver, one or more
Physical Securities of like tenor and amount.
(d) In connection with the transfer of an entire Global
Security to beneficial owners pursuant to paragraph (b) of this
Section 2.16, such Global Security shall be deemed to be
surrendered to the Trustee for cancellation, and the Company
shall execute and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depository in exchange
for its beneficial interest in the Global Security, an equal
aggregate principal amount of Physical Security of authorized
denominations.
(e) The Holder of a Global Security may grant proxies and
otherwise authorize any Person, including Agent Members and
Persons that may hold interest through Agent Members, to take any
action which a Holder is entitled to take under this Indenture or
the Securities.
SECTION 2.17 Special Transfer Provisions.
Notwithstanding any other provisions of this Indenture, a
Global Security may not be transferred as a whole except by the
Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or any such nominee to a successor
Depository or a nominee of such successor Depository.
SECTION 2.18 Interest and Payment Terms.
(a) The Company promises to pay Fixed Interest on the
unpaid principal amount of the Securities; provided, however,
that upon the occurrence and during the continuance of an Event
of Default the Company will pay interest on the unpaid principal
amount of the Securities at the applicable Fixed Interest rate
accruing from the most recent Interest Payment Date. The Company
will pay interest monthly in arrears on the 30th day of each
calendar month on Securities originally issued in denominations
of $15,000 or more (unless the original Holder elects quarterly
payment) and quarterly in arrears on March 30, June 30, September
30 and December 30 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (the "Interest
Payment Date"), commencing on the first such date to occur
following the Issue Date for each Security. Fixed Interest on
the Securities will accrue from the most recent Interest Payment
Date to which Fixed Interest has been paid or, if no interest has
been paid, from the date of issuance. Interest shall accrue with
respect to principal on this Security to, but not including the
date of repayment of such principal; provided, however, that if
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payment to the Paying Agent occurs after 10:00 a.m., New York
City time, interest shall be deemed to accrue until the following
Business Day. On each Interest Payment Date, interest on the
Securities will be paid for the immediately preceding accrual
period. To the extent lawful, the Company shall pay interest
(including post-petition interest in any proceeding under any
Bankruptcy Law) on (i) overdue Principal, if any, at the Default
Rate, compounded semiannually; and (ii) overdue installments of
interest, if any (without regard to any applicable grace period)
at the same rate, compounded semiannually. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Record Date for determining the Holders entitled to payment
of interest is the 10th day prior to each Interest Payment Date,
unless a special Record Date has been set by the Trustee in
accordance with Section 6.10.
(b) The Company promises to pay Additional Interest on the
Securities. Additional Interest will be paid to Holders of
record on December 31, of each year on the basis of a fraction,
the numerator of which is the principal amount of the Securities
held by each such Holder and the denominator of which is the
principal amount of the Securities outstanding on such date. The
Company will pay the Additional Interest, if any, on the 120th
day following the end of each calendar year, or if any such day
is not a Business Day, on the next succeeding Business Day. The
Record Date for determining the Holders entitled to payment of
interest is December 31 of each calendar year, unless a special
Record Date has been set by the Trustee in accordance with
Section 6.10.
(c) The Company shall pay interest on the Securities
(except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately
preceding the Interest Payment Date even if the Securities are
canceled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to the
Paying Agent to collect principal payments. The Securities will
be payable as to Principal and interest at the office or agency
of the Company maintained for such purpose within the City and
State of New York, or, at the option of the Company, payment of
interest may be made by check mailed to the Holders of the
Securities at their addresses set forth in the register of
Holders. If this Security is a Global Security, all payments in
respect of this Security will be made to the Depository or its
nominee in immediately available funds in accordance with
customary procedures established from time to time by the
Depository.
(d) Initially, the Trustee under the Indenture will act as
Paying Agent and Registrar. The Company may change any Paying
Agent, Registrar or co-Registrar without notice to the Holders.
The Company or any of its Subsidiaries may act as Registrar.
ARTICLE III.
REDEMPTION
SECTION 3.01 Notices to Trustee.
If a Holder seeks redemption of its Securities pursuant to
the Securities and such redemption is agreed to by the Company,
it shall notify the Trustee and the Paying Agent in
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writing of the Redemption Date, the Redemption Price and the principal
amount of the Securities to be redeemed, together with an
Officers' Certificate stating that such redemption will comply
with the conditions contained herein and in the Securities.
Notwithstanding anything set forth in this Article III, the
Company shall at all times comply with Article X hereof.
SECTION 3.02 Notice of Redemption.
At least thirty (30) days, but not more than sixty (60)
days, before a Redemption Date, the Company shall mail a notice
of redemption by first class mail to each Holder whose Securities
are to be redeemed at the address of such Holder appearing in the
Security register maintained by the Registrar. At the Company's
request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense; provided, that the
Company shall give the Trustee at least forty-five (45) days
advance notice of the Redemption Date. In the event of a partial
redemption, the Trustee will select the Securities to be redeemed
by lot or by such other manner as the Trustee deems fair and
appropriate to the Holders of the Securities. Each notice of
redemption shall identify the Securities to be redeemed and shall
state:
(i) the Redemption Date;
(ii) the Redemption Price to be paid;
(iii) the name and address of the Paying Agent;
(iv) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption
Price;
(v) that, unless the Company defaults in making the
redemption payment or such redemption payment is prevented
for any reason, interest on Securities to be redeemed ceases
to accrue on and after the Redemption Date, and the only
remaining right of the Holders of such Securities is to
receive payment of the Redemption Price upon surrender to
the Paying Agent of the Securities redeemed;
(vi) if fewer than all the Securities are to be
redeemed, the identification of the particular Securities
(or portion thereof) to be redeemed, as well as the
aggregate principal amount of Securities to be redeemed and
the aggregate principal amount of Securities to be reissued
to the Holders after such partial redemption;
(vii) if any Security is being redeemed in part,
the portion of the principal amount of such Security to be
redeemed and that, after the Redemption Date, and upon
surrender of such Security, a new Security or Securities in
the aggregate principal amount equal to the unredeemed
portion thereof will be issued without charge to the
Security holder;
(viii) the CUSIP number, if any, relating to such
Securities pursuant to Section 2.14 hereof; and
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(ix) that the notice is being sent pursuant to this
Section 3.02 and pursuant to the optional redemption
provisions of the Securities.
SECTION 3.03 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with
Section 3.02, Securities called for redemption become due and
payable on the Redemption Date and at the Redemption Price. Upon
surrender to the Trustee or Paying Agent, such Securities called
for redemption shall be paid at the applicable Redemption Price;
provided, that any Additional Interest under the Securities shall
be paid 120 days following the end of the calendar year in which
the redemption is effected. Interest installments whose maturity
is on or prior to such Redemption Date will be payable on the
relevant Interest Payment Dates to the Holders of record.
Notice of redemption shall be deemed to be given when mailed
to each Holder in the manner herein provided whether or not the
Holder receives such Notice. In any event, failure to give such
notice, or any defect therein, shall not affect the validity of
the proceedings for the redemption of any other Security.
SECTION 3.04 Deposit of Redemption Price.
On or prior to each Redemption Date, the Company shall
deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the Redemption Price of all Securities to be redeemed on that
date; provided, that any Additional Interest under the Securities
shall be deposited with the Paying Agent 120 days following the
end of the calendar year in which the redemption is effected.
Upon the written request of the Company, the Paying Agent shall
promptly return to the Company any U.S. Legal Tender so deposited
which is not required for that purpose except with respect to
monies owed as obligations to the Trustee pursuant to Article
VII.
If the Company complies with the preceding paragraph,
interest on the Securities to be redeemed will cease to accrue on
the applicable Redemption Date, whether or not such Securities
are presented for payment. If any Security called for redemption
shall not be so paid upon surrender for redemption, interest will
be paid, from the Redemption Date until such Redemption Price is
paid, on the unpaid Principal of and on any interest not paid on
such unpaid Principal, in each case, at the rate provided in the
Securities.
SECTION 3.05 Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part,
the Company shall issue and the Trustee shall authenticate for
the Holder, at the expense of the Company, a new Security or
Securities equal in principal amount to the unredeemed portion of
the Security surrendered.
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ARTICLE IV.
COVENANTS
SECTION 4.01 Payment of Securities.
The Company shall pay the Principal of and interest on the
Securities on the dates and in the manner provided in the
Securities and this Indenture. An installment of Principal of or
interest on the Securities shall be considered paid on the date
it is due if the Trustee or Paying Agent holds on that date U.S.
Legal Tender designated for and sufficient to pay the installment
and/or interest then due and is not prohibited from paying such
installment on such date.
The Company shall pay interest on (i) overdue Principal at
the rate set forth in the second paragraph of paragraph 1 of the
Securities, and (ii) overdue installments of interest 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, the office or agency required under Section
2.03. The Company shall give prior 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 agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders,
notices and demands described in such Section 2.03 may be made or
served at the address of the Trustee set forth in Section 2.03.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented
or surrendered for any or all such purposes and may from time to
time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough
of Manhattan, The City of New York, 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 initially
designates the corporate trust office of the Trustee set forth in
Section 2.03 as such office.
SECTION 4.03 Corporate Existence.
Except as otherwise permitted by Article V, the Company
shall do or cause to be done all things necessary to preserve and
keep in full force and effect its existence and the existence of
each of its Subsidiaries, in accordance with the respective
organizational documents of each of them and the rights (charter
and statutory) and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be
required to preserve, with respect to itself, any right or
franchise, and with respect to any of its Subsidiaries, any such
existence, right or franchise, if (a) the Board of Directors of
the Company shall determine reasonably and in good
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faith that the preservation thereof is no longer desirable in the conduct of
the business of the Company and (b) the loss thereof is not adverse
in any material respect to the Holders.
SECTION 4.04 Payment of Taxes and Other Claims.
The Company shall and shall cause each of its Subsidiaries
to, pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, (i) all taxes, assessments and
governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed
upon it or any of its Subsidiaries or properties of it or any of
its Subsidiaries, and (ii) all lawful claims for labor, materials
and supplies that, if unpaid, might by law become a Lien upon the
property of it or any of its Subsidiaries; provided, however,
that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge
or claim if either (a) the amount, applicability or validity
thereof is being contested in good faith by appropriate
proceedings and an adequate reserve has been established therefor
to the extent required by GAAP, or (b) the failure to make such
payment or effect such discharge (together with all other such
failures) would not have a material adverse effect on the
financial condition or results of operations of the Company and
its Subsidiaries, taken as a whole.
SECTION 4.05 Maintenance of Properties and Insurance.
(a) The Company shall cause all Properties used or useful
in the conduct of its business or the business of any of its
Subsidiaries to be maintained and kept in satisfactory condition,
repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all
as in its judgment may be necessary, so that the business carried
on in connection therewith may be properly and advantageously
conducted at all times unless the failure to so maintain such
properties (together with all other such failures) would not have
a material adverse effect on the financial condition or results
of operations of the Company and its Subsidiaries taken as a
whole; provided, however, that nothing in this Section 4.05 shall
prevent the Company or any of its Subsidiaries from discontinuing
the operation or maintenance of any of such properties or
disposing of any of them if such discontinuance or disposal is
either (i) in the ordinary course of business, (ii) in the good
faith judgment of the Board of Directors of the Company or the
Subsidiary concerned, or of the senior officers of the Company or
such Subsidiary, as the case may be, desirable in the conduct of
the business of the Company or such Subsidiary, as the case may
be, or (iii) is otherwise permitted by this Indenture.
(b) The Company shall provide or cause to be provided, for
itself and each of its Subsidiaries, insurance (including
appropriate self-insurance) against loss or damage of the kinds
that, in the reasonable, good faith opinion of the Company are
adequate and appropriate for the conduct of the business of the
Company and such Subsidiaries in a prudent manner, with reputable
insurers or with the government of the United States of America
or an agency or instrumentality thereof, in such amounts, with
such deductibles, and by such methods as shall be customary, in
the reasonable, good faith opinion of the Company, for companies
similarly situated in the industry, unless the failure to provide
such insurance (together with all other such failures) would not
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have a material adverse effect on the financial condition or
results of operations of the Company and its Subsidiaries, taken
as a whole.
(c) The Company shall and shall cause each of its
Subsidiaries to keep proper books of record and account, in which
full and correct entries shall be made of all financial
transactions and the assets and business of the Company and each
Subsidiary in accordance with GAAP consistently applied to the
Company and its Subsidiaries taken as a whole.
SECTION 4.06 Compliance Certificates; Notice of Default.
(a) The Company shall deliver to the Trustee, within sixty
(60) days after the end of each of the Company's first three
fiscal quarters and within ninety (90) days after the end of the
Company's fiscal year, an Officers' Certificate stating that a
review of the Company's activities and the activities of its
Subsidiaries during the preceding fiscal period has been made
under the supervision of the signing Officers with a view to
determining whether it has kept, observed, performed and
fulfilled its obligations under this Indenture and further
stating, as to each such Officer signing such certificate, that
to the best of his knowledge, the Company during such preceding
fiscal period has kept, observed, performed and fulfilled each
and every such covenant and no Default or Event of Default
occurred during such period and at the date of such certificate
there is no Default or Event of Default that has occurred and is
continuing or, if such signers do know of such Default or Event
of Default, the certificate shall describe the Default or Event
of Default and its status with particularity and what action the
Company has taken or proposes to take with respect thereto. The
Officers' Certificate shall also include all calculations
necessary to show covenant compliance. The Officers' Certificate
shall also notify the Trustee should the Company elect to change
the manner in which it fixes its fiscal year end.
(b) So long as (and to the extent) not contrary to the then
current recommendations of the American Institute of Certified
Public Accountants, the Company shall deliver to the Trustee
within ninety (90) days after the end of each fiscal year a
written statement by an independent public accounting firm
stating (A) that their audit examination has included a review of
the terms of this Indenture and the Securities as they relate to
accounting matters, and (B) whether, in connection with their
audit examination, any Default or Event of Default has come to
their attention and if such a Default or Event of Default has
come to their attention, specifying the nature and period of
existence thereof.
(c) The Company will deliver to the Trustee promptly, and
in any event within ten (10) days after the Company becomes aware
or should reasonably have become aware of the occurrence of any
Default or Event of Default, an Officers' Certificate describing
such Default or Event of Default and its status with
particularity and what action the Company is taking or proposes
to take with respect thereto.
SECTION 4.07 Compliance with Laws.
The Company shall comply, and shall cause each of its
Subsidiaries to comply, with the respective organizational
documents of each of them and all applicable statutes, rules,
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regulations, orders and restrictions of the United States of
America, all states, provinces and municipalities thereof, and of
any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing,
in respect of the conduct of their respective businesses and the
ownership of their respective properties, except such the
noncompliance with which would not in the aggregate have a
material adverse effect on the financial condition or results of
operations of the Company and its Subsidiaries taken as a whole.
SECTION 4.08 SEC Reports and Other Information.
To the extent permitted by applicable law or regulation,
whether or not the Company is subject to Section 13(a) or 15(d)
of the Exchange Act, the Company shall file with the SEC the
annual reports, quarterly reports and other documents which the
Company would have been required to file with the SEC pursuant to
such Sections 13(a) and 15(d) if the Company were so subject,
such documents to be filed with the SEC on or prior to the
respective dates (the "Required Filing Dates") by which the
Company would have been required so to file such documents if the
Company were so subject. The Company shall comply with its
reporting and filing obligations under the applicable federal
securities laws. Annual reports will contain consolidated
financial statements and notes thereto, together with an opinion
thereon expressed by an independent public accounting firm and
management's discussion and analysis of financial condition and
results of operations, and quarterly reports will contain
unaudited condensed consolidated financial statements for the
first three quarters of each fiscal year. Upon qualification of
this Indenture under the TIA, the Company shall also comply with
the provisions of TIA 314(a).
SECTION 4.09 Waiver of Stay Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any
stay or extension law or any usury law or other law that would
prohibit or forgive the Company from paying all or any portion of
the Principal of or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) the
Company hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 4.10 Limitation on Indebtedness.
The Company shall not, and shall not cause or permit any of
its Subsidiaries to, directly or indirectly, create, incur,
assume, issue, guarantee or in any manner become liable for or
with respect to the payment of, any Indebtedness, except that the
Company and its Subsidiaries may incur (each of which shall be
given independent effect):
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(a) Indebtedness of the Company evidenced by the Securities
or otherwise arising under this Indenture, and additional
Indebtedness which may be incurred from time to time through the
issuance of notes, bonds, or other Obligations of the Company
(whether under this Indenture or under some other instrument)
which is pari passu or subordinated in right of payment with the
Securities;
(b) Indebtedness of the Company and its Subsidiaries
outstanding on the Issue Date; provided, none of the instruments
and agreements evidencing or governing such Indebtedness shall be
amended, modified or supplemented after the Issue Date to change
any terms of subordination, payment of Principal, interest, fees
or other amounts due, or rights of conversion, put, exchange or
other similar rights or any other covenants, terms or conditions
thereof to be less favorable to the Holders than such terms,
rights and conditions as is effect on the Issue Date.
(c) purchase money Indebtedness of the Company described in
Section 4.13(d) not to exceed an aggregate outstanding amount at
any time of $5,000,000;
(d) Indebtedness of the Company unsecured or secured by
Property of the Company, which is superior in right of payment to
the Securities, in an aggregate principal amount not to exceed
the highest aggregate principal amount of the Securities issued
under this Indenture if, immediately after giving pro forma
effect to the incurrence thereof, no Default or Event of Default
shall have occurred;
(e) Indebtedness of a Subsidiary of the Company issued to
and held by the Company or a Wholly-Owned Subsidiary of the
Company; provided, however, that any transfer of such
Indebtedness (other than to the Company or a Wholly-Owned
Subsidiary of the Company) shall be deemed, in such case, to
constitute a new incurrence of such Indebtedness by the issuer
thereof;
(f) Indebtedness of the Company owed to or held by a Wholly-
Owned Subsidiary of the Company that is unsecured and
subordinated in right of payment to the Securities; provided,
however, that any subsequent issuance or transfer of any Capital
Stock which results in any such other Wholly-Owned Subsidiary
ceasing to be a Wholly-Owned Subsidiary of the Company, or any
transfer of such Indebtedness (other than to a Wholly-Owned
Subsidiary of the Company), shall be deemed in each case to
constitute a new incurrence of such Indebtedness by the Company;
(g) Indebtedness represented by Hedging Obligations of the
Company or its Subsidiaries with respect to Indebtedness of the
Company or its Subsidiaries (which Indebtedness is otherwise
permitted to be incurred under this Section 4.10 and which
Hedging Obligations are otherwise permitted to be incurred under
Section 4.19) to the extent the notional principal amount of such
Hedging Obligations does not exceed the principal amount of the
Indebtedness to which such Hedging Obligations relate;
(h) any replacements, renewals, refinancings and extensions
of Indebtedness incurred under clauses (a), (b), (c), (d), (e),
and (f) above provided that (i) any such replacement, renewal,
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refinancing and extension (x) shall not provide for any mandatory
redemption, amortization or sinking fund requirement in an amount
greater than or at a time prior to the amounts and times
specified in the Indebtedness being replaced, renewed, refinanced
or extended and (y) shall be contractually subordinated to the
Securities at least to the extent, if at all, that the
Indebtedness being replaced, renewed, refinanced or extended is
subordinate to the Securities, (ii) any such Indebtedness of any
person must be replaced, refinanced or extended with Indebtedness
incurred by such person or by the Company, (iii) the principal
amount of Indebtedness incurred pursuant to this clause (h) (or,
if such Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof, the original issue price
of such Indebtedness) shall not exceed the sum of the principal
amount (or with respect to Indebtedness which provides for an
amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity
thereof, the accreted value thereof) of Indebtedness so replaced,
renewed, refinanced or extended, plus accrued interest, the
amount of any premium required to be paid in connection with such
replacement, renewal, refinancing or extension pursuant to the
terms of such Indebtedness or the amount of any premium
reasonably determined by the Company as necessary to accomplish
such replacement, renewal, refinancing or extension by means of a
tender offer or privately negotiated purchase and the amount of
fees and expenses incurred in connection therewith, (iv) the
covenants, terms and conditions of any such extension, renewal,
refunding or refinancing Indebtedness (and of any agreement or
instrument entered into in connection therewith) are no less
favorable to the Holders than the terms of the Indebtedness as in
effect prior to such action, and (v) immediately prior to and
immediately after giving effect to any such extension, renewal,
refunding or refinancing, no Default or Event of Default shall
have occurred and be continuing; and
(i) the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of
business.
SECTION 4.11 Limitation on Restricted Payments.
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, make any Restricted
Payment described in clause (iv) thereof or make another
Restricted Payment, 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 occur as a consequence thereof; and
(b) the aggregate of all Restricted Payments declared or
made after the Issue Date through and including the date of such
Restricted Payment does not exceed 50% of the Company's
Consolidated Net Income from and including January 1, 1999, to
and including the last day of the fiscal quarter immediately
preceding the date of such Restricted Payment.
The provisions of this Section 4.11 shall not prohibit (i)
the payment of any dividend within sixty (60) days after the date
of declaration thereof, if such payment would comply with the
provisions of this Indenture at the date of the declaration of
such payment, (ii) the retirement of any shares of Capital Stock
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of the Company or Indebtedness of the Company which is
subordinated in right of payment to the Securities by conversion
into, or by an exchange for, shares of Capital Stock of the
Company that are not Disqualified Stock or out of the Net
Proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of other shares of Capital Stock
(other than Disqualified Stock) of the Company, and (iii) the
redemption or retirement of Indebtedness of the Company which is
subordinated in right of payment to the Securities in exchange
for, by conversion into, or out of the Net Proceeds of, a
substantially concurrent sale of subordinated Indebtedness of the
Company (other than to a Subsidiary of the Company) that is
contractually subordinated in right of payment to the Securities
at least to the same extent that the Indebtedness being redeemed
or retired is subordinated to the Securities.
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 4.11 were computed, which calculations may be based upon
the Company's latest available financial statements.
SECTION 4.12 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective or enter into any
agreement with any person that would cause any consensual
encumbrance or restriction of any kind on the ability of any
Subsidiary of the Company to (a) pay dividends, in cash or
otherwise, or make any other distributions on its Capital Stock
or any other interest or participation in, or measured by, its
profits owned by, or pay any Indebtedness owed to, the Company or
any of its Subsidiaries, (b) make loans or advances to the
Company or any of its Subsidiaries or (c) transfer any of its
Properties to the Company or any of its Subsidiaries, except, in
each case, for such encumbrances or restrictions existing under
or contemplated by or by reason of customary non-assignment or
sublease provisions of any agreement of the Company or its
Subsidiaries.
SECTION 4.13 Limitation on Liens.
Other than Permitted Liens, the Company shall not, and the
Company shall not permit, cause or suffer any of its Subsidiaries
to, create, incur, assume or suffer to exist any Lien, charge or
other encumbrance of any kind with respect to any property or
assets now owned or hereafter acquired by it, which (a) secures
Indebtedness of the Company subordinated in right of payment to
the Securities, unless the Securities are secured by a Lien on
such property that is senior to such Lien, (b) secures
Indebtedness of the Company which is pari passu in right of
payment with the Securities, unless the Securities are secured by
a Lien on such Property that is equal and ratable with such Lien,
(c) secures Indebtedness incurred to refinance Indebtedness which
has been secured by a Lien permitted under this Indenture and is
permitted to be refinanced under this Indenture, to the extent
such Liens extend to or cover Property of the Company or any of
its Subsidiaries not securing the Indebtedness so refinanced or
increase the extent of such Liens, or (d) purchase money Liens to
secure Indebtedness permitted under this Indenture (or as
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extended or renewed as permitted under this Indenture) and
incurred to purchase fixed assets, unless such Indebtedness
represents not less than seventy-five percent (75%) and not more
than one hundred percent (100%) of the purchase price of such
assets as of the date of purchase thereof and no Property other
than the assets so purchased secures such Indebtedness.
SECTION 4.14 Limitation on Investments, Loans and Advances.
The Company shall not make, and shall not permit any of its
Subsidiaries to make, any Investment, except: (i) Investments by
the Company or any of its Subsidiaries in any Wholly-Owned
Subsidiary of the Company (including any such Investment pursuant
to which a Person becomes a Wholly-Owned Subsidiary of the
Company) or in the Company by any of its Subsidiaries; (ii)
Investments of the type contemplated by the prospectus included
in the Company's registration Statement on Form SB-2 (file no.
333-71091) as filed with, and declared effective by, the SEC (the
"Prospectus"); (iii) Investments permitted to be made pursuant to
Section 4.11; (iv) Investments represented by advances to
employees, officers and directors of the Company or its
Subsidiaries made in the ordinary course of business and
consistent with reasonable and customary business practices; (v)
Permitted Investments; (vi) Investments permitted to be made with
the Net Cash Proceeds of Asset Sales pursuant to Section 4.17;
(vii) Investments in Hedging Obligations permitted under Section
4.24; (viii) Investments represented by loans or advances to
Affiliates; and (x) Investments permitted to be made pursuant to
Section 4.10(e) and Section 4.10(f).
SECTION 4.15 Limitation on Transactions with Affiliates.
The Company will not, and will not permit, cause or suffer,
any of its Subsidiaries to, participate in an Affiliate
Transaction, except in good faith and on terms that are no less
favorable to the Company or such Subsidiary, as the case may be,
than those that could have been obtained in a comparable
transaction on an arm's length basis from a person not an
Affiliate of the Company or such Subsidiary. With respect to any
Affiliate Transaction (and each series of related Affiliate
Transactions which are similar or part of a common plan)
involving aggregate payments or other market value in excess of
$5,000,000, the Company shall deliver an Officers' Certificate to
the Trustee certifying that such Affiliate Transaction (or series
of related Affiliate Transactions) complies with the foregoing
provisions and that such Affiliate Transaction (or series of
related Affiliate Transactions) was approved by the Board of
Directors of the Company. Notwithstanding the foregoing, the
restrictions set forth in this Section 4.15 shall not apply to
(i) any employment agreement, consulting agreement and
indemnification obligations entered into by the Company or any of
its Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such
Subsidiary, (ii) the payment of reasonable and customary fees to
directors of the Company who are not employees of the Company,
and (iv) transactions permitted under Sections 4.10, 4.11 and
4.14 hereof.
SECTION 4.16 Limitation on Liquidations, Dissolutions, Mergers
and Consolidation.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve
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itself (or suffer any liquidation or dissolution), or convey,
sell, lease, assign, transfer or otherwise dispose of, all or
substantially all of its property, business or assets, or make
any material change in its present method of conducting business,
except, (i) any Subsidiary of the Company may be merged or
consolidated with or into the Company (provided that the Company
shall be the continuing or surviving corporation) or with or into
any one or more Wholly-Owned Subsidiaries of the Company
(provided that a Wholly-Owned Subsidiary of the Company shall be
the continuing or surviving corporation) and after giving effect
to any of such transactions, no Default or Event of Default shall
exist; (ii) any Wholly-Owned Subsidiary of the Company may sell,
lease, transfer or otherwise dispose of any or all of its assets
(upon voluntary liquidation or otherwise) to the Company or any
of its Wholly-Owned Subsidiaries; (iii) any Affiliate of the
Company may be merged or consolidated with or into the Company
(provided that the Company shall be the continuing or surviving
corporation) or with or into any one or more Wholly-Owned
Subsidiaries of the Company (provided that a Wholly-Owned
Subsidiary of the Company shall be the continuing or surviving
corporation) and after giving effect to any of such transactions,
no Default or Event of Default shall exist; (iv) any conveyance,
sale, assignment, transfer, or disposition of property and assets
contemplated by the Registration Statement to create liquidity
for repayment of the Securities; or (v) any the Company may be
merged or consolidated with or into another entity, provided that
there is no material change in the business of the surviving
entity from the business of the Company, the surviving entity
assumes all obligations hereunder and under the Securities, and
after giving effect to any such transaction, no Default or Event
of Default shall exist.
SECTION 4.17 ERISA Compliance.
The Company will not and will not permit any of its
Subsidiaries to, directly or indirectly, (i) engage in a
"prohibited transaction," as such term is defined in Section 406
of ERISA or Section 4975 of the Internal Revenue Code, with
respect to any Plan or Multiemployer Plan or knowingly consent to
any other "party in interest" or any "disqualified person," as
such terms are defined in Section 3(14) of ERISA or Section
4975(e)(2) of the Internal Revenue Code, respectively, engaging
in any "prohibited transaction," with respect to any Plan or
Multiemployer Plan maintained by the Company or any of its
Subsidiaries; (ii) permit any Plan maintained by the Company or
any of its Subsidiaries to incur any "accumulated funding
deficiency," as defined in Section 302 of ERISA or Section 412 of
the Internal Revenue Code, unless such incurrence shall have been
waived in advance by the Internal Revenue Services; (iii)
terminate any Plan in a manner which could result in the
imposition of a Lien on any property of the Company or any of its
Subsidiaries pursuant to Section 4068 of ERISA; (iv) breach, or
knowingly permit any employee of officer or any trustee or
administrator of any Plan maintained by the Company or any of its
Subsidiaries to breach, any fiduciary responsibility imposed
under Title I of ERISA with respect to any Plan; (v) engage in
any transaction which would result in the incurrence of a
liability under section 4069 of ERISA; or (vi) fail to make
contributions to a Plan or Multiemployer Plan which results in
the imposition of a Lien on any property of the Company or any of
its Subsidiaries pursuant to Section 302(f) of ERISA or Section
412(n) of the Internal Revenue Code.
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SECTION 4.18 Limitation on Acquisitions.
The Company will not and will not permit any of its
Subsidiaries to enter into any agreement, contract, binding
commitment or other arrangement providing for any Acquisition, or
take any action to solicit the tender of securities or proxies in
respect thereof in order to effect any Acquisition, other than
Permitted Acquisitions.
SECTION 4.19 Limitation on Hedging Obligations.
The Company will not and will not permit any of its
Subsidiaries to incur any Hedging Obligations or enter into any
agreements, arrangements, devices or instruments relating to
Hedging Obligations, except for Hedging Obligations the aggregate
notional amount of which does not exceed $75,000,000.
ARTICLE V.
SUCCESSOR CORPORATION
SECTION 5.01 Consolidation, Merger, Conveyance, Transfer or
Lease.
The Company shall not consolidate with or merge with or into
or sell, assign, convey, lease, transfer or otherwise dispose of
all or substantially all of its properties and assets (determined
on a consolidated basis for the Company and its Subsidiaries,
taken as a whole) to another Person or Persons, in a single
transaction or through a series of related transactions, or cause
or permit any of its Subsidiaries to do any of the foregoing,
unless:
(a) the Company is the continuing Person, or the Person
formed by or surviving such consolidation or merger or the Person
to which such sale, assignment, conveyance, lease, transfer or
other disposition is made (the "surviving entity") is a
corporation organized and validly existing under the laws of the
United States, any State thereof or the District of Columbia;
(b) the surviving entity shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee, in
form and substance reasonably satisfactory to the Trustee, all of
the obligations of the Company under the Securities and this
Indenture;
(c) immediately before and immediately after giving effect
to such transaction, or series of transactions (including,
without limitation, any Indebtedness incurred or anticipated to
be incurred in connection with or in respect of such transaction
or series of transactions), no Default or Event of Default shall
have occurred and be continuing; and
(d) the Company or the surviving entity shall have
delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel, each stating that (i) if a supplemental indenture is
required in connection with such transaction or series of
transactions, such supplemental indenture complies with this
Section 5.01, and (ii) all conditions precedent in this Indenture
relating to the transaction or series of transactions have been
satisfied.
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SECTION 5.02 Successor Entity Substituted.
Upon any consolidation, merger or any transfer of all or
substantially all of the assets of the Company in accordance with
Section 5.01, the surviving entity formed by such consolidation
or into or with which the Company is merged or to which such
transfer is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this
Indenture with the same effect as if such surviving entity had
been named as the Company herein and the Company shall be
discharged from all obligations and covenants under the Indenture
and the Securities.
ARTICLE VI.
DEFAULT AND REMEDIES
SECTION 6.01 Events of Default.
An "Event of Default" occurs if:
(i) the Company defaults in the payment of interest on
any Security when the same becomes due and payable and
continuance of any such default for a period of thirty (30) days;
or
(ii) the Company defaults in the payment of the
Principal of or premium on any Security as and when due and
payable (including a default in payment upon an offer to purchase
required to be made by this Indenture); or
(iii) the Company defaults in the performance, or
breach, of any material covenant, obligation or agreement in the
Securities or this Indenture (other than defaults specified in
clause (i) or (ii) above), and such default or breach continues
for a period of thirty (30) days after written notice to the
Company by the Trustee or to the Company and the Trustee by the
Holders of at least 30% in aggregate principal amount of the
outstanding Securities; or
(iv) any representation or warranty contained in the
Financing Documents or any writing furnished by the Company or
any of its Subsidiaries to any Holder, contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading; or
(v) failure by the Company or any of its Subsidiaries
(a) to make any payment when due with respect to any other
Indebtedness under one or more classes or issues of Indebtedness
which one or more classes or issues of Indebtedness are in an
aggregate principal amount of $5,000,000 or more and such failure
results in acceleration of the maturity thereof; or (b) to
perform any term, covenant, condition, or provision of one or
more classes or issues of Indebtedness which one or more classes
or issues of Indebtedness are in an aggregate principal amount of
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$5,000,000 or more, which failure, in the case of this clause
(b), results in an acceleration of the maturity thereof; or
(vi) one or more judgments, orders or decrees for the
payment of money in excess of $5,000,000, either individually or
in an aggregate amount, shall be entered against the Company or
any of its Subsidiaries or any of their respective properties and
shall not be discharged and there shall have been a period of
thirty (30) days during which a stay of enforcement of such
judgment or order, by reason of pending appeal or otherwise,
shall not be in effect; or
(vii) any of the Financing Documents ceases to be
in full force and effect (other than as a result of termination
pursuant to its terms) or any such Financing Document or any of
its material provisions is declared or asserted to be null and
void or otherwise becomes unenforceable in accordance with its
terms; or
(viii) the Company or any Material Subsidiary of the
Company pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding with
respect to itself,
(B) consents to the entry of an order for relief
against it in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of
it or for all or any material part of its property,
(D) makes a general assignment for the benefit of
its creditors,
(E) consents to or acquiesces in the institution
of bankruptcy or insolvency proceedings against it,
(F) shall generally not pay its debts when such
debts become due or shall admit in writing its
inability to pay its debts generally, or
(G) takes any corporate action in furtherance of
or to facilitate, conditionally or otherwise, any of
the foregoing; or
(ix) a court of competent jurisdiction enters a decree,
judgment or order under any Bankruptcy Law that:
(A) is for relief against the Company or any
Material Subsidiary of the Company in an involuntary
case or proceeding,
(B) appoints a Custodian of the Company or any
Material Subsidiary of the Company for all or
substantially all of its properties, or
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(C) orders the winding-up or liquidation of the
Company or any Material Subsidiary of the Company, and
in each case the order or decree remains unstayed and
in effect for sixty (60) days; or
(x) this Indenture ceases to be in full force and
effect or ceases to give the Trustee, an any material
respect, the liens, rights, powers and privileges purported
to be created thereby, in each case, as determined by a
court of competent jurisdiction.
The Company shall, within sixty (60) days following the end
of each of its first three Fiscal Quarters, and within ninety
(90) days following the end of each of its Fiscal Years, file
with the Trustee an Officers' Certificate certifying that the
Company has performed all of its obligations under this Indenture
in all material respects and that no Event of Default has
occurred during the preceding Fiscal Quarter or Fiscal Year, as
the case may be, or in the event any such Event of Default has
occurred, the facts and circumstances resulting in such Event of
Default. The Company shall promptly upon the occurrence thereof
provide notice to the Trustee of an Event of Default.
SECTION 6.02 Acceleration.
If an Event of Default (other than an Event of Default
specified in clause (viii) or (ix) above with respect to the
Company or any Material Subsidiary of the Company) occurs and is
continuing, then the Trustee or the Holders of at least thirty
percent (30%) in aggregate principal amount of the outstanding
Securities may, by written notice to the Company and the Trustee,
and the Trustee upon the request of the Holders of not less than
thirty percent (30%) in aggregate principal amount of the
outstanding Securities shall, subject in each case to Section
10.02(e), declare the Principal of and accrued and unpaid
interest, if any, on all the Securities on the date of such
declaration to be due and payable immediately (the "Default
Amount"). Upon any such declaration, the Default Amount shall
become due and payable immediately. If an Event of Default
specified in clause (viii) or (ix) above with respect to the
Company occurs and is continuing, then the Default Amount on all
of the Securities shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of
the Trustee or any Holder.
After a declaration of acceleration, the Required Holders
may, by notice to the Trustee, rescind such declaration of
acceleration if all existing Events of Default have been cured or
waived, other than nonpayment of the Default Amount on the
Securities that have become due solely as a result of such
acceleration and if the rescission of acceleration would not
conflict with any judgment, order or decree by a court of
competent jurisdiction. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may, subject to Section 10.02(e), pursue any available remedy by
proceeding at law or in equity to collect the payment of
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Principal of, or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture
as may be required or permitted thereunder.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in
the proceeding. A delay or omission by the Trustee or any
Securityholder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default.
No remedy is exclusive of any other remedy. All available
remedies are cumulative to the extent permitted by law.
SECTION 6.04 Waiver of Past Defaults.
Subject to Sections 6.02, 6.07 and 9.02, the Required
Holders by notice to the Trustee may waive an existing Default or
Event of Default and its consequences, except a Default in the
payment of Principal of or interest on any Security as specified
in clauses (i) and (ii) of Section 6.01 or in respect of any
provision hereof which cannot be modified or amended without the
consent of the Holder so affected pursuant to Section 9.02. When
a Default or Event of Default is so waived, it shall be deemed
cured and ceases to exist, but no such waiver shall extend to any
subsequent or other Default or impair any right consequent
thereon.
SECTION 6.05 Control by Required Holders.
The Required Holders may direct the time, method and place
of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on it
including, without limitation, any remedies provided for in
Section 6.03. Subject to Section 7.01, however, the Trustee may
refuse to follow any direction that conflicts with any law or
this Indenture that the Trustee determines may be unduly
prejudicial to the rights of another Securityholder, or that may
involve the Trustee in personal liability unless the Trustee has
asked for and received indemnification reasonably satisfactory to
it against any loss, liability or expense caused by its following
such direction; provided that the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent
with such direction.
SECTION 6.06 Limitation on Suits.
A Securityholder may not pursue any remedy with respect to
this Indenture or the Securities unless:
(a) the Holder gives to the Trustee notice of a continuing
Event of Default;
(b) Holders of at least thirty percent (30%) in principal
amount of the outstanding Securities make a written request to
the Trustee to pursue the remedy;
(c) such Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or
expense to be incurred in compliance with such request;
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(d) the Trustee does not comply with the request within
thirty (30) days after receipt of the request and the offer of
indemnity; and
(e) during such thirty-(30) day period the Required Holders
do not give the Trustee a direction which, in the opinion of the
Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or
priority over such other Securityholder.
SECTION 6.07 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture,
except as set forth in Article X, the right of any Holder to
receive payment of Principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to
bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without
the consent of such Holder.
SECTION 6.08 Collection Suit by Trustee.
If an Event of Default in payment of Principal or interest
specified in clause (i) or (ii) of Section 6.01 occurs and is
continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company or any other
obligor on the Securities for the whole amount of Principal and
accrued interest remaining unpaid, together with interest on
overdue Principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest,
in each case at the rate per annum borne by the Securities and
such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for the reasonable
compensation, expenses, taxes, disbursements and advances of the
Trustee, its agents and counsel) and the Securityholders allowed
in any judicial proceedings relating to the Company or any other
obligor upon the Securities, any of their respective creditors or
any of their respective property and shall be entitled and
empowered to collect and receive any monies or other securities
or property payable or deliverable upon the conversion or
exchange of the Securities or upon any such claims and to
distribute the same, and any Custodian in any such judicial
proceedings is hereby authorized by each Securityholder to make
such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the
Securityholders, to first pay to the Trustee any amount due to it
for the reasonable compensation, expenses, taxes, disbursements
and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein
contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Securityholder
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any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the
claim of any Securityholder in any such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this Article
VI, it shall pay out the money and other property in the
following order:
First: to the Trustee for amounts due under Section
7.07;
Second: to Holders for Principal and interest owing
under the Securities, ratably, according to the amounts due
and payable on the Securities for Principal, in the
following order of priority: first to any premiums, and
then to interest; and
Third: to the Company or any other obligor on the
Securities, as their interests may appear, or as a court of
competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a
Record Date and payment date for any payment to Securityholders
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 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 pursuant to Section
6.07, or a suit by a Holder or Holders of more than ten percent
(10%) in principal amount of the outstanding Securities.
SECTION 6.12 Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 6.13 Delay or Omission Not Waiver.
No delay or omission by the Trustee or by any Holder of any
Security to exercise any right or remedy arising upon any Event
of Default shall impair the exercise of any such right or remedy
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or constitute a waiver of any such Event of Default. Every right
and remedy given by this Article VI or by law to the Trustee or
to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as
the case may be.
ARTICLE VII.
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this
Indenture and covenants and agrees to perform the same, as herein
expressed.
SECTION 7.01 Duties of Trustee.
(a) If a Default or 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 thereof as a prudent person would
exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of a Default or an Event
of Default:
(i) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and
no covenants or obligations shall be implied in this
Indenture that are adverse to the Trustee.
(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 but need not
verify the accuracy of the contents thereof.
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act, or its
own willful misconduct, except that:
(i) this 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 Trust Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 6.05.
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(d) The Trustee may refuse to perform any duty or exercise
any right or power unless it receives indemnity reasonably
satisfactory to it against any loss, liability or expense.
(e) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(f) 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), (c), (d) and (e) of
this Section 7.01.
(g) The Trustee shall not be liable for interest on any
money or assets received by it except as the Trustee may agree
with the Company, and the Trustee shall not be responsible to
invest such money or assets except at the direction of the
Company. Assets held in trust by the Trustee need not be
segregated from other assets except to the extent required by
law.
SECTION 7.02 Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in
acting or refraining from acting 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
consult with counsel and may require an Officers' Certificate or
an Opinion of Counsel, which shall conform to Sections 11.04 and
11.05 hereof. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon.
(d) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of
any agent (other than the negligence or misconduct of an agent
who is an employee of the Trustee) appointed with due care.
(e) The Trustee shall not be liable for any action that it
takes or omits to take in good faith which it believes to be
authorized or within its rights or powers, provided that the
Trustee's conduct does not constitute negligence or bad faith.
(f) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, notice, request,
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direction, consent, order, bond, debenture, or other paper or
document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled, upon
reasonable notice to the Company, to examine the books, records,
and premises of the Company, personally or by agent or attorney.
(g) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Holders pursuant to the
provisions of this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities which may be incurred by it
in compliance with such request, order 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 Securities and may otherwise deal
with the Company, any Subsidiary of the Company or their
respective Affiliates with the same rights it would have if it
were not Trustee. Any Agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11
hereof.
SECTION 7.04 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Securities. Further, the
Trustee shall not be accountable for the Company's use of the
proceeds from the Securities, nor be responsible for any
statement in the Prospectus or Securities other than the
Trustee's certificate of authentication.
SECTION 7.05 Notice of Default.
If a Default or an Event of Default occurs and is continuing
and after written notice to the Trustee of such Default or Event
of Default is received by the Trustee, the Trustee shall mail to
each Securityholder, as their names and addresses appear on the
Securityholder list described in Section 2.05 hereof, notice of
the Default or Event of Default within thirty (30) days after the
Trustee has received such written notice that a Default or Event
of Default has occurred, unless such Default or Event of Default
shall have been cured or waived. Except in the case of a Default
or an Event of Default in payment of Principal of or interest on,
any Security, and a Default or Event of Default that resulted
from the failure to comply with Section 5.01 hereof, the Trustee
may withhold the notice if and so long as its Board of Directors,
the executive committee of its Board of Directors or a committee
of its directors and/or Trust Officers in good faith determines
that withholding the notice is in the interest of the
Securityholders.
SECTION 7.06 Reports by Trustee to Holders.
If required by law, within sixty (60) days after each May 15
beginning with the May 15 following the date of this Indenture,
the Trustee shall mail to the Holders, at the Company's expense,
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a brief report dated as of such reporting date that complies with
TIA 313(a) (but if no event described in TIA 313(a) has
occurred within the twelve months preceding the reporting date,
no report need be transmitted). The Trustee also shall comply
with TIA 313(b)(2) to the extent applicable. The Trustee shall
also transmit by mail all reports as required by TIA 313(c).
A copy of each report at the time of its mailing to Holders
shall be filed with the SEC and each stock exchange or market on
which the Securities are listed or quoted. The Company shall
notify the Trustee when the Securities are listed on any stock
exchange or quoted on any market.
SECTION 7.07 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time
reasonable compensation for all services rendered by it
hereunder. Any law on compensation of a trustee of an express
trust shall not limit the Trustee's compensation. The Company
shall reimburse the Trustee upon request for all tax obligations
imposed on the Trustee related to this Indenture and all
reasonable out-of-pocket expenses incurred or made by it. Such
expenses shall include the reasonable fees and expenses of the
Trustee's agents, compensation and counsel.
The Company shall indemnify the Trustee and its agents for,
and hold them harmless against, any loss, liability or expense
(including reasonable attorneys' fees and expenses) incurred by
them without negligence, bad faith or willful misconduct on their
part, arising out of or in connection with the administration of
this trust including the reasonable costs and expenses of
enforcing this Indenture against the Company (including Section
7.07 hereof) and of defending themselves against any claim
(whether asserted by any Securityholder or the Company) or
liability in connection with the exercise or performance of any
of their rights, powers or duties hereunder. The Trustee shall
notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. The Company need not
pay for any settlement made without its written consent. The
Company need not reimburse any expense or indemnify against any
loss or liability to the extent incurred by the Trustee through
its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section
7.07, the Company and the Holders agree that the Trustee shall
have a lien prior to the Securities on all assets or money held
or collected by the Trustee, in its capacity as Trustee.
When the Trustee incurs expenses or renders services after
an Event of Default specified in Section 6.01(viii) or (ix)
occurs, such expenses and the compensation for such services are
intended to constitute expenses of administration under any
Bankruptcy Law. This Section 7.07 shall survive the termination
of this Indenture.
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
7.08.
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The Trustee may resign by so notifying the Company in
writing at least thirty (30) days prior to the date of the
proposed resignation; provided, however, that no such resignation
shall be effective until a successor Trustee has accepted its
appointment pursuant to this Section 7.08. The Required Holders
may remove the Trustee by so notifying the Company and the
Trustee and may appoint a successor Trustee with the Company's
consent. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.01 or 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under
any Bankruptcy Law;
(c) a receiver Custodian or other 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 notify
each Holder of such event and shall promptly appoint a successor
Trustee. Within one (1) year after the successor Trustee takes
office, the Required Holders may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of
its appointment to the retiring Trustee and to the Company.
Immediately after that, the retiring Trustee shall transfer all
property held by it as Trustee to the successor Trustee, subject
to the lien provided in Section 7.07, the resignation or removal
of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Securityholder.
If a successor Trustee does not take office within sixty
(60) days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company or the Holders of at least ten
percent (10%) in principal amount of the outstanding Securities
may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Security holder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor
Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall
continue for the benefit of the retiring Trustee.
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SECTION 7.09 Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into,
or transfers all or substantially all of its corporate trust
business to, another corporation, the resulting, surviving or
transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise
eligible hereunder, be the successor Trustee.
SECTION 7.10 Eligibility: Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA 310(a)(1) and 310(a)(5). The Trustee (or in
the case of a corporation included in a bank holding company
system, the related bank holding company) shall always have a
combined capital and surplus of at least $150,000 as set forth in
its most recent published annual report of condition. In
addition, if the Trustee is a corporation included in a bank
holding company system, the Trustee, independently of such bank
holding company, shall meet the capital requirements of TIA
310(a)(2). The Trustee shall comply with TIA 310(b) including
the optional provision permitted by the second sentence of TIA
310(b)(9); provided, however, that there shall be excluded from
the operation of TIA 310(b)(1) any indenture or indentures under
which other securities, or certificates of interest or
participation in other securities, of the Company are
outstanding, if the requirements for such exclusion set forth in
TIA 310(b)(1) are met.
SECTION 7.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA 311(a), excluding any
creditor relationship listed in TIA 311(b). A Trustee who has
resigned or been removed shall be subject to TIA 311(a) to the
extent indicated therein.
ARTICLE VIII.
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01 Discharge of Indenture.
This Indenture shall cease to be of further effect (except
that the Company's obligations under Sections 7.07, 8.04 and 8.05
shall survive) as to all outstanding Securities when all such
Securities theretofore authenticated and delivered (except lost,
stolen or destroyed Securities which have been replaced or paid
and Securities for the payment of which money has theretofore
been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from
such trust) have been delivered to the Trustee for cancellation
and the Company has paid all sums payable hereunder. In
addition, the Company may terminate all of its obligations under
this Indenture (except the Company's obligations under Sections
7.07, 8.04 and 8.05) if:
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(a) all Securities have otherwise become due and payable in
accordance with the terms of this Indenture (including the
provisions of Article X);
(b) the Company shall have irrevocably deposited or caused
to be deposited with the Trustee or a trustee satisfactory to the
Trustee, under the terms of an irrevocable trust agreement in
form and substance satisfactory to the Trustee, as trust funds in
trust solely for the benefit of the Holders for that purpose,
U.S. Legal Tender sufficient to pay Principal of and interest, if
any, on the outstanding Securities; provided that the Trustee
shall have been irrevocably instructed to apply such U.S. Legal
Tender to the payment of said Principal and interest with respect
to the Securities;
(c) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent providing for the termination of
the Company's obligation under the Securities and this Indenture
have been complied with; and
(d) the Company shall have paid all sums payable by it
hereunder.
Notwithstanding the foregoing paragraph, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 4.02,
7.07, 7.08, 8.03, 8.04 and 8.05 hereof shall survive until the
Securities are no longer outstanding. After the Securities are
no longer outstanding, the Company's obligations in Sections
7.07, 8.04 and 8.05 hereof shall survive.
After such delivery or irrevocable deposit the Trustee upon
request shall acknowledge in writing the discharge of the
Company's obligations under the Securities and this Indenture
except for those surviving obligations specified above.
SECTION 8.02 Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution, at
any time, with respect to the Securities, elect to have either
paragraph (b) or paragraph (c) below be applied to the
outstanding Securities upon compliance with the conditions set
forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (b), the Company shall be
deemed to have been released and discharged from its obligations
with respect to the outstanding Securities on the date the
conditions set forth in paragraph (d) below are satisfied
(hereinafter, "legal defeasance"). For this purpose, such legal
defeasance means that the Company shall be deemed to have paid
and discharged the entire indebtedness represented by the
outstanding Securities, which shall thereafter be deemed to be
"outstanding" only for the purposes of paragraph (e) below and
the other Sections of and matters under this Indenture referred
to in (i) and (ii) below, and to have satisfied all its other
obligations under such Securities and this Indenture insofar as
such Securities are concerned (and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of
Holders of outstanding Securities to receive solely from the
trust fund described in paragraph (d) below and as more fully set
forth in such paragraph, payments in respect of the Principal of
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and interest on such Securities when such payments are due, (ii)
the Company's obligations with respect to such Securities under
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.02, 7.07, 7.08, 8.03,
8.04 and 8.05, (iii) the rights, powers, trusts, duties and
immunities of the Trustee hereunder, and (iv) this Section 8.02.
Subject to compliance with this Section 8.02, the Company may
exercise its option under this paragraph (b) notwithstanding the
prior exercise of its option under paragraph (c) below with
respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (c), the Company shall be
released and discharged from its obligations under any covenant
contained in Article V and in Sections 4.10 through 4.16 with
respect to the outstanding Securities on and after the date the
conditions set forth in paragraph (d) below are satisfied
(hereinafter, "covenant defeasance"), and the Securities shall
thereafter be deemed to be not "outstanding" for the purpose 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. For this purpose, such covenant
defeasance means that, with respect to the outstanding
Securities, 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, but, except as specified above, the remainder
of this Indenture and such Securities shall be unaffected
thereby.
(d) The following shall be the conditions to application of
either paragraph (b) or paragraph (c) above to the outstanding
Securities:
(i) the Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee
satisfying the requirements of Section 7.10 who shall agree
to comply with the provisions of this Section 8.02
applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) U.S. Legal Tender in an
amount, or (B) U.S. Government Obligations which through the
scheduled payment of Principal of and interest in respect
thereof in accordance with their terms will provide (without
giving effect to the reinvestment of any interest thereon),
not later than one (1) day before the due date of any
payment, U.S. Legal Tender in an amount, or (C) a
combination thereof, sufficient, in the opinion of a firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and
discharge and which shall be applied by the Trustee (or
other qualifying trustee) to pay and discharge Principal of
and interest, on the outstanding Securities on the Maturity
Date of such principal or installment of principal or
interest in accordance with the terms of this Indenture and
of such Securities; provided, however, that the Trustee (or
other qualifying trustee) shall have received an irrevocable
Company Order instructing the Trustee (or other qualifying
trustee) to apply such U.S. Legal Tender or the proceeds of
such U.S. Government Obligations to said payments with
respect to the Securities;
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(ii) no Default or Event of Default or event which with
notice or lapse of time or both would become a Default or an
Event of Default with respect to the Securities shall have
occurred and be continuing on the date of such deposit or,
in so far as Sections 6.01(viii) and (ix) are concerned, at
any time during the period ending on the 91st day after the
date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration
of such period);
(iii) such legal defeasance or covenant defeasance
shall not result in a breach or violation of, or constitute
a Default or Event of Default under, this Indenture or any
other agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which any of them is
bound;
(iv) in the case of an election under paragraph (b)
above, the Company shall have delivered to the Trustee an
Opinion of Counsel stating that (x) the Company has received
from, or there has been published by, the Internal Revenue
Service a ruling, or (y) 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 shall confirm that, the Holders of the
outstanding Securities 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;
(v) in the case of an election under paragraph (c)
above, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of the
outstanding Securities 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;
(vi) in the case of an election under either paragraph
(b) or (c) above, an Opinion of Counsel to the effect that,
(x) the trust funds will not be subject to any rights of any
other holders of any other Indebtedness of the Company after
the 91st day following the deposit, and (y) after the 91st
day following the deposit, the trust funds will not be
subject to the effect of any applicable Bankruptcy Law;
(vii) the Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that (A) all conditions precedent provided for
relating to either the legal defeasance under paragraph (b)
above or the covenant defeasance under paragraph (c) above,
as the case may be, have been complied with; and (B) if any
other Indebtedness of the Company (including, without
limitation, the Senior Indebtedness) shall then be
outstanding, such legal defeasance will not violate the
provisions of the agreements or instruments evidencing such
Indebtedness; and
(viii) 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
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the Holders of the Securities over other creditors of the
Company or with the intent of defeating, hindering, delaying
or defrauding creditors of the Company or others.
(e) All money and U.S. Government Obligations (including
the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this paragraph
(e), the "Trustee") pursuant to paragraph (d) above in respect of
the outstanding Securities shall be held in trust and applied by
the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through
any Paying Agent as the Trustee may determine, to the Holders of
such Securities of all sums due and to become due thereon in
respect of Principal, 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 U.S.
Government Obligations deposited pursuant to paragraph (d) above
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 Securities.
Anything in this Section 8.02 to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company
from time to time upon the request, in writing, by the Company
any money or U.S. Government Obligations held by it as provided
in paragraph (d) above which, in the opinion of a firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of
the amount thereof which would then be required to be deposited
to effect an equivalent legal defeasance or covenant defeasance.
SECTION 8.03 Application of Trust Money.
The Trustee shall hold in trust U.S. Legal Tender or U.S.
Government Obligations deposited with it pursuant to Sections
8.01 and 8.02, and shall apply the deposited U.S. Legal Tender
and the U.S. Legal Tender from U.S. Government Obligations in
accordance with this Indenture to the payment of Principal of and
interest on the Securities.
SECTION 8.04 Repayment to Company.
Subject to Sections 7.07, 8.01 and 8.02, the Trustee shall,
subject to Article X, promptly pay to the Company, upon receipt
by the Trustee of an Officers' Certificate, any excess money,
determined in accordance with Sections 8.02(d)(i) and (e), held
by it at any time. The Trustee and the Paying Agent shall pay to
the Company upon receipt by the Trustee or the Paying Agent, as
the case may be, of an Officers' Certificate, any money held by
it for the payment of Principal or interest that remains
unclaimed for two (2) years, provided, however, that the Trustee
and the Paying Agent before being required to make any payment
may, but need not, at the expense of the Company, cause to be
published once in a newspaper of general circulation in The City
of New York or mail to each Holder entitled to such money notice
that such money remains unclaimed and that after a date specified
therein, which shall be at least thirty (30) days from the date
of such publication or mailing, any unclaimed balance of such
money then remaining will be repaid to the Company. After
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payment to the Company, Securityholders entitled to money must
look solely to the Company for payment as general creditors
unless an applicable abandoned property law designates another
person.
SECTION 8.05 Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S.
Legal Tender or U.S. Government Obligations in accordance with
this Indenture by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application,
then and only then the Company's obligations under this Indenture
and the Securities shall be revived and reinstated as though no
deposit had been made pursuant to this Indenture until such time
as the Trustee is permitted to apply all such U.S. Legal Tender
or U.S. Government Obligations in accordance with this Indenture;
provided, however, that if the Company has made any payment of
Principal of or interest on of any Securities because of the
reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such
payment from the U.S. Legal Tender or U.S. Government Obligations
held by the Trustee or Paying Agent.
SECTION 8.06 Acknowledgment of Discharge by Trustee.
After (i) the conditions of Section 8.02 have been
satisfied, (ii) the Company has paid or caused to be paid all
other sums payable hereunder by the Company, and (iii) the
Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent
referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee
upon written request shall acknowledge in writing the discharge
of the Company's obligations under this Indenture except for
those surviving obligations specified in Section 8.01.
ARTICLE IX.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01 Without Consent of Holders.
The Company, when authorized by its Board Resolution, and
the Trustee, together, may without notice to or the consent of
any Securityholder amend, waive or supplement this Indenture or
the Securities:
(i) to cure any ambiguity, defect or inconsistency or to
make any other provisions with respect to matters or questions
arising under this Indenture; provided that such action does not
adversely affect the rights of any Holder;
(ii) to add to the covenants of the Company for the benefit
of the Holders, or to surrender any right or power herein
conferred upon the Company, or to provide any additional rights
or benefits to the Holders;
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(iii) to evidence the succession of another person to
the Company, and the assumption by any such successor of the
obligations of the Company herein and in the Securities in
accordance with Article V;
(iv) to provide for uncertificated Securities in addition to
or in place of certificated Securities;
(v) to make any other change that does not adversely affect
the rights of any Securityholders hereunder;
(vi) to comply with the TIA; or
(vii) to comply with any requirements of the SEC in
connection with the qualification of this Indenture under the
TIA;
provided that the Company has delivered to the Trustee an Opinion
of Counsel and an Officers' Certificate, each stating that such
amendment or supplement complies with the provisions of this
Section 9.01.
SECTION 9.02 With Consent of Holders.
Subject to Section 6.07, the Company when authorized by its
Board Resolution, and the Trustee, together, with the written
consent of the Required Holders, may amend or supplement this
Indenture or the Securities, without notice to any other
Securityholders. However, without the consent of each
Securityholder affected, no amendment, supplement or waiver,
including a waiver pursuant to Section 6.04, may:
(i) reduce the principal amount of any Security or premium,
if any, with respect thereto;
(ii) change the Maturity Date of, or alter the redemption or
repurchase or other provisions of the Securities, in a manner
that adversely affects the rights of any Holder;
(iii) reduce the percentage in principal amount
outstanding of Securities which must consent to an amendment,
supplement or waiver or consent to take any action under this
Indenture or the Securities;
(iv) impair the right to institute suit for the enforcement
of any payment on or with respect to the Securities;
(v) make any changes in the provisions concerning waivers
of Defaults or Events of Default by Holders of the Securities or
the rights of Holders to recover the principal of, interest on,
any Security;
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(vi) make any change in or affecting the ranking of the
Securities with respect to any other obligation of the Company or
any Subsidiary in a way that adversely affects the rights of any
Holder;
(vii) reduce the interest rate or extend the time for
payment of interest, if any, on the Securities;
(viii) make the principal of, premium, if any, or the
interest on, any Security payable with anything, at any place of
payment or in any manner other then as provided for in this
Indenture and the Security as in effect on the date hereof; or
(ix) make any changes in this Section 9.02 in a manner that
adversely affects the rights of any Holder.
It shall not be necessary for the consent of the Holders
under this Section to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if
such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders
affected thereby a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such amendment, supplement
or waiver.
SECTION 9.03 Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or
the Securities shall comply with the TIA as then in effect.
SECTION 9.04 Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective,
a consent to it by a Holder is a continuing consent by the Holder
and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any
Security. However, prior to becoming effective, any such Holder
or subsequent Holder may revoke the consent as to his Security or
portion of his Security by notice to the Trustee or the Company
if such notice is received by the Trustee or the Company before
the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of
Securities have consented (and not theretofore revoked such
consent) to the amendment, supplement or waiver. Notwithstanding
the above, nothing in this paragraph shall impair the right of
any Securityholder under 316(b) of the TIA.
The Company may, but shall not be obligated to, fix a Record
Date for the purpose of determining the Holders entitled to
consent to any amendment, supplement or waiver. If a Record Date
is fixed, then notwithstanding the last sentence of the
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immediately preceding paragraph, those persons who were Holders
at such Record Date (or their duly designated proxies), and only
those persons, shall be entitled to revoke any consent previously
given, whether or not such persons continue to be Holders after
such Record Date. No such consent shall be valid or effective
for more than ninety (90) days after such Record Date unless
consents from Holders of the principal amount of Securities
required hereunder for such amendment, supplement or waiver to be
effective shall have been given and not revoked within such
ninety (90) day period.
After an amendment, supplement or waiver becomes effective,
it shall bind every Securityholder, unless it makes a change
described in any of clauses (i) through (x) of Section 9.02, in
which case, the amendment, supplement or waiver shall bind only
each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security;
provided, however, that any such waiver shall not impair or
affect the right of any Holder to receive payment of Principal of
and interest on a Security, on or after the respective dates set
for such amounts to become due and payable expressed in such
Security, or to bring suit for the enforcement of any such
payment on or after such respective dates.
SECTION 9.05 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to
deliver the Security to the Trustee. The Trustee may place an
appropriate notation on the Security about the changed terms and
return the Security to the Holder. Alternatively, if the Company
or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new
Security that reflects the changed terms. Failure to make the
appropriate notation or issue a new Security shall not affect the
validity and effect of such amendment, supplement or waiver.
SECTION 9.06 Trustee To Sign Amendments, Etc.
Subject to the next sentence, the Trustee shall execute any
amendment, supplement or waiver authorized pursuant to this
Article IX, provided, however, that the Trustee may, but shall
not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or
immunities under this Indenture. The Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an
Opinion of Counsel and an Officers' Certificate each stating that
the execution of any amendment, supplement or waiver is
authorized or permitted by this Indenture.
ARTICLE X.
SUBORDINATION
SECTION 10.01 Securities Subordinated to Senior Indebtedness.
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The Company covenants and agrees, and each Holder (and each
Person holding any Security, whether upon original issue, or upon
transfer, assignment or exchange thereof) of the Securities, by
its acceptance thereof, likewise covenants and agrees that: (i)
all Securities shall be issued subject to the provisions of this
Article X; (ii) the payment of the Principal of, and interest on,
the Securities by the Company shall, to the extent and in the
manner herein set forth, be subordinated and junior in right of
payment to the prior payment in full, in cash or Cash
Equivalents, of the Senior Indebtedness; and (iii) the
subordination is for the benefit of, and shall be relied upon and
be enforceable directly by, the holders of Senior Indebtedness.
The Company and each Holder hereby agree not to amend, modify or
change in any manner any provision of this Article X (and any
defined term used in this Article X) so that the terms and
conditions hereof, as so amended, modified or changed, are less
favorable to the holders of the Senior Indebtedness and their
Representative than the terms hereof on the Issue Date, without
the prior written consent of the necessary holders of Senior
Indebtedness.
SECTION 10.2 Suspension of Payment on Securities in Certain
Events.
(a) If (i) any default occurs and is continuing after the
expiration of any applicable cure period (each a "Senior Debt
Payment Default"), in the payment when due, whether at maturity,
upon any redemption, by declaration or otherwise, of any
Principal of, or interest on the Senior Indebtedness, or fees or
other amounts due under the terms of the Senior Indebtedness, and
(ii) the Representative of the holders of the Senior Indebtedness
gives written notice (a "Default Notice") of such Senior Debt
Payment Default to the Trustee, then no payment of any kind or
character shall be made by or on behalf of the Company or any
other Person on its behalf with respect to any Principal of, or
interest on or fees or other amounts due with respect to, the
Securities or to redeem, repurchase or otherwise acquire any of
the Securities for cash or property or otherwise, until such
payment is made in full or Senior Payment Default has been cured,
waived or has ceased to exist.
(b) If (i) any event of default other than a Senior Debt
Payment Default (a "Senior Debt Other Default") occurs and is
continuing with respect to the Senior Indebtedness, as such
Senior Debt Other Default is defined in the instrument creating
or evidencing such Senior Indebtedness, permitting the holders of
such Senior Indebtedness to accelerate the maturity thereof, and
(ii) the Representative of the holders of the Senior Indebtedness
gives a Default Notice to the Trustee, then until the earlier of
(A) the Trustee receiving notice from the Representative of the
holders of the Senior Indebtedness terminating the Blockage
Period (as defined below), (B) the date on which the Senior Debt
Other Default giving rise to the Blockage Period is cured or
waived, or (C) 180 days after the delivery of such Default Notice
(the "Blockage Period"), neither the Company nor any other Person
on its behalf shall make any payment of any kind or character
with respect to any Principal of, or interest on, or fees or
other amounts due with respect to the Securities, or redeem,
repurchase or otherwise acquire any of the Securities for cash or
property or otherwise; provided, however, that if such Senior
Indebtedness has not been accelerated or become the subject of
judicial proceedings within the Blockage Period, then the Company
shall resume making any and all required payments in respect of
the Securities. At the expiration or termination, as applicable,
of such Blockage Period the Company shall promptly pay to the
Trustee all sums not paid during such Blockage Period as a result
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of this subsection (b). Notwithstanding anything herein to the
contrary, in no event will a Blockage Period extend beyond 180
days from the date of the Senior Debt Other Default and only one
such Blockage Period may be commenced within any period of 360
consecutive days. No Senior Debt Other Default or event which,
with the giving of notice and/or lapse of time or otherwise,
would become a Senior Debt Other Default which existed on the
date of the commencement of such Blockage Period, may be used as
the basis for declaring any subsequent Blockage Period unless
such Senior Debt Other Default or event, as the case may be,
shall in the interim have been cured or waived for a period of
not less than ninety (90) consecutive days.
(c) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such
payment is prohibited by Sections 10.02(a) and (b), then unless
and until such payment is no longer prohibited by this Section
10.02, such payment shall be held in trust for the benefit of,
and shall as soon practicable be paid over or delivered to, the
Representative of the holders of the Senior Indebtedness. No
amount paid by the Company, or any other Person on its behalf, to
the Trustee or any Holder of the Securities, and paid over by
such Person to the Representative of the holders of the Senior
Indebtedness pursuant to this Article X shall, as between the
Company and the Holders of the Securities, be deemed a payment by
the Company to or on account of any payments due in respect of
the Securities.
(d) The Company shall give prompt written notice to the
Trustee of any Senior Debt Payment Default or any Senior Debt
Other Default, under the Senior Indebtedness or under any
agreement pursuant to which Senior Indebtedness may have been
issued. Failure to give such notice shall not affect the
subordination of the Securities to the Senior Indebtedness
provided in this Article X.
(e) Nothing contained in this Article X shall limit the
right of the Trustee or the Holders of Securities to take any
action to accelerate the maturity of the Securities pursuant to
Section 6.02 or to pursue any rights or remedies available under
this Indenture or otherwise; provided that the Trustee or the
Holders shall, prior to commencing any such action, provide the
Representative of the holders of the Senior Indebtedness with
five (5) days prior written notice of its intention to take such
action; provided further that all Senior Indebtedness thereafter
due or declared to be due shall first be paid in full, in cash or
Cash Equivalents, before the Holders are entitled to receive any
payment of any kind or character with respect to Principal of, or
interest on or fees or other amounts due with respect to, the
Securities.
SECTION 10.03 Securities Subordinated to Prior Payment of All
Senior Indebtedness on Dissolution, Liquidation or Reorganization
of Company.
(a) Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or
securities, to creditors upon any liquidation, dissolution,
winding-up, reorganization, assignment for the benefit of
creditors or marshaling of assets of the Company or in a
bankruptcy, reorganization, insolvency, receivership or other
similar proceeding relating to the Company or its property,
whether voluntary or involuntary, all Senior Indebtedness shall
first be paid in full in, cash or Cash Equivalents (or such
payment shall be duly provided for), before any payment or
distribution of any kind or character is made on account of any
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Principal of, or interest on, or fees or other amounts due with
respect to, the Securities, or for the acquisition of any of the
Securities for cash or property or otherwise. Upon any such
dissolution, winding-up, liquidation, reorganization,
receivership or similar proceeding, any payment or distribution
of assets of the Company of any kind or character, whether in
cash, property or securities, to which the Holders of the
Securities or the Trustee under this Indenture would be entitled,
except for the provisions hereof, shall be paid by the Company or
by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by
the Holders or by the Trustee under this Indenture if received by
them, to the Representative of the holders of the Senior
Indebtedness, for application to the payment of Senior
Indebtedness remaining unpaid until all such Senior Indebtedness
has been paid in full, in cash or Cash Equivalents, after giving
effect to any concurrent payment, distribution or provision
therefor to or for the holders of Senior Indebtedness.
Notwithstanding anything herein to the contrary, the Company's
obligations to the Trustee under Section 7.07 shall at all times
be deemed Senior Indebtedness.
(b) To the extent any payment of Senior Indebtedness
(whether by or on behalf of the Company, as proceeds of security
or enforcement of any right of setoff or otherwise) is declared
to be fraudulent or preferential, set aside or required to be
paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then, if such
payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar
Person, the Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment has not occurred.
(c) The consolidation of the Company with, or the merger of
the Company with or into, another corporation or the liquidation
or dissolution of the Company following the conveyance or
transfer of all or substantially all of its assets, to another
corporation upon the terms and conditions provided in Article V
hereof and as long as permitted under the terms of the Senior
Indebtedness shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section if
such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, assume in writing, to the
reasonable satisfaction of the Representative, the Company's
obligations hereunder in accordance with Article V hereof.
(d) The Company shall give prompt written notice to the
Trustee of any dissolution, winding-up, liquidation or
reorganization of the Company, but failure to give such notice
shall not affect the subordination of the Securities to the
Senior Indebtedness provided in this Article X.
SECTION 10.04 Holders to be Subrogated to Rights of Holders of
Senior Indebtedness.
Subject to the payment in full, in cash or Cash Equivalents,
of the Senior Indebtedness, the Holders shall be subrogated to
the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property or securities of the
Company applicable to the Senior Indebtedness until the
Securities shall be paid or converted in full. For the purposes
of such subrogation, no such payments or distributions of cash,
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property or securities of the Company to the holders of the
Senior Indebtedness by or on behalf of the Company or by or on
behalf of the Holders by virtue of this Article X which otherwise
would have been made to the Holders shall, as between the Company
and the Holders, be deemed to be a payment by the Company to or
on account of the Senior Indebtedness, it being understood that
the provisions of this Article X are and are intended solely for
the purpose of defining the relative rights of the Holders of the
Securities, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
SECTION 10.05 Obligations of the Company Unconditional.
Nothing contained in this Article X or elsewhere in this
Indenture or in the Securities, is intended to or shall impair,
as between the Company and the Holders, the obligation of the
Company, which is absolute and unconditional, to pay to the
Holders the principal of, and interest on, the Securities as and
when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Company other than the
holders of the Senior Indebtedness, nor shall anything herein or
therein prevent the Trustee or any Holder from exercising all
remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article
X of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise
of any such remedy. Upon any payment or distribution of cash,
property or securities of the Company referred to in this Article
X, the Trustee, subject to the provisions of Sections 7.01 and
7.02, and the Holders shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which any
liquidation, dissolution, winding-up or reorganization
proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee or agent or other
Person making any payment or distribution to the Trustee or to
the Holders for the purpose of ascertaining (i) the Persons
entitled to participate in such payment or distribution, (ii) the
holders of Senior Indebtedness and other Indebtedness of the
Company, (iii) the amount thereof or payable thereon, (iv) the
amount or amounts paid or distributed thereon, and (iv) all other
facts pertinent thereto or to this Article X. Nothing in this
Article X shall apply to the claims of, or payments to, the
Trustee under or pursuant to Section 7.07. The Trustee, subject
to Section 1.01, shall be entitled to rely on the delivery to it
of a written notice by a Person representing himself or itself to
be the Representative of the holders of the Senior Indebtedness.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a
Representative of the holders of the Senior Indebtedness, the
Trustee may request such Person to furnish evidence thereof to
the reasonable satisfaction of the Trustee, and if such evidence
is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to right of such Person
to receive such payment on behalf of the holders of the Secured
Indebtedness.
SECTION 10.06 Trustee Entitled to Assume Payments Not Prohibited
in Absence of Notice.
The Company shall give prompt written notice to the Trustee
of any fact known to the Company which would prohibit the making
of any payment to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article X. Regardless of
anything to the contrary contained in this Article X or elsewhere
in this Indenture, the Trustee shall not be charged with
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knowledge of the existence of any Senior Debt Payment Default or
Senior Debt Other Default or of any other facts which would
prohibit the making of any payment to or by the Trustee unless
and until the Trustee shall have received notice in writing from
the Company, or from a holder of Senior Indebtedness or a
Representative thereof, together with proof satisfactory to the
Trustee of such holding of Senior Indebtedness or of the
authority of such Representative, and, prior to the receipt of
any such written notice, the Trustee shall be entitled to assume
(in the absence of actual knowledge to the contrary), subject to
the provisions of Section 7.01 and 7.02 that no such facts exist.
SECTION 10.07 Application by Trustee of Assets Deposited with
It.
U.S. Legal Tender or U.S. Government Obligations deposited
in trust with the Trustee pursuant to and in accordance with
Sections 8.01 and 8.02 shall be for the sole benefit of the
Holders of the Securities and, to the extent allocated for the
payment of Securities, shall not be subject to the subordination
provisions of this Article X. Otherwise, any deposit of assets,
property or securities by or on behalf of the Company with the
Trustee or any Paying Agent (whether or not in trust) for the
payment of Principal of, or interest on, any Securities shall be
subject to the provisions of this Article X; provided, however,
that if prior to the second Business Day preceding the date on
which by the terms of this Indenture any such assets may become
distributable for any purpose (including, without limitation, the
payment of either Principal of, or interest on, any Security) the
Trustee or such Paying Agent shall not have received with respect
to such assets the notice provided for in Section 10.06, then the
Trustee or such Paying Agent shall have full power and authority
to receive such assets and to apply the same to the purpose for
which they were received, and shall not be affected by any notice
to the contrary received by it on or after such date. Nothing
contained in this Section 10.07 shall limit the right of the
holders of Senior Indebtedness to recover payments as
contemplated by this Article X.
SECTION 10.08 No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at
any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder, or by any non-
compliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of
this Section 10.08, the holders of Senior Indebtedness may, at
any time and from time to time, without the consent of or notice
to the Trustees or the Holders, without incurring responsibility
to the Holders and without impairing or releasing the
subordination provided in this Article X or the obligations
hereunder of the Holders to the holders of Senior Indebtedness,
do any one or more of the following: (1) change the manner,
place, terms or time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (2)
sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (3)
release any Person liable in any manner for the collection or
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payment of Senior Indebtedness; and (4) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 10.09 Holders Authorize Trustee to Effectuate
Subordination of Notes.
Each Holder of the Securities by such Holders' acceptance
thereof authorizes and expressly directs the Trustee on his
behalf to take such action as may be necessary or appropriate to
effectuate, as between the Holders and the holders of Senior
Indebtedness, the subordination provisions contained in this
Article X, and appoints the Trustee such Holders' attorney-in-
fact for such purpose, including, in the event of any
liquidation, dissolution, winding-up, reorganization, assignment
for the benefit of creditors or marshaling of assets of the
Company (whether in bankruptcy, insolvency or receivership
proceedings or upon assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business and assets
of the Company, the immediate filing of a claim for the unpaid
balance of such Holder's Securities in the form required in said
proceedings and cause said claim to be approved. If the Trustee
does not file a proper claim or proof of debt in the form
required in such proceeding prior to thirty (30) days before the
expiration of the time to file such claim or proof, then any of
the holders of the Senior Indebtedness or their Representative is
hereby authorized, but is not obligated, to file an appropriate
claim for and on behalf of the Holders of said Securities.
Nothing herein contained shall be deemed to authorize the Trustee
or the holders of Senior Indebtedness or their Representative to
authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder
thereof, or to authorized the Trustee or the holders of Senior
Indebtedness or their Representative to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 10.10 Right of Trustee to Hold Senior Indebtedness.
The Trustee and any agent of the Company shall be entitled
to all the rights set forth in this Article X with respect to any
Senior Indebtedness which may at any time be held by it in its
individual or any other capacity to the same extent as any other
holder of Senior Indebtedness and nothing in this Indenture shall
deprive the Trustee or any such agent of any of its rights as
such holder.
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this
Article X, and no implied covenants or obligations with respect
to the holders of Senior Indebtedness shall be read into this
Indenture against the Trustee.
Whenever a distribution is to be made or a notice given to
holders or owners of Senior Indebtedness, the distribution will
be made and the notice will be given to their Representative.
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SECTION 10.11 This Article X Not To Prevent Events of Default.
The failure to make a payment on account of Principal of, or
interest on, the Securities by reason of any provision of this
Article X will not be construed as preventing the occurrence of
an Event of Default.
Nothing contained in this Article X shall limit the right of
the Trustee or the Holders of the Securities to take any action
to accelerate the maturity of the Securities pursuant to Article
VI or to pursue any rights or remedies hereunder or under
applicable law, subject to the rights, if any, under this Article
X of the holders, from time to time, of Senior Indebtedness.
SECTION 10.12 No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness, and it undertakes to perform
or observe such of its covenants and obligations as are
specifically set forth in this Article X, and no implied
covenants or obligations with respect to the Senior Indebtedness
shall be read into this Indenture against the Trustee. The
Trustee shall not be liable to any such holders (other than for
its willful misconduct or gross negligence) if it shall pay over
or deliver to the Holders or the Company or any other Person
money or assets in compliance with the terms of this Indenture.
Nothing in this Section 10.12 shall affect the obligation of any
Person other than the Trustee to hold such payment for the
benefit of, and to pay such payment over to, the holders of
Senior Indebtedness or their Representative.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.01 TIA Controls.
If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be included
in this Indenture by the TIA, the required provision shall
control.
SECTION 11.02 Notices.
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, or
overnight courier addressed as follows:
if to the Company: IBF VI - Participating Income Fund
1733 Connecticut Avenue, NW
Washington, DC 20009
Attention: Simon A. Hershon, President
Fax: (202) 588-5088
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with a copy to: Lehman, Jensen & Donahue, L.C.
620 Judge Building
8 East Broadway
Salt Lake City, UT 84111
Attention: Mark E. Lehman, Esq.
Fax: (801) 363-1715
if to the Trustee: Continental Stock Transfer & Trust
Company
2 Broadway
New York, NY 10004
Attention: Corporate Trust Department
Fax: (212) 509-4000
Each of the Company and the Trustee by written notice to
each other may designate additional or different addresses for
notices. Any notice or communication to the Company or the
Trustee shall be deemed to have been given or made as of the date
so delivered, if personally delivered; when answered back, if
telexed; when receipt is acknowledged, if faxed; five (5)
calendar days after mailing, if sent by registered or certified
mail, postage prepaid (except that a notice of change of address
shall not be deemed to have been given until actually received by
the addressee); 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 mailed to a Securityholder,
including any notice delivered in connection with TIA 310(b),
TIA 313(c), TIA 314(a) and TIA 315(b) shall be mailed to him
by first class mail or other equivalent means at his address as
it appears on the registration books of the Registrar and shall
be sufficiently given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a
Securityholder or any defect in it shall not affect its
sufficiency with respect to other Securityholders. If a notice
or communication is mailed in the manner provided above, it is
duly given, whether or not the addressee receives it.
SECTION 11.03 Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA 312(b) with
other Securityholders with respect to their rights under this
Indenture or the Securities. The Company, the Trustee, the
Registrar and any other person shall have the protection of TIA
312(c).
SECTION 11.04 Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the
Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee at the request of the Trustee:
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(a) an Officers' Certificate (in form and substance
reasonably satisfactory to the Trustee) stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action
have been complied with; and
(b) an Opinion of Counsel (in form and reasonably
satisfactory to the Trustee) stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with
a condition or covenant provided for in this Indenture 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 has
made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of
each such person, such condition or covenant has been complied
with; provided, however, that, with respect to certain matters of
fact not involving any legal conclusion, an Opinion of Counsel
may rely on an Officers' Certificate or certificates of public
officials.
SECTION 11.06 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make
reasonable rules and set reasonable requirements for its
functions.
SECTION 11.07 Legal Holidays.
If a payment date is a Legal Holiday at such place, payment
may be made at such place on the next succeeding day that is not
a Legal Holiday, and no interest shall accrue for the intervening
period.
SECTION 11.08 Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE
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PARTIES HERETO AGREE TO IRREVOCABLY SUBMIT TO THE JURISDICTION OF
ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE
AND THE SECURITIES, AND IRREVOCABLY ACCEPT FOR THEMSELVES AND IN
RESPECT OF THEIR PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO
SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH
THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OR THAT
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
SECTION 11.09 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company or any of its
Subsidiaries, except to the extent necessary to interpret the
meanings of provisions or defined terms specifically incorporated
by reference. Any such indenture, loan or debt agreement may not
be used to interpret this Indenture, except to the extent
necessary to interpret the meanings of provisions or defined
terms specifically incorporated by reference.
SECTION 11.10 No Recourse Against Others.
A director, officer, employee, stockholder or Affiliate, as
such, of the Company and each of its Subsidiaries shall not have
any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. Each
Holder by accepting a Security waives and releases all such
liability. Such waiver and release are part of the consideration
for the issuance of the Securities.
SECTION 11.11 Successors.
All agreements of the Company in this Indenture and the
Securities shall bind its successors and assigns. All agreements
of the Trustee in this Indenture shall bind its successors and
assigns.
SECTION 11.12 Counterparts.
This Indenture may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be and original and all of
which taken together shall constitute one and the same agreement.
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SECTION 11.13 Severability.
In case any provision in this Indenture or in the Securities
shall be held invalid, illegal or unenforceable, in any respect
for any reason, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby; it being intended that all of the provisions hereof
shall be enforceable to the full extent of the law.
SECTION 11.14 Table of Contents, Headings. Etc.
The table of contents, cross-reference sheet and headings of
the Articles and Sections of this Indenture have been inserted
for convenience of reference only, and are not to be considered a
part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
IBF VI - PARTICIPATING
INCOME FUND, as Issuer
By:_________________________________
Name:
Title:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, as Trustee
By:_________________________________
Name:
Title:
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EXHIBIT A
IBF VI - PARTICIPATING INCOME FUND
Class A 10% Income Participating Notes due December 31, 200__
No. $
IBF VI - PARTICIPATING INCOME FUND, a Delaware corporation
(the "Company", which term includes any successor entity), for
value received promises to pay to or registered assigns, the
Principal sum of
_________________________________________________________________
________________dollars ($_________) on December 31, 200__,
together with interest at the rate of 10% per annum and
Additional Interest, including any applicable Default Rate, all
on the terms set forth in Indenture, dated as of ___________,
1999 (the "Indenture"), between the Company and the Trustee.
This Security is one of a duly authorized issue of Securities of
the Company designated as its Class A 10% Income Participating
Notes due December 31, 2005. Each Holder, by accepting the
Securities, agrees to be bound by all the terms and provisions of
the Indenture, as the same may be amended from time to time in
accordance with its terms. The terms of the Securities include
those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code 77aaa-77bbbb) (the "TIA"), as in effect on the date
of the Indenture. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders
are referred to the Indenture and the TIA for a statement of such
terms. The Securities are unsecured obligations of the Company
limited (except as otherwise provided in the Indenture) in
aggregate principal amount to $50,000,000 plus amounts, if any,
sufficient to pay interest and premium, if any, on outstanding
Securities. Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to them in the Indenture.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may
be made to: IBF VI - Participating Income Fund, 1733 Connecticut
Avenue N.W., Washington, D.C. 20009, Attn.: President.
Subject to certain exceptions, the Indenture or the
Securities may be amended or supplemented with the written
consent of the Required Holders (as defined in the Indenture),
and any existing Default or Event of Default or compliance with
any provision may be waived with the consent of the Required
Holders. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Securities
to, cure among other things, any ambiguity, defect or
inconsistency, provide for uncertificated Securities in addition
to or in place of certificated Securities, comply with Article V
of the Indenture or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA,
or make any other change that does not adversely affect the
rights of any Holder of a Security.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same
effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to
be signed manually or by facsimile by its duly authorized
officers.
Dated: ______________,1999
IBF VI - PARTICIPATING INCOME FUND
Attest: By:
Name: Title: Name: Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities in the within-mentioned Indenture.
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, as Trustee
By:
Authorized Signer
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IBF VI - PARTICIPATING INCOME FUND
Class A 10% Income Participating Notes due December 31, 200__
1. The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A
Holder shall register the transfer of or exchange Securities in
accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay certain taxes or similar
governmental charges required by law and as permitted by the
Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for
redemption. The Company need not exchange or register the
transfer of any Security or portion of a Security selected for
redemption, except for the unredeemed portion of any Security
being redeemed in part. Also, it need not exchange or register
the transfer of any Securities for a period of fifteen (15) days
before a selection of Securities to be redeemed or during the
period between a record date and the corresponding Interest
Payment Date.
2. Initially, the Trustee under the Indenture will act as
Paying Agent and Registrar. The Company may change any Paying
Agent, Registrar or co-Registrar without notice to the Holders.
The Company or any of its Subsidiaries may act as Registrar.
3. On and after January 1, 2001, the Securities may be
redeemed, at the option of the Company, in whole or in part at
the Redemption Price stated in the Indenture. The Company may at
any time or from time to time purchase Securities from Holders in
market transactions and such purchases shall not be considered
redemptions. If the Redemption Date is subsequent to a Record
Date with respect to any Interest Payment Date and on or prior to
such Interest Payment Date, then such accrued interest, if any,
will be paid to the person in whose name such Securities are
registered at the close of business on such Record Date and no
other interest will be payable thereon. In the event of a partial
redemption, the Trustee will select the Securities to be redeemed
by lot or by such manner as the Trustee deems fair to the Holders
of the Securities. In the event of any conflict between the
Security and the Indenture, the Indenture shall govern. Notice
of redemption will be mailed by first class mail at least thirty
(30) days but not more than sixty (60) days before the Redemption
Date to each Holder of Securities to be redeemed at such Holder's
registered address. Except as set forth in the Indenture, from
and after any Redemption Date, if on such Redemption Date the
Paying Agent holds U.S. Legal Tender sufficient for the
redemption of the Securities called for redemption on such
Redemption Date, then, unless the Company defaults in the payment
of the Redemption Price or the Paying Agent is otherwise
prohibited from paying the Redemption Price, the Securities
called for redemption will cease to bear interest and the only
right of the Holders of such Securities will be to receive
payment of the Redemption Price.
4. The Holder may tender this Security in whole, not in part,
for redemption at the Redemption Price stated in the Indenture
under hardship circumstances. To effect redemption, the Holder
may deliver to the Company notice of redemption with the Security
only during the periods June 1 through June 30 and December 1
through December 31 each calendar year. The Holder's notice of
redemption is irrevocable, and is subject only to the Company's
acceptance. The notice must provide information on the financial
difficulty or change of circumstances of the Holder and the
Holder must provide any additional information requested by the
Company on the hardship situation. The Company has complete
discretion on the basis of the information provided or factors
unrelated to the Holder's personal circumstances to accept or
reject the request for hardship redemption. Notes will be
redeemed effective the last day of the month in which the notice
of redemption is tendered to the Company, and payment of the
Redemption Price will be made 30 calendar days thereafter. The
aggregate Holder redemption of Securities in the Series in each
calendar year shall not exceed 10% of the aggregate principal
amount of the Notes in the Series outstanding on the first day of
each calendar year. The Company will select the Securities to be
redeemed on a "first come - first served" basis or by such manner
as the Company deems fair to the Holders of the Securities.
5. The Company's obligations pursuant to the Indenture will be
discharged, except for obligations pursuant to certain sections
thereof, subject to the terms of the Indenture, upon the payment
of all the Securities or upon the irrevocable deposit with the
Trustee of U.S. Legal Tender sufficient to pay when due Principal
of and interest, if any, on the Securities to maturity or
redemption, as the case may be. The Indenture contains
provisions (which provisions apply to this Security) for
defeasance at any time of (a) the entire Indebtedness of the
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Company on this Security or (b) certain restrictive covenants and
the Defaults and Events of Default related thereto, in each case
upon compliance by the Company with certain conditions set forth
therein.
6. The Indenture contains certain covenants that, among other
things, limit the ability of the Company to incur additional
Indebtedness, transfer or sell assets, pay dividends, make
certain other Restricted Payments and Investments, create Liens
or enter into transactions with Affiliates and mergers. The
Company must report quarterly to the Trustee on compliance with
such limitations.
7. If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least thirty percent (30%) in the aggregate
principal amount of Securities then outstanding may declare all
the Securities to be due and payable in the manner, at the time
and with the effect provided in the Indenture. Holders may not
enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture
or the Securities unless it has received indemnity reasonably
satisfactory to it. The Indenture permits, subject to certain
limitations therein, the Required Holders to direct the Trustee
in its exercise of any trust or power.
8. Subject to certain limitations imposed by the TIA, the
Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may
otherwise deal with the Company, its Subsidiaries or their
respective Affiliates, as if it were not the Trustee.
9. A stockholder, director, officer, employee or incorporator,
as such, of the Company or any of its Subsidiaries shall not have
any liability for any obligation of the Company under the
Securities or the Indenture or for any claim based on, in respect
of or by reason of, such obligations or their creation, including
with respect to any certificates delivered hereunder or
thereunder from any such person. Each Holder of a Security by
accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issuance
of the Securities.
10. This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of
authentication on this Security.
11. The Indenture and this security shall be governed by and
construed in accordance with the laws of the State of New York,
as applied to contracts made and performed within the State of
New York without regard to principles of conflicts of laws.
12. Customary abbreviations may be used in the name of a Holder
of a Security 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).
13 Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company may cause
CUSIP numbers to be printed on the Securities immediately prior
to the qualification of the Indenture under the TIA as a
convenience to the Holders of the Securities. No representation
is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other
identification numbers printed hereon.
14. When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture and the
transaction complies with the terms of Article V of the
Indenture, the predecessor will be released from those
obligations.
15. If money for the payment of Principal or interest remains
unclaimed for two (2) years, the Trustee or Paying Agent shall
return the money to the Company upon its request. After that,
all liability of the Trustee and Paying Agent with respect to
such money shall cease and Holders entitled to money must look to
the Company for payment.
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EXHIBIT B
[FORM OF LEGEND FOR BOOK-ENTRY SECURITIES]
Any Global Security authenticated and delivered hereunder
shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING
OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED
IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR
A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE
FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF
THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY
A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
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Exhibit No. 7
IBF VI - Guaranteed Income Fund
Form SB-2, Amend. No. 1
File No. 333-71091
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is made as of the ____ day of
____________, 1999 (the "Effective Date"), by and between IBF VI
- - PARTICIPATING INCOME FUND, a Delaware corporation with an
address of 1733 Connecticut Avenue, NW, Washington, D.C. 20009
("Company"), and IBF MANAGEMENT CORP., a Delaware corporation,
with an address of 1733 Connecticut Avenue, NW, Washington, D.C.
20009 ("Manager").
Recitals
WHEREAS, Company was formed to engage in the business of
acquiring, holding, and disposing of loan assets and equity
securities (the "Finance Business"); and
WHEREAS, Manager has particular expertise, knowledge and
experience in connection with the operation of the Finance
Business.
Agreement
NOW, THEREFORE, for the consideration herein stipulated, the
mutual covenants set forth herein, and other good and valid
consideration, the parties hereto, intending to be legally bound,
do hereby agree as follows:
1. Duties of Manager
(a) Manager shall have responsibility for the management of
the day-to-day operation of the Finance Business and the Manager
shall perform all management services necessary for the efficient
operation of the Finance Business.
(b) During the term of this Agreement, Manager shall, among
other things:
(i) Review the financial viability of each proposed
investment by the Company in loan and equity transactions
(the "Portfolio Assets"). Manager will utilize underwriting
criteria that are normal and standard in the finance
industry to evaluate each borrower or issuer (the "Portfolio
Companies") and the terms of the proposed Portofoio Asset
transaction. All information regarding the Portfolio
Company and the proposed investment in its Portfolio Assets,
including the Manager's evaluation of risk and return on
investment, will be submitted to the Company for it to
determine whether to make the investment.
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(ii) Provide financial and operational advice in
connection with the operation of the Finance Business;
(iii) Review and approve such accounting and
administrative records, procedures and reports as shall be
necessary to operate the Finance Business and develop
procedures for and carry out the collection of all revenue
generated by the Finance Business and the payment of all
operating expenses of the Finance Business;
(iv) Obtain insurance for liability or otherwise as may
be necessary or prudent, if any;
(v) Review, approve, and carry out operating,
personnel, and other management policies and procedures as
shall be necessary in the operation of the Finance Business;
(vi) Maintain sufficient personnel and independent
contractors to operate the Finance Business;
(vii) Perform all duties set forth in Company's
Registration Statement on Form SB-2, SEC File No. 333-71091
("Registration Statement");
(viii) Advise and consult with Company in connection
with any and all aspects of the Finance Business and the
operation thereof;
(ix) Keep or cause to be kept at the principal office
of Manager and/or the Finance Business all necessary books
and records of all Finance Business affairs (the books of
account shall be kept in accordance with generally accepted
accounting principles and procedures consistently applied),
in which shall be entered the transactions of the Finance
Business and provide Company or its representatives with
access to inspect and examine same at any reasonable time;
(x) Perform all loan servicing functions required for
the Portfolio Assets; and
(xi) Enforce the rights of the Company with respect to
the Finance Business, including, but not limited to,
collecting on the Portfolio Assets.
(c) Manager will pay all overhead, expenses, and salaries
required to perform the services described in Section 1 of this
Agreement, except for legal fees, accounting fees, filing fees,
appraisal fees, fees paid to the Company's Indenture Trustee,
Portfolio Asset transaction costs, taxes, officer and director
liability insurance, and similar expenses.
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2. Compensation of Manager
(a) Manager will receive an organizational fee of 5% of the
gross proceeds of the offering of the Company's Notes described
in the Registration Statement to establish the administrative
facilities and systems required for the Company's Finance
Business.
(b) Manager will receive in each calendar year a management
fee (the "Management Fee"), equal to 2% of the gross proceeds of
the offering of the Company's Notes described in the Registration
Statement. The Management Fee for each year is payable in four
equal installments on the 15th day following the end of each
calendar quarter during the year.
(c) In the event the Company has an accumulated deficit for
any period with respect to which the Management Fee is payable,
the Management Fee for that period will accrue but not be paid
until 15 days following the end of any subsequent calendar
quarter in which the Company has retained earnings and has
otherwise paid or provided for all of its current payment
obligations under the Notes described in the Registration
Statement.
3. Bank Accounts
(a) Manager shall create and maintain, in the name of and
on behalf of Company, one or more bank accounts in a bank or
banks satisfactory to Company for use in operating and
maintaining the Finance Business. Manager shall cause any and
all receipts to be promptly deposited in said account or
accounts. All funds in said account or accounts from time to
time shall be the property of Company. Manager shall cause to be
paid from said account or accounts all payments of costs,
expenses, fees and charges payable by the Company with respect to
the Finance Business, including debt service, subject to the
terms hereof. All such payments shall be made promptly when due
upon receipt of an invoice in reasonable detail as to the source
of the costs in question. In the event that at any time there
shall be insufficient funds in said account or accounts with
which to make any payment provided for hereunder, then Manager
shall immediately notify Company of such fact.
(b) All checks or drafts upon or withdrawals made from the
account or accounts established hereunder shall require the
authorization of a designee of Manager, which authorization may
be in the form of a blanket authorization granted in advance of
any particular check or draft. Manager shall designate the
person or persons having authority to draw checks upon or make
withdrawals from the accounts; provided, however, that in no
event shall a check for any unbudgeted expense be drawn upon, or
a withdrawal made from, the accounts that exceeds $10,000 without
the prior approval of Company. No other accounts of Company
shall be created or maintained by Manager without approval of
Company.
4. Term and Termination
(a) This Agreement shall become effective as of the
Effective Date and shall continue in full force and effect until
terminated by mutual agreement of the parties or as otherwise
provided in Section 4(b) of this Agreement.
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(b) Subject to the provisions of clause (c) of this Section
4, this Agreement may be terminated as follows:
(i) By Company on written notice to Manager in the
event of any default by Manager which continues for 45 days
after written notice thereof from Company to Manager,
provided, however, if such default cannot be cured within
such 45-day period, then such additional period as shall be
reasonable, provided Manager commences to cure such default
within such 45-day period and proceeds diligently to
prosecute such cure to completion;
(ii) By Company or Manager immediately upon the
dissolution of Manager or Company. As used herein,
"dissolution" shall include voluntary or involuntary
dissolution or liquidation and shall occur at such time as
Company or Manager ceases operations, or intends to cease
operations, or files any statement indicating its intent to
dissolve or terminate a significant portion of its
operations, provided, however, that Company and Manager
shall not effect a voluntary dissolution or liquidation and
shall not voluntarily cease operations or a significant
portion of its operations for three years from the Effective
Date without the prior written consent of the other;
(iii) Upon a sale or other disposition of all or
substantially all of the assets of the Company;
(iv) By Company or Manager on written notice to the
other if a petition in bankruptcy or insolvency is filed by
Company or Manager, respectively, or if either shall make an
assignment for the benefit of creditors, or if either shall
file a petition for a reorganization, or for the appointment
of a receiver or trustee of all or a substantial portion of
its property, or if a petition in bankruptcy or other above-
described petition is filed against either which is not
discharged with sixty (60) days thereafter; and
(v) By Company "for cause." As used herein, the term
"for cause" shall mean (A) the gross negligence or
deliberate or willful misconduct of Manager hereunder, or
(B) misappropriation of funds held by Manager in trust for
Company.
(c) After receipt of notice of termination and before the
effective date of termination provided by the notice or this
Agreement, Manager shall continue management of the Finance
Business in accordance with the terms of this Agreement unless
instructed by Company to the contrary, in which case such
instructions shall prevail over any provisions of this Agreement.
Further, Manager shall take all actions necessary to deliver to
Company possession or control of all property of Company or its
designee in an orderly manner and without interruption of
Company's obligations to its obligees, including, but not limited
to, its subscribers, customers, advertisers, servants, employees,
agents, contractors, lenders, and all governmental authorities,
and Manager shall use its best efforts to preserve goodwill and
retain the services of employees and independent contractors of
the Finance Business.
E-117
<PAGE>
(d) Subject to any special instruction by Company, upon
termination of this Agreement, Manager shall immediately
relinquish to Company, or its designee, possession and control of
all property of Company, including, but not limited, to all
documents, records, and data pertaining to the Finance Business.
(e) In the event of termination of this Agreement pursuant
to the terms hereof, Manager shall remain liable to Company for
any required payment to Company or other obligations hereunder
accrued prior to the date of termination; and Manager shall be
entitled to receive the amount payable for any accrued but unpaid
services or work performed under the provisions hereof, subject
to the terms hereof as to sources of payment and adjustments of
payments.
5. Power of Attorney
Company hereby makes, constitutes and appoints Manager as
its true and lawful attorney for Company, and in the name, place
and stead of Company from time to time to make, execute, sign,
acknowledge and file any and all documents, certificates or
instruments as Manager may deem necessary or appropriate to
consummate the transactions contemplated by this Agreement. The
foregoing grant of authority is a special power of attorney
coupled with an interest, is revocable and may be exercised by
said attorney-in-fact with full power of substitution.
6. Miscellaneous
(a) All communications permitted or required between the
parties hereto shall be effective when hand delivered or mailed
by United States mail, with postage prepaid, addressed to the
addresses first set forth in this Agreement or at such other
addresses as may be designated from time to time by written
notice to the other party.
(b) This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors
and assigns; however, Manager may not assign its obligations
under this Agreement without the prior written approval of
Company.
(c) This Agreement shall be governed by and construed
according to the laws of the District of Columbia,
notwithstanding any conflict of law provision to the contrary.
This Agreement may not be modified, altered or amended in any
manner except by agreement in writing duly executed by the
parties hereto. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original; and all
of which together shall constitute one and the same instrument.
E-118
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Management Agreement as of the day and year first above written.
IBF VI - Participating Income Fund
By:_________________________________
Title:______________________________
IBF Management Corp.
By:_________________________________
Title:______________________________
E-119
Exhibit No. 11
IBF VI - Guaranteed Income Fund
Form SB-2, Amend. No. 1
File No. 333-71091
Lehman, Jensen & Donahue, L.C.
620 Judge Building
8 East Broadway
Salt Lake City, Utah 84111
May 24, 1999IBF VI - Participating Income Fund
1733 Connecticut Avenue, NW
Washington, D.C. 20009
Re: Class A 10% Income Participating Notes ("Notes")
Ladies and Gentlemen:
You have requested our opinion as to the legality of the
above-referenced Notes of IBF VI - Participating Income Fund, a
Delaware corporation (the "Corporation") to be issued and
distributed pursuant to a Registration Statement on Form SB-2,
and amendments thereto (the "Registration Statement") under the
Securities Act of 1933, as amended.
In furnishing our opinion, we have examined original,
photostatic, or certified copies of certain records of the
Corporation, including the Registration Statement, the
Certificate of Incorporation, as amended, the By-laws and such
other documents that we have deemed relevant and necessary for
the opinion hereinafter set forth. In such examination, we have
assumed the genuineness of all signatures, the authenticity of
all documents submitted to us as originals and the conformity to
authentic originals of all documents submitted to us as certified
or photostatic copies. As to various questions of fact material
to such examination, we have relied upon representations made to
us by officers and directors of the Corporation, and we have not
conducted or received independent verification of those facts.
Based upon and subject to the foregoing and such other
matters of fact and questions of law as we have deemed relevant
in the circumstances, and in reliance thereon, it is our opinion
that:
1. The Corporation is duly organized and is validly
existing as a corporation in good standing under the laws of the
State of Delaware; and
2. The Notes being offered under the Registration
Statement are duly authorized and, when issued in accordance with
the terms and conditions of the Prospectus and the form of
Indenture governing the Notes included as a exhibit to the
Registration Statement, will be validly issued and non-assessable
and shall represent the binding obligations of the Corporation.
We consent to being named in the Registration Statement and
related Prospectus as counsel who are passing upon the legality
of the above securities for the Corporation by reference to our
name under the caption "Legal Matters" in such Prospectus. We
also consent to your filing copies of this opinion as an exhibit
to the Registration Statement or any amendment thereto.
E-120
<PAGE>
This opinion is limited to the matters set forth herein and
may not be relied upon by any other person or used for any other
purpose without our prior written consent.
Sincerely,
Lehman, Jensen & Donahue, L.C.
E-121
Exhibit No. 12
IBF VI - Guaranteed Income Fund
Form SB-2, Amend. No. 1
File No. 333-71091
INDEPENDENT ACCOUNTANT'S CONSENT
We hereby consent to the use of our report dated May 17, 1999 and
the reference to us under Experts to be included in the
Registration Statement on Form SB-2 of IBF VI - Participating
Income Fund on or about May 18, 1999.
Radin, Glass & Co., LLP
Certified Public Accountants
May 26, 1999
E-122
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