As filed with the Securities and Exchange Commission January 20, 2000
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. 2
IBF VI - PARTICIPATING INCOME CORPORATION
(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 Corporation
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. Arthur Don, Esq.
Lehman, Jensen & Donahue, L.C. Steve Curtis, Esq.
8 East Broadway, Suite 620 D'Ancona & Pflaum LLC
Salt Lake City, UT 84111-2204 111 East Wacker Drive, Suite
(801) 532-7858 2800
(801) 363-1715 fax Chicago, IL 60601
(312) 602-2000
(312) 602-3000 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.
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If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [X]
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.
ii
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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 CORPORATION
CLASS A 10% INCOME PARTICIPATING BONDS
IBF VI - Participating Income Corporation is offering its
Class A 10% Income Participating Bonds due December 31, 2006.
IBF VI does not expect a public market for the bonds will develop
after the offering.
See "Risk Factors" beginning on page 3 for certain
information you should consider before you purchase bonds.
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 bond 100% 8% 92%
Minimum $500,000 $40,000 $460,000
Maximum $50,000,000 $4,000,000 $46,000,000
The offering is made through National Securities
Corporation, as underwriter on a best efforts, $500,000 minimum,
$50,000,000 maximum basis. If less than $500,000 of bonds are
sold within three months following the date of this prospectus
(unless extended by IBF VI and National for an additional three
months), all proceeds raised will be promptly returned to
investors with interest. All proceeds from the sale of bonds
will be placed in escrow with Continental Stock Transfer & Trust
Company. If the minimum amount of bonds is sold within the
minimum offering period, then the offering will continue until
all the bonds are sold, IBF VI elects to terminate the offering
in its sole discretion, or June 30, 2001.
NATIONAL SECURITIES CORPORATION
875 N. Michigan Ave., Suite 1560
Chicago, Illinois 60611
312-751-8833
The date of this Prospectus is _______________, _________.
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PROSPECTUS SUMMARY
The Company
IBF VI - Participating Income Corporation 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 Management Corp., an affiliate of
InterBank, will provide administrative and support services to
IBF VI for a fee. 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.
IBF VI will engage in the business of:
* Acquiring individual and packaged commercial and residential
real estate loans;
* Making commercial loans secured by real estate;
* Acquiring debt obligations representing part or all of the
sales price of merchandise, insurance, and services;
* Making loans to manufacturers, wholesalers, and retailers in
connection with the sale of specific merchandise, insurance, and
services; and
* Making loans to purchasers of specific merchandise,
insurance, and services.
IBF VI will attempt to acquire and make loans that will
produce an average annual return of 18 percent. Management has
extensive loan acquisition and origination experience and has
broad discretion in selecting the loans IBF VI will acquire or
make.
The Offering
Bonds Offered $50,000,000 aggregate principal amount of
Class A 10% Income Participating bonds,
due December 31, 2006. The bonds are
general, unsecured obligations. See
"Description of the bonds" for a more
detailed description of the bonds.
Denomination The minimum principal amount of bonds you
can purchase is $5,000 (except in certain
states). 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 The bonds mature December 31, 2006.
Interest Interest at the rate of 10% per annum is
payable monthly or quarterly, depending on
the amount of the bonds you buy. In
addition, you may receive additional
interest payable 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 bonds
from time to time after January 1, 2001.
Your bonds may be tendered for redemption
in the
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event of your death and you may
tender your bonds for redemption under
hardship circumstances, subject to certain
conditions.
Rating The bonds are not rated.
Trustee, Payment Continental Stock Transfer & Trust Company
Agent and Registrar
RISK FACTORS
IBF VI has no history on which to judge its prospects for
success
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. There is no assurance that
IBF VI will be successful in fully implementing its business plan
or achieving profitable operations.
Management has broad discretion in selecting loan investments
IBF VI has broad discretion in applying the net proceeds of
this offering. Although four loan investments totaling $11.69
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.
Collateral on loan investments may not be adequate
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.
There is no assurance IBF VI will make interest payments
IBF VI intends to make interest payments on the bonds out of
revenue from 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.
There is no assurance IBF VI will be able to pay principal
when due
IBF VI will look for opportunities to liquidate its
portfolio assets beginning in 2005 with a view to having
sufficient capital to pay the bonds 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 bonds. See "Business."
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Non-performing loans may expose IBF VI to a higher risk of
loss
One 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 may entail a higher risk of loss than on loans typically
extended by commercial banks. In the event IBF VI experiences
higher losses on non-performing loans than expected, its earnings
will be negatively impacted.
Limited offering proceeds will limit investment diversity and
increase risk of loss
If IBF VI realizes less than $10 million in gross proceeds
from the sale of bonds 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.
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 potential
conflict of interest when management is on both sides of the loan
transaction.
Under the indenture governing the bonds, transactions
with affiliates of IBF VI must be effected on an arms' length
basis. Nevertheless, 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.
You have no control over management of IBF VI
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.
Additional indebtedness could adversely affect payment of your
bonds
Under the indenture, IBF VI can borrow funds in the future
on a secured or unsecured basis. The interest expense on the
bonds 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 bonds.
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Securing additional indebtedness with IBF VI's assets could
adversely affect payment of your bonds
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 bonds and any other obligations
on an equal footing with the bonds. Therefore, there may not be
sufficient assets to pay any or all amounts due on the bonds.
Covenants in the indenture provide limited protection to bond
holders
The covenants in the indenture are limited and do not
restrict the operations of IBF VI to enhance profits or cash flow
for the payment of interest on the bonds.
A default could result in accelerating payment of the bonds
terminating your investment
If a default occurs on the bonds or under the indenture, the
trustee or the holders of 30% of the outstanding bonds may
accelerate payment of all principal and interest on the bonds.
The holders of a majority of the bonds outstanding can waive the
default, but if they are unwilling to do so your investment in
the bonds would be terminated through prepayment even if you
would prefer that the investment continue.
No market for bonds
There is no public market for the bonds and it is not
expected that a market will develop following the offering.
Accordingly, you should purchase the bonds only as a long-term
investment with the expectation of holding the bonds until
maturity.
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
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
The following table sets forth IBF VI's best estimate of
the use of proceeds from the sale of the minimum and maximum
amount of bonds offered during the year following the offering.
Since the dollar amounts shown in the table are estimates only,
actual use of proceeds may vary from the estimates shown. See
"Plan of Operation."
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Assuming Assuming
Minimum Maximum
Amount of bonds Sold Amount of bonds Sold
Amount($) Percent Amount($) Percent
Gross proceeds 500,000 100.0 50,000,000 100.0
Expenses and reserves
Sales commission to National
and selling agents 40,000 8.0 4,000,000 8.0
Additional offering expenses(1) 50,000 10.0 400,000 0.8
Organization fee to IBF
Management (2) 25,000 5.0 2,500,000 5.0
Working capital (3) 25,000 5.0 2,500,000 5.0
Net proceeds available for
investment (4)(5) 360,000 72.0 40,600,000 81.2
___________________________
(1) The different amounts of additional offering expenses at the
minimum and maximum levels is a result of the commitment of
InterBank to pay these expenses without reimbursement from IBF VI
if only the minimum offering is sold.
(2) The organization fee includes $300,000 of printing and
shipping costs for this offering and implementing IBF VI's
business, $1,575,000 for marketing this offering and IBF VI's
loan business, $500,000 of estimated legal and accounting
expenses for implementing the business and $125,000 for new
computer and equipment purchases required for the business. The
different amounts of the organization fee at the minimum and
maximum levels is a result of the commitment of InterBank to pay
these expenses without reimbursement from IBF VI if only the
minimum offering is sold.
(3) IBF VI will maintain working capital reserves estimated to
be 5% of the gross proceeds.
(4) IBF VI does not expect to incur any costs or expenses on
loans it originates because it will require its borrowers to pay
all such costs. Costs and expenses of each loan purchase are
estimated at 1% of the loan amount, so that the total amount of
such costs for all loan purchases by IBF VI will be less than 1%
of the gross proceeds of the offering.
IBF VI has identified four loans totaling $11.69 million
that it will purchase, in whole or in part, as soon as it
receives sufficient capital from this bond 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 expects it
will use the available proceeds from the offering and its
existing equity capital to participate in each of the loan
acquisitions with InterBank. Two of the identified loan
acquisitions involve loans to affiliates of InterBank. There is
no limit on the amount of the net proceeds of the offering that
may be used to acquire or make loans involving affiliates of
InterBank, but the indenture does require that any such
transactions must be on at least the same terms that IBF VI could
obtain from an unrelated third party.
IBF VI expects to realize revenue from its business
activity during the first year following the offering, to cover
its interest obligation on the bonds 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
bonds, IBF VI will use proceeds allocated
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to working capital to cover the shortfall. 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. The remaining 45
percent may be used to purchase debt obligations or make loans
pertaining to real estate type investments and purchase and sale
of merchandise, insurance, and services. 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 banks and
lending institutions because of time constraints or who might not
satisfy the lending criteria of these institutions. Under these
circumstances, IBF VI's loans will have higher potential yields,
but also potentially 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 bonds and
operating expenses. Revenue will be applied first to payment of
interest on the bonds 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 four loans totaling $11.69 million
that it will purchase all or part of 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 bonds is sold in the offering,
IBF VI will have a minimum of $40.6 million to invest. Fixed
interest expense on the bonds in the first year following the
offering will not exceed $5 million, and operating expenses,
including the management fee, will not exceed $1.1 million. If
IBF VI is able to achieve its target return, gross revenue would
be approximately $7.2 million, which is sufficient to meet its
obligations.
If the minimum amount of bonds is sold in the offering,
IBF VI will apply $360,000 to loan investments. Fixed interest
and operating expenses in the first year following the offering
will not exceed $60,000, so that IBF VI will only be short
$16,000 to cover all such expenses.
Regardless of the amount of bonds 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, bonds
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 bonds.
Year 2000 Compliance
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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.
BUSINESS
General
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, and other
personal property. 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 acquire
performing and non-performing loans secured by real
estate. IBF VI will focus on acquiring commercial
loans, but may also purchase packages of residential
loans.
Originating real estate loans. IBF VI will seek
opportunities to make commercial loans secured by real
estate.
Commercial secured loans. Opportunities may arise
for IBF VI to acquire performing and non-performing
loans and to make loans secured by personal property.
The loans will represent part or all of the sales price
of merchandise, insurance, or services.
Other loans. IBF VI may have the opportunity to
make high return commercial loans outside the
categories described above. Such loans will only be
made if they mature in less than one year.
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. Under the indenture,
loans to affiliates may only be made on terms similar to the
terms obtainable from unrelated third parties. IBF VI may be the
sole lender, act as the lead lender for a group of participating
lenders consisting of affiliates or non-affiliates, or simply act
as a participating lender with affiliates or non-affiliates.
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.
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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
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
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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.
Specific loan transactions
IBF VI will use the proceeds of this offering to purchase
part or all of four 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 $6.0 million loan to a borrower
unrelated to IBF VI and its affiliates. The loan was used to
purchase and develop 1,400 acres of beach front property located
on Cat Island in the Bahamas. The development will include
residential commercial and hospitality sites. Included in the
collateral are a first deed of trust on the land, an assignment
of a gaming license for the hotel, and all governmental licenses
and permits. InterBank places a value of $13.5 million on the
property. The loan to value ratio is 40%. Interest only is
payable monthly. The maturity date of the loan is February of
2001. The borrower is current on its interest payments.The
lender received a fee of $78,000 for making the loan, which was
included in the loan principal.
IBF VI will purchase a loan made to an unrelated third
party in the amount of $950,000. The loan was used to acquire a
70 room hotel located in Orlando, Florida. The loan bears
interest at a rate of 12% per annum. InterBank is to receive a
preferred 20% annualized return on its investment, and 40% of the
cash flow generated from the operations of the hotel. The loan
is secured by an assignment of 100% ownership interest of the
borrower and the hotel, which is valued by InterBank at $4.56
million. There is a first deed of trust on the property in the
amount of $3.15 million, so the amount of the loan is 67% of the
real property collateral. The loan matures in June 2002.
Interest only is payable monthly. The borrower is current on its
interest payments. The lender received a fee of $47,500 for
making the loan, which was included in the loan principal.
IBF VI will purchase a loan made to a corporation
controlled by InterBank. The amount of the loan is $840,000.
The loan bears interest at a rate of 15% per annum. The proceeds
of the loan were used by the borrower to acquire two employee
benefit administration businesses located in California. The
loan is secured by 100% of the capital stock of the borrower.
Based on the discounted cash flow of the businesses, over a
period of three years, InterBank places a value on the borrower
of $1.25 million. This value translates to a 67% loan to value.
Interest only is payable monthly. The borrower is current on its
interest payments. A fee of $76,000 was paid to InterBank for
making the loan and additional consulting fees were paid to
InterBank Capital Group, an affiliate of InterBank, for
originating the loan. These fees are included in the principal
amount of the loan.
IBF VI will purchase a $3.9 million loan made to a
corporation controlled by InterBank. The loan proceeds were used
by the borrower to fund the acquisition of a cereal manufacturing
company. The loan bears interest at a rate of 12% per annum.
The loan is secured by a second lien on all the property, plant
and equipment owned by the manufacturing company. The
manufacturing company
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owes $586,000 to the holder of the first lien on the property, who is
unrelated to InterBank. The collateral is valued by InterBank at
$5.4 million, so the amount of both loans is 83% of the collateral.
Interest only is payable monthly. The borrower is current on its
interest payments. The loan matures in August 2002. A fee of $232,000
was paid to InterBank for making the loan. Additional consulting fees were
paid to InterBank Capital Group, an affiliate of InterBank, for
originating the loan. These fees are included in the principal
amount of the loan.
Loan servicing
IBF Management was formed in December 1998, and is the
successor corporation to InterBank Consultants, Inc., which was
formed in December 1977. Since December 1990, InterBank and its
affiliates and successors, including IBF Management, have been in
the business of providing crisis management and turnarounds,
asset restructuring, workouts, and corporate and real estate
finance.
During that period, InterBank and its affiliates and
successors completed over $3 billion in restructurings and
workouts including the restructuring of the mortgage backed bonds
for Gibraltar Mortgage Securities, Inc., and real estate-backed
municipal securities for the cities of Knoxville, TN and
Baltimore, MD. In addition, InterBank assisted clients in the
development of over 100 real estate projects. Some of these
projects included the Sears House on Pennsylvania Avenue, in
Washington, DC, the Consumers Cooperative Bank in Washington, DC,
and the Market Square Festival Marketplace in Charleston, S.C.
In addition, InterBank provided workout services in the largest
personal bankruptcy case in the Washington metropolitan area,
which involved over 200 partnerships.
InterBank and its affiliates have 11 employees, which
include three analysts and asset managers, three accountants, one
loan administrator, two operations managers, and three senior
managers.
IBF Management will manage the day-to-day operation of
IBF VI's business, which will include the following duties.
* IBF Management will review the financial viability of
each proposed investment by the Company in loan transactions.
IBF Management will obtain credit reports and other information
on each borrower to determine its credit rating. It will obtain
title reports and appraisals on the real property collateral and
financing statement reports on any equipment or other personal
property collateral. All information regarding proposed
investments, including IBF Management's evaluation of risk and
return on the investment, will be submitted to management of IBF
VI to determine whether to make the investment.
* IBF Management will establish and maintain operating,
accounting, and administrative systems and procedures necessary
to operate the business of IBF VI.
* It will maintain a staff required to operate the business of
IBF VI and retain for IBF VI as needed accounting, legal, and
other professional services required for the business.
* IBF Management will keep at the principal office of IBF VI
all books and records of IBF VI's affairs.
* It will perform all loan servicing functions.
* IBF Management will enforce the rights of IBF VI with
respect to the business, including, but not limited to,
collecting on the loan investments.
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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 similar 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 bonds 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.
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 bond holders
IBF VI intends to distribute to holders of the bonds
annual reports containing audited financial statements. In
addition, IBF VI will distribute to holders any reports required
by the indenture governing the bonds and the Trust Indenture Act
of 1939.
MANAGEMENT
IBF VI's business will be managed by its officers and
directors and IBF Management. The following persons are the
officers and directors of IBF VI:
Name Age Position Since
Simon A. Hershon 52 CEO, President and Director June 1998
Ehud D. Laska 50 Executive Vice President June 1998
and Director
Sidney E. Bostian 49 Executive Vice-President, August 1999
Chief Financial Officer and
Director
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Ivan M. Krasner 48 Senior Vice President September 1998
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, IBF V -
Alternative Investment Fund, and IBF Special Purpose Corporation
VII. 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.
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., 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.
Sidney E. Bostian joined InterBank as an Executive Vice
President in August 1999. Prior to joining InterBank in August
1999, Mr. Bostian was the principal and owner of The Bostian
Company, which was formed in May 1996 to provide financial
advisory services to businesses and individuals. From April 1994
to June 1996, Mr. Bostian served as the President and Chief
Executive Officer of The Heritage Bank in McLean, Virginia. Mr.
Bostian also served as President and Chief Executive Officer of
NVR Savings Bank of McLean, Virginia, from February 1992 to April
1994. Mr. Bostian graduated from North Carolina State University
with Bachelor of Arts and Master of Economics degrees.
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<PAGE>
Ivan M. Krasner has been employed since September 1998, by
IBF 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 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.
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.
Prior experience of InterBank and IBF Management
InterBank is the parent corporation of five private funds
formed for the purpose of acquiring performing and non-performing
loans, originating loans, and investing in equity and debt
securities. Each of the funds obtained capital by offering and
selling notes to investors in private placements. The total
amount of capital invested in notes issued by the funds is
approximately $50 million. The activities of each of the funds
is managed by IBF Management. The following is a summary of
interest payments made by each of the funds for the periods
indicated.
Fixed
Program Year Funds Interest
Raised Offered
InterBank Funding Special Purpose Corporation 1996 $2.5 million 12%
IBF Special Purpose Corporation II 1997 $4.1 million 12%
1998 $0.9 million 12%
IBF Special Purpose Corporation III 1999 $3.9 million 12%
1999 $6.1 million 12%
IBF Participating Income Fund 1998 $9.3 million 12%
1999 $14.0 million 12%
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IBF Special Purpose Corporation VII 1999 $9.4 million 11%
Generally, InterBank has acted as the lead lender on loans
made or acquired, and the InterBank funds have participated in
the loans. Allocation of loans among the funds is based on the
amount of capital each fund has available for loan investments.
All interest payments on the outstanding notes of the
InterBank funds have been made to date, and the amount of
interest paid has equaled or exceeded the fixed interest offered
on the notes. However, past performance of the InterBank funds
is no guarantee of future performance of IBF VI. There is no
assurance as to the actual interest payments on the bonds.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following table describes the amount and nature of
payments that will or may be made by IBF VI to InterBank and its
affiliates.
Payee Amount ($) Purpose
IBF Management Corp. 25,000 to One time
2,500,000 organization fee (1)
IBF Management Corp. 10,000 to Annual management
1,000,000 fee (1)
Coleman & Company 2,500 to Offering concession
Securities, inc. 250,000 (2)
(1) See "Management - Compensation."
(2) Coleman will receive out of the sales commission payable to
National a fee of 0.5% of the gross proceeds form the sale of
bonds for its assistance in wholesale distribution of the
offering to selected dealers. Coleman will also receive 7% of
the gross sales price of all bonds sold by Coleman directly to
investors in the offering, but it is not expected that sales by
Coleman to investors will be material.
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.
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<PAGE>
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 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 BONDS
The bonds 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 bonds are general, unsecured obligations of IBF VI and
are limited to $50,000,000 aggregate principal amount. The bonds
mature on December 31, 2006. The bonds are subject to redemption
in limited circumstances. See "-- Redemption." The bonds will
be subordinated to the prior payment in full of fees and expenses
of the trustee. The bonds 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 bonds and your ability to sell the bonds to anyone
else.
Fixed interest at the rate of 10% per annum will be paid on
the bonds. If you purchase at least $15,000 of bonds, the fixed
interest is paid to you monthly or quarterly, as you elect. If
you purchase less than $15,000 of bonds, 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 bonds will be issued in denominations of $1,000 and
integral multiples thereof. The bonds will be issued in
certificated form.
IBF VI will furnish to holders of the bonds annual reports
containing audited financial statements of IBF VI.
Redemption
After January 1, 2001, IBF VI may redeem any portion of the
bonds from time to time on at least 30 days' advance notice to
you. After the redemption date specified in the notice, your
bond ceases to
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<PAGE>
accrue fixed interest and additional interest. Partial redemptions
will be allocated among holders of the bonds by lot.
You may tender your bond for redemption under hardship
circumstances beginning in the year 2001. 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 bond 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. Bonds will
be redeemed as of the end of the month in which the request for
redemption is made. The amount of bonds redeemed for hardship
reasons in each calendar year may not exceed 10% of the aggregate
principal amount of the bonds outstanding on the first day of
each calendar year. In the event requests for hardship
redemption during a year exceed the 10% limitation, redemption
will be made on a "first come - first served" basis among the
holders of the bonds requesting redemption.
In the event of the death of a holder, a joint holder, or
the owner of an individual retirement account holding a bond, the
successor in interest may tender the bond for redemption at any
time during the six-month period following the date of death.
Bonds tendered and accepted for redemption under hardship
circumstances or death of a holder will be redeemed as of the end
of the month in which the request for redemption is made.
The redemption value is equal to 100% of the principal
amount of your bond plus accrued fixed interest through the date
of redemption. Furthermore, additional interest will be paid on
redemptions by IBF VI, redemptions from deceased holders, 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 deceased holder
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 bonds 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
bonds 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 bond and neither
the trustee nor the holders of the bonds may accelerate the
maturity of the bonds 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 bonds has
been declared due and
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<PAGE>
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 bonds 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
* 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),
* 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
* 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 bonds 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 bonds, 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:
* failure to pay the principal on the bonds when due at
maturity, upon redemption, or upon repayment, as provided in the
indenture;
* failure to pay any interest on the bonds when due, which
default continues for 30 days;
* 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
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<PAGE>
outstanding bonds under the indenture specifying the default and
requiring IBF VI to remedy such default;
* 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;
* certain events of insolvency, receivership, or
reorganization of IBF VI, and
* 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 bonds 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 bonds may accelerate the maturity of all
outstanding bonds. Prior to any judgment or decree for the
payment of money being obtained, the holders of a majority of the
outstanding bonds may waive a default resulting in acceleration
of the bonds, 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
* the holder has previously given to the trustee written
notice of a default,
* the holders of at least 30% of the outstanding bonds have
made a written request and offered reasonable indemnity to the
trustee to institute such proceedings,
* the trustee has failed to institute such proceeding within
60 days, and
* the trustee has not received from the holders of a majority
of the outstanding bonds a direction inconsistent with such
request.
However, you have an absolute right to receive payment of
principal and interest on your bond 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 bonds, the indenture may be modified by IBF VI
with the consent of holders of not less than a majority of the
outstanding bonds, if the bonds are affected by the modification.
No change can be made without your consent if the effect is to:
* change the maturity date of principal or the payment date of
any interest on your bond,
* reduce the principal of, or the rate of interest on, your
bond,
* change the coin or currency in which any portion of the
principal of, or interest on, your bond is payable,
* impair your right to institute suit for the enforcement of
any such payment,
* reduce the percentage of holders of the outstanding bonds
necessary to modify the indenture, or
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<PAGE>
* modify the foregoing requirements or reduce the percentage
of outstanding bonds necessary to waive any past default.
The holders of a majority of the outstanding bonds 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 bonds 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 bonds. Defeasance of the bonds is subject to
delivery to the trustee of an opinion of independent counsel that
holders of the outstanding bonds 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 Underwriting Agreement between IBF VI and National
Securities Corporation, IBF VI will offer through National, on a
best efforts basis, a maximum of $50,000,000 in principal amount
of the bonds. 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."
The sales commission paid to National is 8.0 percent of
the gross offering proceeds and an additional amount equal to 2.0
percent of IBF VI's annual net income for each calendar year in
which the bonds are outstanding. In addition, IBF VI will
reimburse National for all out-of-pocket expenses on an
accountable basis. National may reallow the selling compensation
to selected dealers participating in the offering.
Coleman & Company Securities, Inc., an affiliate of
InterBank and IBF VI, will participate in wholesale distribution
of the offering to selected dealers. Coleman may also make sales
of bonds to investors. For these services, Coleman will receive
from National out of its sales commission 0.5 percent of the
gross proceeds of the offering, 7.0% of the gross proceeds
received on bonds sold by Coleman directly to investors, and an
additional amount equal to 2.0 percent of IBF VI's annual net
income for each calendar year in which the bonds are outstanding.
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.
National is the independent underwriter for the offering and has
priced the offering and conducted due diligence on the issuer.
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<PAGE>
The Underwriting Agreement and the Selected Dealer
Agreements contain provisions for the indemnification of National
and participating selected dealers by IBF VI with respect to
certain liabilities, including liabilities arising under the
Securities Act.
Until subscriptions for $500,000 of bonds have been
accepted by IBF VI, all funds received by National and selected
dealers from subscriptions for bonds will be placed in an escrow
account with Continental Stock Transfer & Trust Company, as
escrow agent. If less than $500,000 of bonds are sold within
three months following the date of this prospectus (unless
extended by IBF VI and National 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 bonds is sold within the minimum
offering period, the offering will continue until all bonds are
sold, terminated by IBF VI, or June 30, 2001, whichever occurs
first. In no event will any bonds be sold to affiliates of IBF
VI in order to reach the minimum.
The offering of the bonds is made subject to prior sale
and to withdrawal, cancellation, or modification of the offer
without notice. National and IBF VI reserve the right to reject
any order for the purchase of bonds.
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 bonds 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
bonds. An investment in bonds is not appropriate for you if you
must rely on cash distributions with respect to their bonds 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 bonds. For Qualified Plans and IRAs, the minimum
investment is $2,000 in principal amount of the bonds.
Minimum Net Worth/Income. Except with respect to Qualified
Plans and IRAs, bonds will be sold to you only if you represent
in writing:
* your net worth is at least $65,000 in excess of the proposed
investment in the bonds and you have an annual gross income of at
least $65,000, or
* irrespective of annual gross income, your net worth is at
least $225,000, or
* 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.
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<PAGE>
All computations of your net worth must exclude the value
of your principal residence, its furnishings, and personal
automobiles. All other assets should be valued at their fair
market value.
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
must do the following to subscribe to purchase bonds. You must
personally execute the Subscription Agreement and deliver it to
National or selected dealer soliciting the investment with
payment of the purchase price for the bonds. 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 bonds is sold within the minimum offering period,
subscription payments will continue to be deposited and cleared
through the escrow account.
IBF VI and National 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, National, and the selected dealers
will have the right, but not the obligation, to subscribe for and
purchase bonds for their own account for investment purposes,
subject to the terms and conditions contained herein. Such
affiliates may purchase bonds prior to sale of the minimum
$500,000 of bonds, which will count toward the achievement of the
minimum requirement. All bonds 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 bonds. 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
- -22-
<PAGE>
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 bonds.
LEGAL MATTERS
The legality of the issuance of the bonds offered hereby
and certain other matters will be passed upon for IBF VI by
Lehman, Jensen & Donahue, L.C., Salt Lake City, Utah. Certain
matters will be passed upon for National by D'Ancona & Pflaum
LLC, of Chicago, Illinois.
EXPERTS
The financial statements of IBF VI as of September 30,
1999 and 1998, appearing in this Prospectus and Registration
Statement has been audited by Radin, Glass & Co., LLP,
independent auditors, as set forth in their report appearing
elsewhere herein, and are included in reliance upon such report
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 bonds 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 bonds 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.
- -23-
<PAGE>
INDEPENDENT AUDITOR'S REPORT
IBF VI - Participating Income Corporation
Washington, DC
We have audited the accompanying balance sheet of IBF VI -
Participating Income Corporation (A Development Stage Enterprise)
for the period June 8, 1998 (inception) through September 30,
1999 and the related statement of operations, change in
shareholder's equity and cash flows for the period June 8, 1998
(inception) through September 30, 1999. This financial
statements are 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. These 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 Corporation (A Development Stage
Enterprise) for the period June 8, 1998 (inception) through
September 30, 1999 and the results of its operations and its cash
flows for the period then ended in conformity with generally
accepted accounting principles.
RADIN, GLASS & CO., LLP
Certified Public Accountants
New York, NY
November 12, 1999
- -24-
<PAGE>
IBF VI - PARTICIPATING INCOME CORPORATION
(A Development Stage Enterprise)
BALANCE SHEET
December 31, September 30,
1998 1999
ASSETS
CURRENT ASSETS:
Cash $ 1,000 $ 189,195
TOTAL CURRENT ASSETS 1,000 189,195
DEBT ISSUANCE COSTS 26,276 87,081
DUE FROM AFFILIATE 249,000 -
$ 276,276 $ 276,276
STOCKHOLDER'S EQUITY
COMMON STOCK, $1 par value, 1,000 $ 1,000 $ 1,000
shares authorized, issued and outstanding
ADDITIONAL PAID-IN CAPITAL 275,276 275,276
$ 276,276 $ 276,276
- -25-
<PAGE>
IBF VI - PARTICIPATING INCOME CORPORATION
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
JUNE 8, 1998 TO SEPTEMBER 30, 1999
Cumulative
June 8, 1998 to January 1, 1999 to June 8,1998
December 31, September 30, September 30
1998 1999 1999
EXPENSES $ - $ - $ -
NET EARNINGS $ - $ - $ -
NET EARNINGS PER SHARE:
EARNINGS PER COMMON $ - $ - $ -
SHARE
WEIGHTED AVERAGE 1,000 1,000 1,000
SHARES
- -26-
<PAGE>
IBF VI - PARTICIPATING INCOME CORPORATION
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDER'S EQUITY
JUNE 8, 1998 TO SEPTEMBER 30, 1999
Additional Total
Common Stock Paid in Stockholder's
Shares Amount Capital Equity
Balance as of June 8,
1998 (inception) - $ - $ - $ -
Capital Contributions 1,000 1,000 275,276 276,276
Net Earnings for the
Period June 8, 1998 to
December 31, 1998 - - - -
Balance as of December
31, 1998 1,000 1,000 275,276 276,276
Capital Contributions - - - -
Net Earnings for the
Period January 1, 1999
to September 30, 1999 - - - -
Balance as of
September 30, 1999 1,000 $ 1,000 $275,276 $276,276
- -27-
<PAGE>
IBF VI - PARTICIPATING INCOME CORPORATION
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
JUNE 8, 1998 TO SEPTEMBER 30, 1999
Cumulative
June 8, January 1, June 8,1998
1998 to 1999 to to
December September September
31, 1998 30, 1999 30, 1999
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ - $ - $ -
NET CASH USED IN OPERATING
ACTIVITIES - - -
CASH FLOWS FROM INVESTING
ACTIVITIES:
Debt issuance costs (26,276) (60,805) (87,081)
NET CASH USED IN INVESTING
ACTIVITIES (26,276) (60,805) (87,081)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Capital contributions 276,276 - 276,276
Loan to parent (249,000) (335,000) (584,000)
Receipts from loan to parent - 584,000 584,000
NET CASH PROVIDED BY FINANCING
ACTIVITIES 27,276 249,000 276,276
NET DECREASE IN CASH AND CASH
EQUIVALENTS 1,000 188,195 189,195
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD - 1,000 -
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,000 $189,195 $ 189,195
- -28-
<PAGE>
IBF VI - PARTICIPATING INCOME CORPORATION
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. INITIATION OF BUSINESS
On June 8, 1998, IBF VI - Participating Income Corporation (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 September 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 December 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
bonds, Class A (the "bonds") of IBF VI - Participating Income
Corporation. The bonds may be subordinated to future Senior
Indebtedness of the Company. Any amount of the bonds is redeemable
at the option of the Company after January 1, 2001. bonds may be
redeemed at the request of the registered holders of the bonds
("Holders") under limited circumstances. The redemption value of
each bond is equal to 100% of its principal amount plus accrued
Interest and Additional Interest, if any.
The minimum principal amount of bonds 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.
- -29-
<PAGE>
IBF VI - Participating Income Corporation
Subscription Agreement
Initial Subscription
Additional Investment: Account Number Previously Assigned:
INVESTMENT
I desire to purchase $ aggregate
principal amount of IBF VI - Participating Income Corporation.
Make Checks Payable to: CSTTC Escrow Agent for IBF VI
Subscriber Information: Please clearly print name(s) in which Notes are to be
acquired. All checks and correspondence will go to the Investor Residence
Address unless specified otherwise in the Check Distribution Section
Investor 1 (First, Middle I., Last):
Investor 2 (First, Middle I. Last):
Registration For The Investment (How The Investment Should Be Titled):
Investor Residence Address 1: Check One Of The Following:
U.S. Citizen
Investor Residence Address 2:
Resident Alien
City, State ZIP Code Foreign Resident; Country ____
U.S. Citizen residing outside the U.S.
Occupation:
Check Distribution Information (if different):
Financial Institution (Bank, Trust Company, etc.):
Address:
City, State ZIP Code
Account Number:
Enter the taxpayer identification number. 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 IRAs, Keoghs, and
qualified plans, enter both the Social Security Number and the Taxpayer
Identification Number for the plan.
Social Security Number Taxpayer Identification Number (If
Applicable)
Form of Ownership (Individual, IRA, Trust, UGMA, Pension Plan, etc.)
Broker/Dealer - Registered Representative Information (To be completed by
Registered Representative)
I hereby certify that the investor(s) has read the prospectus and meets the
suitability requirements.
Broker/Dealer Firm Name:
Registered Representative:
Sales Representative Signature:
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 (and/or Tax Identification Number) and that interest income on
this account should be reported on this number. I acknowledge and agree to
this statement on the reverse side hereof.
Authorized Signature of Investor 1 Date
- -30-
<PAGE>
Authorized Signature of Investor 2 Date
Company's Acceptance (To be completed only by an authorized representative of
the Company.)
The foregoing subscription is accepted this ____________ day of
________________, _____
___________________________________
Authorized Representative of the Company
- -31-
<PAGE>
[Outside back cover]
================================== ==================================
Until _____________, 2000, 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 CORPORATION
underwriters and with respect [logo]
to their unsold allotments or
subscriptions.
- ------------------------------- Class A 10% Income
TABLE OF CONTENTS Participating Bonds
- ------------------------------
---------------------
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 ___________________ 2000
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.
==================================
- -32-
<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.
- -I-
<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. 2
Page E-1
2 (1) Selling Group Agreement Amend. 2
Page E-14
3 (3)(i) Certificate of Incorporation, as amended Initial Filing
Page E-17
3(a) (3)(i) Certificate of Amendment to Amend. 1
Certificate of Incorporation Page E-32
3(b) (3)(i) Certificates of Amendment to Amend. 2
Certificate of Incorporation Page E-18
4 (3)(ii) By-Laws Initial Filing
Page E-21
5 (4) Proceeds Escrow Agreement Amend. 2
Page E-34
6 (4) Indenture, with exhibits Amend. 2
Page E-27
7 (10) Management Agreement Amend. 1
Page E-114
8 (10) Cat Island Ventures Promissory Note, Amend. 2
Loan Agreement, and Security Agreement Page E-100
9 (10) Granjac Loan Agreement, Commercial Amend. 2
Loan Note, Agreement not to Encumber, Page E-114
Guaranty, and Collateral Assignment
- -II-
<PAGE>
10 (10) IBS Promissory Note, Loan Agreement Amend. 2
and Security Agreement Page E-157
10(a) (10) USM Secured Subordinated Term Note, Amend.
Secured Subordinated Revolving 2
credit Note, and Security Agreement Page E-
171
11 (5)(23) Opinion and Consent of Lehman, Amend.
Jensen & Donahue, L.C. 2
Page E-
187
12 (23) Consent of Radin, Glass & Co., LLP Amend.
2
Page E-
189
13 (25) Form T-1, Statement of Eligibility Initial
under Filing
the Trust Indenture Act of 1939 Page E-
195
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.
- -III-
<PAGE>
The undersigned registrant hereby undertakes to:
(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.
- -IV-
<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 January 13,
2000.
IBF VI - PARTICIPATING INCOME CORPORATION
By /s/ Simon A. Hershon, President
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, Chief Executive Officer January 13, 2000
and Director
/s/ Ehud D. Laska, Director January 13, 2000
/s/ Sidney E. Bostian, Chief Financial Officer January 13, 2000
and Director
- -V-
<PAGE>
E-1
Exhibit No. 1
IBF VI - Participating Income Corporation
Form SB-2, Amend. No. 2
File No. 333-71091
IBF VI - PARTICIPATING INCOME CORPORATION
(A Delaware corporation)
UNDERWRITING AGREEMENT
CLASS A 10% INCOME PARTICIPATING BONDS
$50,000,000
NATIONAL SECURITIES CORPORATION
_________________, 2000
875 N. Michigan Ave., Suite 1560
Chicago, Illinois 60611
Gentlemen:
IBF VI - Participating Income Corporation (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 Bonds ("Bonds"). The Company desires to offer the
Bonds for sale through Coleman & Company Securities, Inc. (the
"Underwriter"). The offering will be undertaken by the
Underwriter as agent for the Company on a "best efforts, $500,000
Bonds minimum-$50,000,000 Bonds maximum" basis so that in the
event $500,000 for the purchase of Bonds is not received within
the agreed period, no Bonds will be sold, and the Underwriter
will not be entitled to any compensation, except reimbursement of
out-of-pocket expenses. On these premises, we set forth the
terms of our proposed agreement as follows:
1. Appointment of Underwriter. The Company hereby
appoints the Underwriter, 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 Bonds.
2. Representations and Warranties of the Company. As an
inducement to, and to obtain the reliance of, the Underwriter in
connection herewith, the Company represents, warrants, and agrees
with the 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 Bonds 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
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.
- -E-1-
<PAGE>
(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 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 Bonds will be duly and validly
authorized and, when issued and paid for in accordance with
this Agreement and the Indenture dated _______________, 2000
("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 Bonds 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
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
- -E-2-
<PAGE>
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 Bonds
pursuant to the Filing, except with respect to applicable
federal and state securities laws.
(g) The Filing contains an audited balance sheets of
the Company as of September 30, 1999, and December 31, 1998,
and the related audited statements of operations, change in
shareholder's equity and cash flows for the period June 8,
1998 (inception) through September 30, 1999, 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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<PAGE>
(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 Underwriter. On the foregoing
representations, agreements, and warranties and subject to the
terms and conditions of this Agreement:
(a) The Company hereby employs the Underwriter as
exclusive agent to sell for the Company's account the Bonds.
The Underwriter 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 Bonds, subject to the terms, provisions, and
conditions hereinafter set forth.
(b) In the event the Underwriter does not find
subscribers for Bonds having a total aggregate purchase
price of $500,000 within three months following the
Effective Date (unless extended by agreement of the Company
and Underwriter 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 Bonds 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
Bonds hereunder within the specified time period.
(c) The Bonds shall be offered to the general public
at face value without discount; provided, that the
Underwriter may, at its discretion, waive its commission
under subsection 3(e), below, and offer Bonds at face value
less the amount of the commission so waived.
(d) The Underwriter is granted irrevocable authority
as agent for the Company to declare any contract to purchase
Bonds offered to the public hereunder in default if the
Bonds are not paid for in cash within seven business days
after the contract date. The Underwriter shall instruct
investors to make all checks tendered as payment for the
Bonds 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 Bonds 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 Bonds 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 Bonds 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
Underwriter's sales commissions and accountable expenses as
provided herein) shall be promptly paid to the Company and
the Underwriter's sales commission and accountable expenses
shall be paid to it.
(e) As its compensation, and subject to the sale of
$500,000 of Bonds, the Underwriter shall be entitled to
receive a commission of 8% of the principal amount of the
Bonds sold and for which payment is made to the Company. In
addition, the Underwriter will receive reimbursement for all
accountable out of pocket expenses. Finally, the
Underwriter shall be entitled to receive 2.0% of the
Company's annual Net Income for each calendar year through
2006. For purposes of
- -E-4-
<PAGE>
this provision, Net Income shall be
calculated in the same manner as set forth in the Indenture.
In the event the Underwriter does not find subscribers for
Bonds having a total aggregate purchase price of $500,000
within three months following the Effective Date (unless
extended by agreement of the Company and Underwriter for an
additional period not to exceed three months), the
Underwriter will be reimbursed only for its actual
accountable out of pocket expenses.
(f) The Company agrees to issue or have issued Bonds
in such names and denominations as may be specified by the
Underwriter and to deliver certificates representing the
Bonds to the purchasers in accordance with the Indenture
against payment of the purchase price of the Bonds net of
the Underwriter's sales commissions (including the
Underwriter's accountable expenses), 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 Bonds as provided in subsection 3(b)
hereof as shall be agreed on by the Underwriter 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 Bonds to the purchasers (a "subsequent time of
closing"). All requisitions for Bonds by the Underwriter
shall be in writing and shall be given to the Company before
the delivery date.
(g) The Underwriter is 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. The
Underwriter will use the services of Coleman & Company
Securities, Inc., an affiliate of the Company ("Coleman") to
assist the Underwriter in making wholesale distribution of
the offering to the selling group of participating dealers.
Participating dealers are to act as agents and shall be
allowed to purchase on an equal basis from the Underwriter
at a price which provides a concession out of the
Underwriter's commissions in such amount as the Underwriter
may determine, but in no event in excess of 7.5% of the
principal amount of the Bonds sold by the participating
dealers and for which payment is made to the Company. For
the services rendered by Coleman, it will receive from the
Underwriter 0.5% of the principal amount of the Bonds sold
and for which payment is made to the Company.
(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 Bonds.
4. Representations and Warranties of the Underwriter. As an
inducement to, and to obtain the reliance of, the Company in
connection herewith, the Underwriter represents, warrants, and
agrees with the Company as follows:
(a) The Underwriter is duly registered as a securities
broker-dealer in accordance with the Securities Exchange Act
of 1934, as amended.
(b) The Underwriter will not publish, issue, or
circulate or authorize the publication, issuance, or
circulation of any circular, notice, or advertisement which
offers the Bonds 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 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.
- -E-5-
<PAGE>
(d) The 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 do so.
The 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 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
Underwriter shall be provided with a copy of such Filing or
amendment, and no such Filing will be made to which the
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 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 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 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 Underwriter may reasonably request.
(e) The Company will deliver to the 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 Underwriter, and will
deliver to the Underwriter, without charge, such reasonable
number of copies of the Registration Statement and
Prospectus (excluding exhibits) and all amendments thereto
as the Underwriter may reasonably request.
(f) Prior to the Termination Date if, in the opinion
of the Underwriter, any statements are contained in the
Filing which are misleading or inaccurate in light of the
circumstances under which they are made, the 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.
- -E-6-
<PAGE>
(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,
registrations and qualifications of the Bonds as will permit
the public offering thereof under the "Blue Sky Laws" of
such states as the Underwriter 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 Underwriter and
shall notify the Underwriter, in writing, of those states in
which the Bonds may be offered and sold pursuant to the
terms hereof. The 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 Bonds; (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 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 Bonds which the Underwriter may make or to
pay for any of the 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 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
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
Underwriter, to all holders of record of the Company's
Bonds, 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.
- -E-7-
<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 agrees to indemnify and hold harmless
the Underwriter and any person who may be deemed to control
the Underwriter within the meaning of section 15 of the
Securities Act; and
(b) The Underwriter 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 Bonds 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 Underwriter 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 Underwriter or on behalf of the Underwriter 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 Underwriter 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 Bonds.
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<PAGE>
7. Conditions to Obligations of the Company. The
obligation of the Company to deliver the Bonds being sold by the
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 Bonds (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 Underwriter.
8. Conditions to the Obligations of the Underwriter. The
several obligations of the 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
Underwriter expressly for use therein shall not be
considered within the scope of this provision.
(b) The 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 Underwriter, is material or omits to state a fact
which, in the opinion of the 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 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
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
the consummation of the transactions herein contemplated and
no substantial change,
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<PAGE>
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
Underwriter's judgment, than as set forth in the Filing.
(f) The Underwriter shall have been furnished at the
time of closing and at each subsequent time of closing, if
any, with such certificates as the 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 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 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 Bonds have been duly and validly
authorized and are fully paid and non-assessable; and
the description of the Bonds 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
Bonds 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
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 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
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).
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 Bonds pursuant to this
Agreement shall be satisfactory as to legal aspects to the
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
Bonds proposed to be sold shall be such as, in the
Underwriter's reasonable judgment, would seriously affect
the offering, sale, or delivery to the public of the Bonds,
or would render such delivery at the initial public offering
price impracticable or inadvisable, the 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
Underwriter. The term "initial public offering" means the
first publication authorized by the Underwriter, following
effectiveness of the Filing, of a newspaper advertisement
relating to the Bonds to be offered pursuant to this
Agreement, or the first allotments or confirmations by the
Underwriter of any of the Bonds to customers or dealers or
others by letter or telegram, whichever shall occur first.
The Underwriter 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
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
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 Underwriter.
If the sale of the Bonds 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 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) __________________;
(ii) The date on which the escrow period set
forth in subsection 3(b) expires without the minimum
number of Bonds having been subscribed to;
(iii) The date on which all offered Bonds
are sold.
10. Miscellaneous Provisions.
- -E-11-
<PAGE>
(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
Bonds contemplated herein for a period of three years.
(c) This Agreement has been and is made solely for the
benefit of the 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 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 Bonds from
the 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 Underwriter, shall be mailed, delivered, or telegraphed
to it at the following address:
National Securities Corporation
875 N. Michigan Ave., Suite 1560
Chicago, Illinois 60611
Attn: Steven A. Rothstein, Chairman
with copies to:
Arthur Don, Esq.
or Steve Curtis, Esq.
D'Ancona & Pflaum LLC
111 East Wacker Drive, Suite 2800
Chicago, IL 60601
or, if sent to the Company, shall be mailed, delivered, or
telegraphed and confirmed to it at the following address:
IBF VI - Participating Income Corporation
1733 Connecticut Avenue, NW
Washington, D.C. 20009
Attn: Simon A. Hershon, President
with copies to:
Mark E. Lehman, Esq.
Lehman, Jensen & Donahue, L.C.
- -E-12-
<PAGE>
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.
(g) The representations, warranties, and undertakings
herein on the part of the Company and the 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 Bonds 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 Corporation
By____________________________________
Simon A. Hershon, President
The foregoing Underwriter Agreement is accepted as of the
date first above written.
National Securities Corporation
By____________________________________
Steven A. Rothstein, Chairman
- -E-13-
<PAGE>
Exhibit No. 2
IBF VI - Participating Income Corporation
Form SB-2, Amend. No. 2
File No. 333-71091
SELLING GROUP AGREEMENT
$50,000,000
CLASS A 10% INCOME PARTICIPATING BONDS
IBF VI - Participating Income Corporation
_________________, 2000
Gentlemen:
We have agreed to act as the agent of IBF VI - Participating
Income Corporation, a Delaware corporation (the "Company"),
pursuant to an Underwriting Agreement between the Company and us
(the "Underwriter"), 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 Bonds
("Bonds"). The Bonds 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 Bonds. As a Selling Group Member, you will be allowed,
subject to the sale of $500,000 of Bonds in the public offering,
a concession on all Bonds sold by you in the offering as set
forth on Exhibit A attached hereto. Subject to the sale of
$500,000 of Bonds, payment of such concession will be made within
five business days after each closing contemplated by the
Underwriting Agreement. The Bonds 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 Bonds. No Selling Group Member is authorized to act as agent
for us when offering the Bonds 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 Bonds purchased by your customers
shall be made, with
- -E-14-
<PAGE>
respect to payments by checks, by
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
Bonds 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 Underwriting
Agreement, subject to the sale of the minimum amount of Bonds.
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 Bonds 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 Underwriting 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 Bonds 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 Bonds 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-15-
<PAGE>
Please confirm your agreement hereto by signing and
returning to us by fax and overnight courier at National
Securities Corporation, 875 N. Michigan Ave., Suite 1560,
Chicago, Illinois 60611, 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,
National Securities Corporation
By____________________________________
Duly Authorized Officer
AGREED AND ACCEPTED as of the date first-above written.
Selling Group Member:
________________________________________
By____________________________________
Duly Authorized Officer
Address of Selling Group Member
_______________________________________
_______________________________________
_______________________________________
- -E-16-
<PAGE>
Exhibit A
COMPENSATION TERMS
1. Concession. Selling Group Member will receive a concession
equal to _______% of the gross sale price of Bonds offered and
sold by the Selling Group Member.
2. Additional Compensation. Selling Group Member is entitled
to the following additional compensation:
- -E17-
<PAGE>
Exhibit No. 3(b)
IBF VI - Participating Income Corporation
Form SB-2, Amend. No. 2
File No. 333-71091
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
IBF VI - PARTICIPATING INCOME FUND
(Changing its name to "IBF VI - Participating Income
Corporation")
IBF VI - PARTICIPATING 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
Corporation.
IN WITNESS WHEREOF, IBF VI - Participating Income Fund has
caused this Certificate to be signed by its duly authorized
officer this 4th day of August, 1999.
IBF VI - PARTICIPATING INCOME FUND
By: /s/ Simon A. Hershon, President
- -E-18-
<PAGE>
E-26
Exhibit No. 5
IBF VI - Participating Income Corporation
Form SB-2, Amend. No. 2
File No. 333-71091
PROCEEDS ESCROW AGREEMENT
PROCEEDS ESCROW AGREEMENT ("Agreement") dated as of
________________, 2000, by and between IBF VI - Participating
Income Corporation, a Delaware corporation (the "Company"),
National Securities Corporation, a ______________ corporation
(the "Underwriter"), 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 $500,000 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 Underwriter 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.
- -E-19-
<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 Underwriter.
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 ________________,
2000, 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 Underwriter , 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
Underwriter (or as otherwise instructed by the Company and
Underwriter) 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
_________________, 2000, 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-20-
<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 Underwriter
have designated a banking corporation, trust company, attorney or
other person as successor. Upon receipt of such written
instructions signed by the Company and Underwriter, 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 Underwriter 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 Underwriter, 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).
- -E-21-
<PAGE>
if to the Company:
IBF VI - Participating Income Corporation
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 Underwriter:
National Securities Corporation
875 N. Michigan Ave., Suite 1560
Chicago, Illinois 60611
Attn: Steven A. Rothstein, Chairman Fax: ( )______________
with a copy to:
D'Ancona & Pflaum LLC
111 East Wacker Drive, Suite 2800
Chicago, IL 60601
Attention: Arthur Don, Esq.
or Steve Curtis, Esq.
Fax: (312) 602-3000
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.
- -E-22-
<PAGE>
(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
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 CORPORATION
By____________________________________
Duly Authorized Officer
NATIONAL SECURITIES CORPORATION
By____________________________________
Duly Authorized Officer
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By____________________________________
Duly Authorized Officer
- -E-23-
<PAGE>
EXHIBIT A
Forms of Receipt of Funds by Escrow Agent
[Date]
IBF VI - Participating Income Corporation
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
___________, 2000, we confirm receipt of the amount of
$_____________________ today for deposit into the Escrow Fund.
Very truly yours,
_______________________________________
- -E-24-
<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 _______________, 2000.
IBF VI - PARTICIPATING INCOME CORPORATION
By____________________________________
Duly Authorized Officer
NATIONAL SECURITIES CORPORATION
By____________________________________
Duly Authorized Officer
- -E-25-
<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 CORPORATION:
Name Title Signature
On Behalf of NATIONAL SECURITIES CORPORATION
Name Title Signature
- -E-26-
<PAGE>
Exhibit No. 6
IBF VI - Participating Income Corporation
Form SB-2, Amend. No. 2
File No. 333-71091
IBF VI - PARTICIPATING INCOME CORPORATION, as Issuer
And
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Trustee
INDENTURE
Dated as of _________________, 2000
$50,000,000
Class A 10% Income Participating Bonds
Due December 31, 2006
- -E-27-
<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 Insurance24
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
- -E-28-
<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-29-
<PAGE>
ARTICLE VIII. DISCHARGE OF INDENTURE; DEFEASANCE 44
SECTION 8.01 Discharge of Indenture 44
SECTION 8.02 Legal Defeasance and Convenat Defeasance45
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 Bonds 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 SeniorIndebtedness 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-31-
<PAGE>
INDENTURE, dated as of ______________, 2000, between IBF VI
- - PARTICIPATING INCOME CORPORATION, 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 Bonds Due
December 31, 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-32-
<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-33-
<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.
- -E-34-
<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
protection agreements,
- -E-35-
<PAGE>
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,
- -E-36-
<PAGE>
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, 2006.
"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.
- -E-37-
<PAGE>
"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
- -E-38-
<PAGE>
Agreements of Depository Institutions with 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.
- -E-39-
<PAGE>
"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 or
effected at the request of the legal representative of the estate
of a deceased Holder or joint Holder (or if the Holder is an
Individual Retirement Account, the deceased owner of such
account) 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
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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,
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 Bonds due December 31, 2006, 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.
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"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.
"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:
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(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with 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.
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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
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
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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
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.
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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
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
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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,
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
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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 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
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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 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
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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
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.
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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 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;
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(viii) the CUSIP number, if any, relating to such
Securities pursuant to Section 2.14 hereof; and
(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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<PAGE>
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
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<PAGE>
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.
(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
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of any shares of Capital Stock 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
extended
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<PAGE>
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
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<PAGE>
dissolve 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 Acquisition
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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<PAGE>
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
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<PAGE>
amount of $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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<PAGE> (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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<PAGE>
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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<PAGE>
(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
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<PAGE>
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the
claim of any Securityholder in any such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this Article
VI or otherwise, 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
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<PAGE>
remedy 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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<PAGE>
(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,
direction,
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<PAGE>
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
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expense, 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
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respect of the Principal of 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 the
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<PAGE>
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
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<PAGE>
repaid to the Company. After 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
immediately preceding
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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 of
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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
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account of any
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,
property or securities of the Company to
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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
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collection or
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 Bonds.
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
Corporation
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
PARTIES
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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 CORPORATION, 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 CORPORATION
Class A 10% Income Participating Bonds due December 31, 2006
No. $
IBF VI - PARTICIPATING INCOME CORPORATION, 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, 2006,
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 ___________,
2000 (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
Bonds due December 31, 2006. 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 Corporation, 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: ______________, 2000
IBF VI - PARTICIPATING INCOME
CORPORATION
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
- -E-95-
<PAGE>
IBF VI - PARTICIPATING INCOME CORPORATION
Class A 10% Income Participating Bonds due December 31, 2006
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. Securities 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 Securities 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.
In the event of the death of a Holder or joint Holder (or if
the Holder is an Individual retirement Account, the death of the
owner of such account), the legal representative of the estate of
the decedent may tender the Security in whole, not in part, for
redemption at the Redemption Price stated in the Indenture. To
effect redemption, the legal representative shall deliver to the
Company notice of redemption with the Security during the six-
month period following the date of death of the deceased Holder
or Individual Retirement Account owner. The notice of
- -E-96-
<PAGE>
redemption
is irrevocable, and is subject only to the Company's acceptance.
Securities 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.
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
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.
- -E-97-
<PAGE>
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.
- -E-98-
<PAGE>
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.
- -E-99-
<PAGE>
E-113
Exhibit No. 8
IBF VI - Participating Income Corporation
Form SB-2, Amend. No. 2
File No. 333-71091
PROMISSORY NOTE
$6,000,000.00 Nassau, New Providence Island
Commonwealth of the Bahamas
March 17, 1999
WITNESSETH, FOR VALUE RECEIVED, the undersigned, Cat Island
Ventures, Ltd. acting by and through its Shareholders, Anguilla
Beach Development Company Limited and CIV Holdings, Ltd. (the
"Borrowers"), promise to pay to IBF/Bahamas Limited (the
"Lender") or ORDER, the principal sum of U.S. SIX MILLION DOLLARS
(U.S. $6,000,000.00), or so much thereof as may be advanced by
Lender to the undersigned pursuant to the terms of a Loan
Agreement of even date herewith between Lender and the
undersigned (the "Loan Agreement"), lawful money of the United
States of America, with interest from this date, on the principal
sum advanced and outstanding from time to time, at a rate per
annum equal to twelve percent (12%). The said principal and all
accrued interest shall be payable in full at the office of
Lender, or at such other place as the holder may, from time to
time, designate in writing TWO (2) YEARS after the date hereof,
(which if not then paid accrues interest at the accrual rate of
the highest annual rate allowed under the law governing the
note.) provided that interest only, on the principal sums
advanced and outstanding, shall be due and payable on the first
(1st) day of each month hereafter commencing on April 1, 1999.
Borrowers shall have the option to extend the due date for
one (1) additional year on the terms set forth in the Loan
Agreement.
AND IT IS HEREBY EXPRESSLY AGREED that the entire principal
sum from time to time outstanding hereunder and all accrued and
unpaid interest thereon shall become due and payable, at the
option of Lender, (i) after default for ten (10) days in the
payment of any sum due hereunder, or (ii) after default in the
performance of any covenant or agreement contained in the Loan
Agreement, or in the security instruments therein referred to,
which shall not have been remedies within twenty (20) days after
written notice thereof shall have been given by Lender.
This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement
of any change, waiver, modification, or discharge is sought.
In case recourse to the courts by the holder of this Note becomes
necessary in order to collect the whole or any unpaid part
thereof together with all accrued interest thereon, the
undersigned agrees to pay any and all court expenses,
disbursements, and reasonable attorney's fees which may be
incurred. Further, Mortgagee is authorized as Mortgagor's
attorney in fact to confess judgment in favor of Mortgagee in any
action brought to enforce the terms hereof.
Presentment, protest, demand, and notice of non-payment are
hereby waived.
This Note is being issued pursuant to the Loan Agreement,
and is secured by the security instruments therein referred to,
and is subject to all of the terms and conditions of the said
Loan Agreement and security instruments as if the same were
herein set forth at length, and any default by the
- -E-100-
<PAGE>
undersigned
under any of the said instruments shall constitute a default
under this Note, except as set forth to the contrary herein or in
the said Loan Agreement.
ANGUILLA BEACH DEVELOPMENT CIV HOLDINGS, LTD., a Bahamian
COMPANY LIMITED, a Baharnian Corporporation,
Corporation
By: By:
President President
Attest: Attest:
Secretary Secretary
CAT ISLAND VENTURES, LTD
BY:
President
Attest:
Secretary
- -E-101-
<PAGE>
LOAN AGREEMENT
This Loan Agreement (the "Agreement") is made as of the 17th day
of March, 1999, by and between Cat Island Ventures, Ltd., a
Bahamian corporation, Anguilla Beach Development Company Limited,
a Bahamian corporation, and CIV Holdings, Ltd., a Bahamian
corporation (all. herein the "Borrowers") and IBF/Bahamas
Limited, a Bahamian corporation, which is an affiliate entity of
InterBank Funding Corporation (collectively herein "Lender").
This Agreement is to acknowledge that all of the terms of a
certain loan in the amount of $6,000,000 from Lender to the
Borrowers hereto are incorporated in the following documents and
all of these said terms in these documents shall survive the
closing and recordation of any Indenture of Mortgage/regarding
said loan: (1) a promissory note in the principal amount of
$6,000,000 dated 3/17, 1999, which is attached hereto as Exhibit
A; (2) a loan commitment letter dated February 25, 1999 from
InterBank, Funding Corporation to Mr. Ervin Knowles, Anguilla
Beach Development Co., Ltd., which is attached hereto as, Exhibit
B; and (3) the Heads of Agreement dated February 25, 1999 which
is attached hereto as Exhibit C.
It is further understood and agreed that VANDAN Enterprises, LLC,
a New York limited liability company described in the Heads of
Agreement incorporated herein as Exhibit C has assigned any and
all rights and/or obligations under said Heads of Agreement to
CIV Holdings, Ltd., a Bahamian corporation.
Cat Island Ventures, Ltd., a Bahamian Anguilla Beach
Development Company
Corporation Limited, a Bahamian
corporation
By: By:
CIV Holding, Ltd., a Bahamian corporation IBF/Bahamas Limited,
a Bahamian
corporation
By: By:
InterBank Funding Corporation VANDAN Enterprises, LLC
By: By:
- -E-102-
<PAGE>
LIMITED GUARANTY
GUARANTY, dated February 26th 1999 (this "Guaranty", by
Ervin Knowles and Brendan Sullivan having an address at Shirley
Street Nassau, Bahamas (the "Guarantors"), in favor of
IBF/Bahamas, Limited (the "Lender").
R E C I T A L S
WHEREAS, Lender has agreed to advance to Cat Island
Ventures, Limited, ("Borrower") the sum total of $6,000,000
(the "Loan") pursuant to a Loan Agreement, Note, and Mortgage
(the "Obligations");
WHEREAS, Guarantors are principals of Borrower; and
WHEREAS as a condition to making the Loan, Lender has
required that Guarantors execute and deliver this Limited
Guaranty with respect to the Obligations.
NOW, THEREFORE, in consideration of the promises and
covenants contained herein after and for good and valuable
consideration received Guarantors, jointly and severally, hereby
agree as follows:
1. Guaranty. Guarantors hereby unconditionally agree to
be personally liable to pay the following:
(a) all losses, damages, costs, and expenses including
attorneys' fees and expense incurred by Lender as a result
of:
(i) fraud:
(ii) material misrepresentation:
(iii) misapplicaton or misappropriation of funds which come
into the possession of Borrower:
(iv) intentional or material waste to the Property:
(v) the breach of the provisions regarding transfers of the
Property: and
(vi) the breach of the provisions regarding no additional liens.
2. Waiver. Guarantors hereby waive, promptness,
diligence, notice of acceptance and any other notice with respect
to any of the Obligations and this Guaranty and other
requirements that the Lender exhaust any right or take any action
against Borrower or any other person, entity or collateral.
Guarantors also hereby waive any claim, right, or remedy which
they may now have or hereafter acquire against Borrower that
arises hereunder or from the performance of Borrower under the
Obligations, including, without limitation, any claim, remedy or
right of subrogation reimbursement exoneration, indemnification,
or participation in any claim, right, or remedy of Lender against
Borrower or any security which Lender now has or hereafter
acquires, whether or not such claim, right, or remedy arises in
equity, under contract, by statute, under common law, or
otherwise. Guarantors further agree that their obligations under
this Guaranty shall not be subject to any counterclaims, offsets,
or defenses of Borrower of any kind which may arise in the
future.
3. Continuing Guaranty: Termination. Guarantors agree
that this Guaranty is a continuing guaranty and shall remain in
full force and effect until the payment and performance or
satisfaction in full of the Obligations. This Guaranty shall
terminate and be of no further force or effect at such time as
the Obligations shall be paid and performed in full or otherwise
satisfied. Upon such termination, Lender shall deliver to
Guarantors such documents as Guarantors may reasonably request to
evidence such termination.
- -E-103-
<PAGE>
4. Expenses. Guarantors agree to pay all costs and
expenses (including, without limitation, reasonable attorneys'
fees and disbursements) paid or incurred by Lender in connection
with the enforcement or protection of the right of Lender under
this Guaranty.
5. No Waiver. No failure or delay on the part of Lender in
exercising any right, power, or privilege hereunder and no course
of dealing between Guarantors and Lender shall operate as a
waiver thereof, nor give rise to any estoppel against Lender, nor
shall any single or partial exercise of any right, power, or
privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.
6. Benefit of Guaranty. This Guaranty shall be binding
upon and inure to the benefit of the assigns of Lender.
7, Governing Law, This Guaranty shall be construed in
accordance with and be governed by the substantive laws of the
Commonwealth of the Bahamas, without giving effect to any
provisions regarding, conflict of laws thereunder.
8. Descriptive Headings. The captions in this guaranty are for
convenience of reference only and shall not define or limit the
provisions hereof.
IN WITNESS WHEREOF, Guarantors have executed and delivered
this guaranty as of the date first above written.
Ervin Knowls
Brenden Sullivan
- -E-104-
<PAGE>
COMMONWEALTH OF THE BAHAMAS
New Providence
THIS INDENTURE OF MORTGAGE is made on the date set out in
Item 1 of the Schedule hereto BETWEEN ANGUILLA BEACH DEVELOPMENT
COMPANY LIMITED a company incorporated in accordance with the
Laws of The Bahamas whose Registered Office is located a Samuel
H. Evan House, Shirley & Christie Streets, Nassau, the Bahamas
(hereinafter called "the Surety") of the one part AND CAT ISLAND
VENTURES LTD. also a company incorporated in accordance with the
Laws of the Bahamas whose Registered Office is located at Samuel
H. Evans House, Shirley & Christie Streets, Nassau, The Bahamas
(hereinafter called "the Borrower ") of the second part AND
IBF/Bahamas Limited a company incorporated in accordance the Laws
of The Bahamas whose Registered Office is located at Samuel H.
Evans House, Shirley & Christie Streets, Nassau, The Bahamas
(hereinafter called "the Lender") of the Third part.
WHEREAS:
(A) The Surety is seised in fee simple in possession of the
hereditaments (hereinafter referred to as "the said
hereditaments") described in the Schedule hereto subject to the
restrictions and encumbrances noted but otherwise free from
encumbrances.
(B) The Lender has agreed with the Borrower to lend to the
Borrower up the principal sum of U.S. 6 Million (hereinafter
referred to as "the Principal Sum") upon having the repayments
thereof with interest thereon at the rate hereinafter mentioned
secured in the manner hereinafter appearing
NOW THIS INDENTURE WITNESSETH as follows:
1. In pursuance of the said agreement and in consideration of
the Principal Sum now paid by the Lender to the Borrower (the
receipt whereof the Borrower hereby acknowledges) the Borrower
and the Surety hereby covenants with the Lender to pay to them on
the day of , A.D.199 or on such later date
as may be agreed between the parties the Principal Sum with
interest thereon in the meantime at 12 percent (12%) per annum
and compliance with further terms set forth in a certain loan
agreement dated day of A.D., 19 , between AND
AND thereafter so long as any principal money shall remain owing
under this security to pay to the Lender interest thereon at the
same rate.
2. In further pursuance of the said agreement and in
consideration of the premises the Surety AS BENEFICIAL OWNER:
(1) Hereby grants and conveys unto the Lender ALL the said
hereditaments TOGETHER WITH the appurtenances thereunto belonging
AND TOGETHER WITH ALL easements rights and privileges (if any)
appurtenant thereto TO HOLD the same unto and to the use of the
Lender and its assigns in fee simple subject to the Restrictive
covenants and other incumbrances (if any) hereto and to the
proviso for redemption hereinafter contained; PROVIDED that the
Borrower shall pay to the Lender the Principal Sum and interest
thereon in accordance in all respects with the terms hereof the
Lender at any time thereafter at the request and cost of the
Borrower will reconvey the said hereditaments to the Surety or as
the Surety shall direct.
3. The Borrower and the Surety hereby convents with the Lender
as follows: -
- -E-105-
<PAGE>
(1) During the continuance of this security to observe and
perform all restrictive and other covenants all building
regulations and all restrictions conditions and stipulations (if
any) for the time being affecting the said hereditaments or the
mode of user or enjoyment of the same or any part thereof and to
indemnify the Lender against all actions cost claims and demands
arising out of the breach or non-observance thereof or any or
them during the continuance of this security.
(2) At all times during the continuance of .this security
duly and regularly to pay all taxes, rates, assessment and
outgoing now or hereafter to become due and payable in respect of
the said hereditaments, and to produce on demand all receipt and
vouchers in proof of such payment and that if the Borrower and
the Surety shall make default in any of the above matters the
Lender may at any time pay all or any such taxes assessments, and
outgoings and impositions and that its, disbursements and
expenses in so doing shall be repaid to it by the Borrower on
demand and until so repaid shall be added to the Principal moneys
hereby secured and bear interest accordingly.
(3) At all times during the continuance of this security to
keep all buildings being upon or forming part of the said
hereditaments and all fittings drains gates walls fences lawns
gardens and things on the said hereditaments including all
fixtures and additions thereto in good and substantial repair and
condition to the satisfaction of the Lender and to do all things
necessary and proper for keeping up the value of the said
hereditaments in order that the security hereby given may not be
depreciated or lessened in value, and the Lender shall be
entitled by its officers or agents with or without workmen or
servants at all reasonable times to enter the said hereditaments
or any part thereof and to view search and see the state and
conditions thereof and the conditions and order of the said
buildings fittings drains gates walls fences lawns gardens and
things with, full and free rights of ingress egress and regress
for such purpose and of all decays defect and wants of reparation
and amendment found upon such inspection to give or leave notice
in writing to or with the Borrower and thereupon the Borrower
will faithfully make good repair and supply according to any
notice given hereunder.
(4) At all times during the continuance of this security to
keep the buildings for the time being comprised in or subject
this security insured against loss or damages by fire hurricane
storm tempest flood and such other risks as the Lender may from
time to time stipulate to the full insurable value thereof with
some insurance office or underwriters approved of by the Lender
and duly and punctually to pay all premiums and other payments
required for effecting and keeping up such insurance as and when
the same shall become due and deliver to the Lender the policy or
policies of such insurance with the Lender's standard mortgage
clause annexed thereto and the receipt for each such payment.
(5) That all monies received by the Surety under any
insurance on the building for the time being comprised in or
subject to this security and on the Chattels effecting or
maintained under the foregoing covenant shall if the Lender so
requires be applied in making good the loss or damage in respect
of which the monies shall have been received or be paid to the
Lender and be applied by them toward the discharge of the monies
for the time being owing hereunder and the Borrower and the
Surety HEREBY IRREVOCABLY APPOINTS the Lender to be his Attorney
to ask demand sue for recover and receive and give valid
discharge for all monies which may become payable to the Borrower
under any such policy or policies of insurance with full power to
adjust compromise and submit to Arbitration and give receipts and
acquittances for and compound all or any claims under every such
policy.
(6) To protect the title to the said hereditaments and all
buildings and structure thereon and every part thereof against
loss from whatever cause including any legal proceedings and any
encroachments or the attempted acquisition or any easements and
to notify in writing the Lender of any
- -E-106-
<PAGE>
threat of any such
proceedings encroachments or attempted acquisition of easements
upon or over the said hereditaments or any part therof or any
building or structure thereon.
(7) Not at any time during the continuance of this security
make or cause to be made any alteration in the structure of the
buildings which are now or may hereafter be erected on the said
hereditaments without the prior consent in writing of the Lender.
(8) Not to sell lease or part with possession of the said
hereditaments or any part thereof without the prior written
consent of the Lender.
(9) Not to mortgage or allow to be charged with the payment
of any moneys the said hereditaments or any part thereof except
in favor of the Lender without the consent in writing first
obtained of the Lender which consent may not be arbitrarily
withheld and in the event that such consent may not be
arbitrarily withheld and in te event that such consent in writing
shall be so obtained any such mortgage or charge shall therein or
in each of them as the case may be declared to be subordinate to
the advance or release of moneys made under the terms of these
presents.
(10) On demand to repay to the Lender all costs charges and
expenses including any reasonable Attorney's fees incurred
hereunder by the Lender in relation to the preparation stamping
perfecting and discharge of the security and for collecting the
Principal Sum and interest or other payment due to the Lender and
until so repaid such cost charges and expenses shall be charged
upon the said hereditaments and shall be added to the mortgage
debt and bear interest at the same rate which interest shall be
payable for the time being under on the Principal Sum computed
for the time or respective times of paying or advancing the same.
4. PROVIDED ALWAYS AND IT IS HEREBY EXPRESSLY AGREED AND DECLARED
as follows:
(1) (a) The Lender may from time to time after giving to
the Borrower and the Surety at least three (3) of months previous
notice in writing of its intention so to do vary the rate of
interest which is then being commonly charged by the Lender may
consider to be of the same character as the said hereditaments
and the decision of the Lender thereon shall be final and
conclusive.
(b) Upon being served with a notice of Borrower's
increase of interest the Borrower and the Surety upon giving to
the Lender not less than Twenty one (21) days notice in writing
of his wish and intention to do so, may repay the mortgage debt
on the date of taking effect of the notice of increase without
bonus or prepayment charge.
(2) It shall be lawful for but not an obligation on the
Lender to advance and pay all sums of money necessary for the
purpose of keeping up any insurance on the building which are now
or may hereafter be erected on the said hereditaments or for
remedying any breach or breaches of covenant or obligation
statutory or otherwise imposed on the Borrower and the Surety or
implied by law under the provisions of this Mortgage and all
monies so paid and also all costs and expenses incurred by the
Lender in relation to any inspection and notice or the repairs or
amendments hereinbefore mentioned shall be repayable on demand
and shall bear interest at the same rate or rates at which
interest shall be payable for the time being hereunder on the
Principal Sum computed from time to time or respective times of
paying or advancing the same.
(3) That no neglect or omission on the part of the Lender
to take advantage of or enforce any right or remedy arising out
of any breach non observance or nonperformance of any covenant or
- -E-107-
<PAGE>
condition herein contained or implied shall be deemed to be or
operate as a general wavier of such covenant or condition herein
contained or implied shall be deemed to be or operate as a
general wavier of such covenant or condition or prejudice the
right of the Lender in effecting or taking advantage thereof
whether original or recurring.
(4) The taking of a judgement or judgements on any covenant
or covenants herein contained shall not operate as a merger of
the said covenant or covenants or affect the Lender's interest at
the rate and times herein set forth.
(5) Any notice to be served on the Borrower under or for
the purpose of any of the provisions of this Mortgage or the law
relating thereto shall be served by leaving the same upon the
said hereditaments or by sending the same by post addressed to
the Borrower at his address given herein or at any later address
which he may give in writing to the Lender and every notice sent
by post shall be deemed to be served on the Fifth day after the
day on which the letter envelope or wrapper containing the same
was posted.
(6) Subject as hereinafter provided if any installment of
principal and interest payable hereunder shall not be paid within
Fourteen (14) days of the due date (whether formally demanded or
not) then without prejudice to such other rights and remedies
accruing to the Lender hereunder consequent on such default such
installment so in arrears shall itself thenceforth bear interest
at the prevailing rate computed from the date upon which the same
shall have become payable to the date upon which such monies are
in fact paid AND in relation to overdue interest the same may at
the sole discretion of the Lender at any time be capitalized and
added for all purposes to the Principal Sum and bear interest
accordingly until actually paid AND FURTHER al1 overdue interest
whether capitalized or not together with all it overdue principal
moneys and the interest thenceforth accruing thereon shall be
secured in the same manner as the Principal Sum and all covenants
and provisions contained in these presents and all powers and
remedies conferred by law or by these presents and all rules of
law or equity in relation to the Principal Sum and the interest
thereon shall equally apply to such overdue installments (whether
the interest then due is capitalized or not) and to the interest
thenceforth accruing thereon which shall itself become interest
bearing and subject to capitalization at any time in the sole
discretion of the Lender PROVIDED NEVERTHELESS that all interest
payable under this sub-clause or under any other clause in this
Mortgage shall not directly or indirectly exceed the Maximum rate
of interest which may be lawfully charged Under the provisions of
the Rate of Interest Act, of the said Commonwealth of under any
other Act of the Legislature.
(7) The full amount of principal and all interest and
arrears of interest hereunder shall Forthwith become due and
payable and all of a mortgagee's powers of sale, foreclosure,
action, possession and of appointing a Receiver (and any other
powers and remedies of a mortgage) shall forthwith be or become
available to the Lender to recover the same and all expenses
incurred or to be incurred by the Lender in enforcing its
security hereunder in the event of any of the following
contingencies coming to pass:
(a) If two (2) or more of the monthly installments herein
provided for shall be in arrears and unpaid (whether lawfully
demanded or not).
(b) If the Borrower shall be struck off the Register of
Companies or shall enter into liquidation (other than a voluntary
liquidation solely for the purpose of amalgamation or
reconstruction) or a Receiver is appointed for debenture holders
or debenture stockholders of the Borrower.
- -E-108-
<PAGE>
(c) If the Borrower shall have any distress or Execution
levied against any property of the Borrower and the same is not
paid out within Seven (7) days.
(d) If there has been a breach of some provisions herein
contained or implied and on the part of the Borrower to be
observed or performed (other than the Covenant for the payment of
the Principal Sum and interest aforesaid) in respect of which
written notice has been given to the Borrower requiring him to
remedy such breach and which notice has not be complied with by
him within Thirty (30) days after service thereof.
(e) If foreclosure proceedings under any encumbrance or
charge in respect of the said hereditaments or any sale in
connection therewith shall be instituted.
(f) If the Surety shall make any disposition or otherwise
attempt to deal with the equity of redemption in the said
hereditaments or any part thereof without the written consent of
the Lender.
(g) If a judgment against the Borrower or the Surety
entered in the Supreme Court of the said Commonwealth and the
relevant writ of summons is not marked settled within Twenty one
(21) days of such entry.
(8) In the event of the appointment of a Receiver by the
Lender hereunder such Receiver shall have in addition to all
other powers to make allowances to and arrangements with present
and future tenants and occupiers of the said hereditaments or
other persons by whom rents may be payable and after applying all
moneys received by him in all necessary outgoings will pay the
residue (if any) of such moneys to the Lender to be applied by it
in discharge reduction of the moneys hereby secured.
(9) The Mortgage may be redeemed at any time during the
term hereof upon the payment of all principle and interest
thereon.
(10) Where the Borrower and the Surety desire to seek
premature redemption of this Mortgage, the said Borrower and the
Surety shall:
(a) Give not less than Thirty (30) days' written notice of
the Borrower's intention to redeem expiring the last day of any
month.
(b) Pay to the Lender the mortgage debt.
(c) In addition pay to the Lender a sum equal to Three (3)
months' interest on the mortgage debt outstanding on the date of
redemption by way of consideration for the Lender allowing the
premature redemption of this Mortgage.
(11) The Borrower and the Surety hereby attorns and becomes
tenant at will to the Lender of the said hereditaments at a
perppercorn rent during the continuance of this security but
nothing in this clause contained shall prevent the Lender from at
any time entering on and taking possession of the said
hereditaments and so determining the tenancy created but neither
the tenancy hereby created not the receipt of the said rent shall
render the Lender liable as a mortgage in possession.
(12) Sections 19 and 22 of The Conveyancing and Law of
Property Act shall not apply to these presents.
- -E-109-
<PAGE>
(13) During the continuance of this security the Surety
shall not without the prior consent in writing of the Lender
grant or agree to grant any lease or tenancy of the said
hereditaments or any part thereof or accept or agree to accept a
surrender of any lease or tenancy thereof.
(14) If the Lender shall enter into possession of the said
hereditaments or any part thereof as mortgage it may from to time
and in its sole discretion relinquish possession to the Borrower
and thereafter shall not be liable to account as mortgagee in
possess ion PROVIDED THAT notice of such fact is within Seven (7)
days after its happening served on the Borrower.
(15) The powers herein contained are in addition to and
without prejudice to and not in substitution for all other powers
and remedies vested in the Lender by Statue of Common Law for
recovering or enforcing payment of the monies hereby secured.
(16) The Borrower and the Surety (if a company) shall keep
at its Registered Office a Register wherein shall be entered the
name of the Lender as the holder of the Mortgage hereby created.
(17) The Borrower and the Surety hereby irrevocably appoints
the Investment manager for the time being of the Lender to be the
Attorney of the Borrower for the Borrower and in his name and on
his behalf and as his act and deed to executed and complete any
assurance agreement act or action which may be required or deemed
proper for any of the purpose of those presents.
(18) In the event that any change in any application law or
regulation or in the interpretation thereof by any governmental
or international authority shall make it unlawful for the Lender
to maintain or give affect to its obligations hereunder the
Borrower shall forthwith repay to the Lender the principal
amounts hereby secured with all accrued interest thereon.
(19) In the event of any compulsory acquisition of the said
hereditaments or any part thereof the Lender shall without
thereby becoming liable as a mortgagee in possession be entitled
to receive and give a good receipt for any moneys or other
valuable consideration paid or given in respect of such
compulsory acquisition and shall be at liberty in the absence of
agreement to the contrary to pay or apply the same in the like
manner as it might pay or apply the proceeds of any sale effected
by the Lender under and by virtue of any power of sale whether
statutory or otherwise.
(20) This Mortgage is the valid and legally binding
obligation of the Borrower and the Surety enforceable in
accordance with the terms hereof the making and performance of
which has been duly authorized by all necessary action corporate
or otherwise and will not violate or constitute a default under
any law or requirement or restriction imposed by any judicial
arbitral or governmental instrumentality any agreement or
instrument to which the Borrower and the Surety are parties or by
which their properties , may be bound or affected.
(21) None of the terms conditions or provisions of this
Mortgage may be amended varied altered or otherwise modified
unless such amendment variation alteration or modification is in
writing and duly signed by all parties hereto.
(22) The Lender may at any time transfer the benefit of
this Mortgage to anyone and in such case the redemption money at
the date of the transfer shall deemed to be the principal money
then owing and shall bear interest at the rate mentioned herein
from the date of the transfer and the transferee shall have the
benefit of all the covenants by the Borrower and the provisions
herein contained and may at
- -E-110-
<PAGE>
anytime thereafter exercise all
rights and remedies of the mortgagee for securing the Principal
Sum and interest.
(23) This Mortgage shall be a security not only for the
moneys intended to be hereby secured but also for any other
moneys that now or may hereafter become due to the Lender for the
Borrower whether by way of further advances or on any other
account whatsoever.
(24) It is a condition to the granting of this Loan that the
Lender accepts or incurs no liability to the Borrower or the
Surety his successors in title or an other Person or persons
whomsoever for any title defects, encumbrances or the like which
may now or hereafter exist over upon or in respect of the said
hereditaments and the Borrower hereby covenants with the Lender
that the Borrower shall save and keep harmless and indemnify the
Lender from and against all actions suits claims and demands
whatsoever in respect of such title defects encumbrances or the
like.
(25) The Lender shall not be answerable for any involuntary
loss happening in or about the exercise or execution of any power
conferred on the Lender by these presents or by Statute or of any
trust connected therewith.
(26) All agreements entered into between the Borrower and
the Lender prior to the date hereof shall survive the execution
of this Mortgage and shall not Merge therein unless expressly so
provided.
(27) The Borrower will at any time at the request of the
Lender but at the cost of the Borrower execute or obtain the
execution of any other or further mortgage change or other
document which the Lender or its Attorneys may in their
discretion think requisite or the security intended to be given
hereby and the Borrower will pay all costs charges and expenses
incurred or to be incurred by the Lender in respect hereof
including all costs charges and expenses which may be incurred or
sustained in obtaining payment of any moneys intended to be
hereby secured or in perfecting or enforcing this Mortgage or
such other or further mortgage charge or other documents as
aforesaid and the Borrower agrees that all such costs and
expenses may be added to this security and bear interest
accordingly.
(28) If any applicable law is interpreted by or governmental
agency charged with the interpretation thereof or is changed and
the effect of such interpretation or change is to cause any
reserve or special requirement against liabilities of or loans by
or other assets of the Lender to be imposed modified or deemed
applicable and the result is to increase the cost to the Lender
hereunder the Borrower shall pay the Lender on demand the
additional amounts to compensate the Lender for such increased
cost.
(29) In the event that the laws of the said Commonwealth
shall require that any payment of any amount due under this
Mortgage shall he subject to a deduction resulting form the
imposition of taxes levies impost duties withholding or other
charges or whatsoever nature the Borrower shall pay to the Lender
to receive a net amount (after deduction of all income franchise
and similar taxes of all jurisdiction attributable to such
additional payment) equal to the full amount which would have
been received by the Lender had no such deduction been made along
with receipts evidencing such deduction or withholding.
5. In this Mortgage where the context so admits the expressions
"the Lender" and "the Borrower" include persons deriving title
tinder the Lender and the Borrower
respectively, and
- -E-111-
<PAGE>
(a) The singular includes the plural, and vice versa;
(b) The masculine includes the feminine and the neuter, and vice
versa;
(c) Person" includes a corporation;
(d) "Item" means an Item in the Schedule hereto;
(e) "the Principal Sum" means the principal sum hereby advanced
and secured and set out in Item 3 of the Schedule hereto and the
balance of the same remaining owing from time to time;
(f) "the mortgage debt" includes the Principal Sum and all
interest and other monies added thereto under the provisions of
this Mortgage;
(g) Where there are two or more persons included in the
expression "the Borrower" covenants expressed to be made by the
Borrower shall be deemed to be made by such persons jointly and
severally.
6. This Mortgage shall take effect and shall be constructed and
interpreted in all respects according to the laws of the said
Commonwealth.
7. The clause titles inserted in the margins hereof are for
convenience only and shall not affect the construction of this
Mortgage.
THE SCHEDULE HEREINBEFORE REFERRED TO
Item 1. DATE OF MORTGAGE: day of , A.D.,
1999
Item 2. MORTGAGE PERIOD: The period of two years from
the date set out in Item 1.
Provided that the Borrower shall
have the option to
extend the terms for a third year
with the approval of the
Lender which shall not be
unreasonable withheld.
Item 3. THE HEREDITAMENTS HEREINBEFORE REFERRRED TO AS
"the said hereditaments".
THE SCHEDULED HEREINBEFORE REFERRED TO
ALL THAT tract of land containing One thousand Four hundred and
Seven and Twelve hundredths (1.407.12) acres froming a part of a
tract of land known as "Anguilla Estate" situate in the vicinity
of the Settlement of Arthur's Town in the Island of Cast Island
one of the Bahama Islands which ssaid tract of land has such
position shape marks boundaries and dimensions as are shown on
the diagram or plan hereto attached and is delineated on the part
of the said diagram or plan which is coloured Pink
IN WITNESS WHEREOF the Surety(s) has caused
its Common Seal to
be hereunto affixed the day and year first
hereinbefore written
____________________________________
The Common Seal of Angilla Beach Development, Ltd was affixed
hereto by Ervin Knowles the President of the said Company and the
said Ervin Knowles subscribed his signature hereto in the
presence of:
- -E-112-
<PAGE>
_____________________________________
IN WITNESS WHEREOF the Borrower(s) has caused
its Common
Seal to be hereunto affixed the day and year
first hereinbefore written
_____________________________________
The Common Seal of Cat Island Ventures Ltd. was affixed hereto by
Brenden Sullivan the President of the said Company and the said
Brenden Sullivan subscribed his signature hereto in the presence
of :
______________________________________
- -E-113-
<PAGE>
E-156
Exhibit No. 9
IBF VI - Participating Income Corporation
Form SB-2, Amend. No. 2
File No. 333-71091
LOAN AGREEMENT
THIS LOAN AGREEMENT (hereinafter referred to as "this
Agreement"), made and entered into as of the 23rd day of June,
1999, by and between INTERBANK FUNDING CORPORATION, a Delaware
corporation (hereinafter referred to as "Lender"), 1733
Connecticut Avenue, NW, Washington, DC 20009, and GANESH
HOSPITALITY, INC., a Florida corporation, and GRANJAC RESORTS,
INC. (hereinafter together referred to as "Borrower"), 8440 North
Tamiami Trail, Sarasota, Florida 34243.
WITNESSETH:
WHEREAS, Borrower has applied to Lender for a loan in the
amount of NINE HUNDRED FIFTY THOUSAND DOLLARS ($950,000.00)
(hereinafter sometimes referred to as the "Loan") and Lender
desires to make the Loan upon the terms and subject to the
conditions hereinafter set forth; and
NOW, THEREFORE, for good and valuable consideration,
receipt of which is hereby acknowledged, and intending to be
legally bound hereby the parties covenant and agree as follows:
ARTICLE I
DEFINITIONS
As used herein and in the Exhibits and Consents attach
hereto, the following terms shall have the following meanings:
"Borrower's Application for Loan" shall mean the application
for the Loan, submitted by Borrower to Lender, including, without
limitation, all information, warranties, and representations,
either oral or in writing, regarding the Purchase supporting said
application.
"Closing Date" shall mean the date when this Agreement, and
the Note, Shareholder Agreement, Security Agreement, and the Loan
Documents are fully executed and delivered by all parties.
"Governmental Requirements" shall mean all laws, ordinances,
orders, rules, or regulations with respect to securities, public
disclosures, zoning, subdivision, building, safety, fire
protection, or environmental matters.
"Hazardous Materials" shall mean jointly and severally any
hazardous wastes, hazardous substances, hazardous materials,
toxic substances, hazardous air pollutants, or toxic pollutants,
as those terms are used in the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and
Liability Act, the Hazardous Materials Transportation Act, the
Toxic Substances Control Act, the Clean Air Act, and the Clean
Water Act, or in any regulations promulgated pursuant thereto, or
in any applicable state or local law, regulation, or ordinance.
- -E-114-
<PAGE>
"Improvements" shall mean the improvements presently located
or to be constructed on the Land, which shall include all
landscaping, drives, approaches, sidewalks, curbs, parking and
chattels, furniture, furnishings, and equipment described in the
Plans.
"Land" shall mean, the real property described in attached
Exhibit "A".
"Loan" shall mean, collectively, all sums advanced by Lender
to or for the account of Borrower, as provided in this Agreement,
and the other Documents, including, without limitation, sums
evidenced by the Note, as well as costs and expenses incurred or
advanced by Lender, for which Borrower is liable pursuant to the
Loan Documents.
"Loan Documents" shall mean this Agreement, the Note, the
Shareholder Agreement, the Security Agreement, and all other
documents or instruments executed and delivered by or on behalf
of Borrower, or third parties, in connection with the Loan and
the transactions contemplated hereby, as the same may be
supplemented or amended from time to time.
"Mortgage" shall mean the Mortgage, Security Agreement, and
Assignment of Rents made by Ganesh Hospitality, Inc.
(individually, "Ganesh") to Citrus Bank ("Citrus") as security
for the obligations of Ganesh to Citrus, creating a first lien
on, and security interest in , the Mortgaged Property, as the
same may be supplemented or amended from time to time.
"Mortgaged Property" shall mean all real and personal
property and rights in property described in, and encumbered by,
the Mortgage, including, without limitation, the Land and the
Improvements.
"Note" shall mean that certain Commercial Note of even date
herewith made by Borrower to Lender in the principal sum of Nine
Hundred Fifty Thousand Dollars ($950,000.00), or so much thereof
as may be disbursed pursuant to this Agreement, as the same may
be supplemented or amended from time to time and which shall
evidence the Loan.
"Purchase" shall mean Borrower's purchase of all of the
stock of Ganesh Hospitality, Inc., and the financing thereof by
or on behalf of Borrower.
"Security Agreement" shall mean the Security Agreement for
Certified Stock made by Stephen C. Mullen in favor of Lender as
security for the Note.
"Shareholder Agreement" shall mean an agreement among
Borrower, Stephen C. Mullen, Grant S. Mullen, and Simon A.
Hershon governing the shares of Ganesh Hospitality, Inc., and the
rights and responsibilities of its shareholders.
"Shares" shall mean the common stock of Ganesh Hospitality,
Inc., a Florida subchapter S corporation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
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<PAGE>
SECTION 2.01. BORROWER'S ORGANIZATIONAL DOCUMENTS AND
RESOLUTIONS. If Borrower is an entity other than an individual.
Borrower has provided Lender with true and correct copies of
Borrower's organizational documents and resolutions, and all such
documents remain in full force and effect.
SECTION 2.02. ORGANIZATIONAL DOCUMENTS. If Borrower is a
partnership, Borrower certifies that the following documents
delivered to Lender, including any and all amendments thereto,
are true and correct copies of the originals and remain in full
force and effect:
(a) Partnership agreement;
(b) Recorded certificate of partnership;
(c) Fictitious name certificate; and
(d) Partnership resolution authorizing the loan transaction and
document signatories.
If Borrower is a corporation, or if any of Borrower's
general partners is a corporation, Borrower certifies that the
following documents delivered to Lender, including any and all
amendments thereto, are true and correct copies of the originals
and remain in full force and effect:
(a) Articles of Incorporation certified by the proper official
of the state of incorporation;
(b) Evidence of good standing certified by the proper official
of the state of incorporation;
(c) If incorporated in a state other than Florida, than evidence
of authority to transact business in the State of Florida
certified by the Secretary of State;
(d) Bylaws certified by the corporation's secretary; and
(e) Resolution authorizing the loan transaction and document
signatories, complete with incumbency certificate, certified by
the corporation's secretary.
SECTION 2.03. AUTHORITY. The execution and performance of
this Agreement, the borrowings hereunder, and the execution and
delivery of the Note, the Shareholder Agreement, the Security
Agreement and all supporting documents have been duly authorized
by all necessary action of Borrower, and will note violate any
provision of law or result in the breach of, or constitute a
default or require any consent under, or result in the creation
of any lien, charge, or encumbrance upon any property or assets
of Borrower pursuant to any indenture or other agreements or
instrument to which Borrower is a party or by which Borrower or
its property may be bound or affected.
SECTION 2.04. LITIGATION. There are no actions, suits, or
proceedings pending, or to the knowledge or Borrower threatened,
against or affecting Borrower, or the Mortgaged Property, at law
or in equity, or before or by any Governmental Authority except
actions, suits, and proceedings fully covered by insurance or
which, if adversely determined, would not substantially impair
the ability of Borrower to perform any of its obligations under
the Loan Documents.
SECTION 2.05. PAYMENT OF TAXES. Borrower has filed or has
caused to be filed all federal, state, and local tax returns of
which are required to be filed, and have paid or has caused to be
- -E-116-
<PAGE>
paid all taxes as shown on said returns, or on any assessment
received, to the extent that such taxes have become due, except
as otherwise permitted by the provisions hereof.
SECTION 2.06. TRADEMARKS, PATENTS, ETC. Borrower possesses
all the trademarks, trade names, copyrights, patents, licenses,
or rights in any thereof, adequate for the conduct of its
business, as now conducted and presently proposed to be
conducted, without conflict with the rights or claimed rights of
others.
SECTION 2.07. AGREEMENTS. Borrower is not a party to any
agreement or instrument or subject to any charter or other
restriction materially or adversely affecting their business,
properties, assets, operations, or conditions (financial or
otherwise), and Borrower is not in default in the performance,
observance, or fulfillment of any of the obligations, covenants,
or conditions contained in any agreement or instrument to which
each is a party.
SECTION 2.08. THIRD-PARTY APPROVAL. The execution,
delivery, and performance of the Loan Documents do not require
the consent or approval of any other person or entity.
SECTION 2.09. PRIOR MATERIALS OR WORK. To Borrower's best
information and belief no materials of any kind have been placed
on the Land by anyone, and no work or labor has been performed
thereon within ninety (90) days prior to the Closing Date that
has not been paid for; there are no unpaid bills for labor,
materials, supplies, furnished upon the Land; and no Notice of
Commencement or claim of lien affecting the Land or the
Improvements has been filed in the public records of the county
in which the Land is located, or in the Office of the Secretary
of State for the State of Florida, and no such Notice of
Commencement or claim of lien was filed prior to the recording of
the Mortgage.
SECTION 2.10. UTILITIES. To Borrower's best information
and belief, all utility services in sufficient capacity necessary
for the operation and sale of the Mortgaged Property for its
present and/or intended purpose, are or will be available for the
use of Borrower at the boundaries of the Land, including water
supply, storm and sanitary sewer facilities, electric, gas, and
telephone services.
SECTION 2.11. ACCESS TO LAND. To Borrower's best
information and belief, adequate vehicular, pedestrian, and
utility access (minimum width of fifty (50) feet) for reasonably
direct ingress and egress and service to and from the Land, from
publicly owned and maintained paved roadways are and will be
available when needed at the Land.
SECTION 2.12. FINANCIAL CONDITION; NO MATERIAL ADVERSE
CHANGE. The financial condition of Borrower is fairly presented
in accordance with generally accepted accounting principles
consistently applied in the financial statements of Borrower
heretofore presented to Lender. Since the date of said financial
statements, there has been no material adverse change in the
financial condition of Borrower.
SECTION 2.13. USE OF MORTGAGED PROPERTY. To borrower's
best information and belief, the present use of the Mortgaged
Property complies with all applicable zoning ordinances,
regulations, and restrictive covenants affecting the Land and all
other Governmental Requirements for such use have been satisfied.
Such Governmental Requirements do not impose any setbacks or
other requirements which would make the construction or operation
of the Improvements upon the Land economically unfeasible; and
Borrower is not aware of any problem or requirement which would
jeopardize the issuance of, or validity of issued building
permits for the construction of the Improvements.
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<PAGE>
SECTION 2.14. CONDITION OF LAND, ETC. To Borrower's best
information and belief, the Land and any improvements or other
property presently located thereon are not now damaged or injured
as a result of any fire, explosion, accidents, flood, or other
casualty.
SECTION 2.15. TITLE TO COLLATERAL. To Borrower's best
information and belief, Ganesh has good and marketable title to
the Mortgaged Property, free and clear of any liens, claims,
encumbrances, or security interests except a first Mortgage to
Citrus, and except for taxes and assessments not yet due and
payable, and Borrower will defend such title against the claims
and demands of all persons except as above stated.
SECTION 2.16. DEFAULTS. No Event of Default and no
condition, event, act or omission which, with the giving of
notice or the lapse of time or both, would constitute an Event of
Default, has occurred and is continuing or exists.
SECTION 2.17. FLOOD AREA; FILLED LAND; HAZARDOUS WASTE. To
Borrower's best information and belief, the Land is not in an
"area of special flood hazard", as that term is defined in the
National Flood Insurance Act of 1968. To borrower's best
information and belief, no portion of the Land consists of and no
portion of the Improvements are located on filled-in land. To
Borrower's best information and belief, the Mortgaged Property
does not contain any Hazardous Materials. All pollution and
environmental control laws and regulations which are applicable
to the Land, and the use thereof, have been satisfied. Borrower
has provided Lender all environmental audits, studies, surveys,
boring logs, soil reports, percolation tests, and other
engineering information which has been performed on the Mortgaged
Property. No Hazardous Materials have been generated, stored,
buried, or disposed of on or in a location that will adversely
affect the Mortgaged Property, and no federal, state, or local
government department, agency, or entity has issued any
environmental citations, warning notice, notice of violation,
consent order, final order, or any other notice of violation of
law, ordinance, or regulation, which affect the Mortgaged
Property.
SECTION 2.18. OFFSET AND DEFENSES. Borrower has no offsets
or defenses with respect to payment of Loan.
SECTION 2.19. SALE OF SECURITIES. Borrower has not
instituted, caused to be instituted, or have not been a party to,
and to the best of Borrower's knowledge, there has not been any
public offering with respect to the Land and/or Improvements
within the meaning of the Securities Act of 1933, and the
Securities Exchange Act of 1934. Borrower has not received any
notice of commencement of any proceeding or investigation by any
Governmental Authority with respect to any such offerings.
SECTION 2.20. TITLE TO SHARES. Borrower has good and
marketable title to the Shares, free and clear of any liens,
claims, encumbrances, or security interests, and Borrower will
defend such title against the claims and demands of all persons.
SECTION 2.21. GENERAL WARRANTY. No representation or
warranty by Borrower contained herein or in any other Loan
Document, or in Borrower's Application for Loan, furnished by
Borrower contains or will contain any untrue statement of
material fact or omits or will omit any material fact necessary
to make such representation or warranty not misleading in light
of the circumstances under which it was made.
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SECTION 2.22. FURTHER CERTIFICATIONS. If any disbursement
of Loan funds are made subsequent to the Closing Date, each
request for a disbursement made by Borrower and each receipt
thereof by Borrower shall constitute a certification by Borrower
that the representations and warranties contained in Section 2.01
through 2.21, inclusive, or elsewhere in the Loan Documents, are
true and correct on the date of such request for disbursement or
such receipt, as the case may be, and such representations and
warranties shall be deemed to be made continuously until the Loan
shall have been paid in full.
ARTICLE III
THE LOAN
Subject to the terms and conditions of this Agreement,
Lender shall make the Loan to Borrower as described in this
Article III.
SECTION 3.01. THE LOAN. Upon the satisfaction by Borrower
of all the conditions specified in this Agreement, Lender shall
lend to Borrower the principal amount of NINE HUNDRED FIFTY
THOUSAND DOLLARS ($950,000.00) in accordance with the terms and
conditions of this Agreement.
SECTION 3.02. LOAN PURPOSE. The Loan, upon its
disbursement to Borrower, shall be used to purchase all of the
outstanding shares of Ganesh Hospitality, Inc. The use of the
loan funds by Borrower, its employees, agents, or
representatives, for purposes other than those set forth above,
and without Lender's prior written approval is prohibited, except
as set forth in the Closing Statement.
SECTION 3.03. LOAN DISBURSEMENTS. On the Closing Date, the
Loan funds shall be disbursed to or for the account of Borrower
to the used solely for the purposes set forth in Section 3.02
above. An election by Lender to disburse a portion of the Loan
funds prior to Borrower's satisfaction of all conditions
precedent to disburse the Loan funds pursuant to the Loan
Documents shall not constitute a waiver by Lender of any such
condition precedents as to the remaining Loan funds, and Lender
shall have no obligation to make any disbursements of the Loan
funds until Borrower has complied with all conditions precedent
thereto to Lender's satisfaction. All Loan funds will be
considered to have been advanced to and received by Borrower, and
interest on such funds shall accrue, and shall be payable, as
provided in the Loan Documents, by Borrower upon their
disbursement. Lender shall be under no obligation or duty to
advance or disburse any of the proceeds of the Loan to Borrower
while any Event of Default exists under the Loan Documents.
SECTION 3.04. THE NOTE. The Loan shall be evidenced by the
Note, in a form acceptable to Lender. The Loan shall bear
interest on the principal amount from time to time outstanding at
the rate set forth in the Note; and the amounts due thereunder
shall be payable by Borrower, as provided in the Note.
ARTICLE IV
SECURITY FOR THE LOAN
Payment of the Loan and the performance of all other present
and future obligations of Borrower to Lender pursuant to the
terms and conditions of the Loan Documents shall be secured as
follows:
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SECTION 4.01. SECURITY DOCUMENTS. As security for the
Note, Borrower shall deliver to Lender, on or before the Closing
Date:
(a) The Shareholder Agreement, which shall contain such terms
and conditions as are reasonably satisfactory to Lender;
(b) The Security Agreement, pledging to Lender a 5.1% interest
in the common stock of Ganesh, all of the stock of Granjac
Resorts, Inc., and containing such terms and conditions as are
reasonably satisfactory to Lender;
(c) A Collateral Assignment of Management Agreement between
Ganesh Hospitality, Inc., as owner, and Granjac Resorts, Inc., as
manager;
(d) An Agreement not to Further Encumber the Mortgaged Property;
and
(e) Any and all other security as may be reasonably required by
Lender or its counsel in order to assure that the Note, and
Borrower's obligation to perform or comply with the terms and
conditions of the Loan Documents, are adequately secured, and
further, to assure the priority and validity of its lien rights
as to the stock pledged, and the quality of the collateral
serving as security for Borrower's performance of its obligations
under the Loan Documents. All security instruments shall be in
form and substance acceptable to Lender and Lender's counsel, and
consistent with the terms and conditions of this Agreement.
SECTION 4.02. ADDITIONAL SECURITY. As additional security
for Borrower's obligations under the Loan Documents:
(a) Borrower irrevocably assigns to Lender, and grants to
Lender a security interest in, its interest in all Loan funds
held by Lender, whether or not disbursed. In addition, Borrower
hereby assigns to Lender all of Borrower's rights under the Loan
Documents, which rights Lender may, at its option, exercise upon
the occurrence of an Event of Default and after applicable grace
periods, if any. Such assignment is made for collateral purposes
only and imposes no obligations upon Lender.
(b) Borrower grants Lender a continuing lien upon any and
all moneys, securities, and other property of Borrower not
encumbered by the Mortgage and the proceeds thereof, now or
hereafter held or received by or in transit to Lender, from or
for Borrower, whether for safekeeping, custody, pledge,
transmission, collections, or otherwise, and also upon any and
all deposits (general or special) and credits of Borrower with,
and any and all claims of Borrower's against Lender, at any time
existing. Upon the occurrence of any Event of Default, Lender,
without notice to Borrower, is authorized to set off,
appropriate, and apply any or all items hereinabove referred to
against all indebtedness of Borrower to Lender under the Loan
Documents.
ARTICLE V
LOAN DISBURSEMENT
SECTION 5.01. CONDITIONAL PRECEDENT FOR DISBURSEMENTS OF
LOAN FUNDS. Lender will not be obligated to disburse any of the
Loan funds until Borrower has fulfilled to Lender's
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satisfaction
all the terms and conditions of Lender's customary and reasonable
loan opening conditions for loans, which include, without
limitation, the following:
(a) Borrower shall have executed and delivered, or, where
applicable, caused to have been executed and delivered to Lender
this Agreement, the Note, the Shareholder Agreement, the Security
Agreement, any other security instruments, and all other Loan
Documents, each in the form and substance satisfactory to Lender;
and all Loan Documents and security instruments required by
Lender which are to be recorded shall have been recorded.
(b) Lender shall have been furnished satisfactory evidence
that the Land is not located in an area designated by the
Secretary of Housing and Urban Development as having special
flood hazards, and if the Land is so located, then, Lender shall
be furnished, at Borrower's expense, with a Certificate of
Insurance and original insurance policy on the Mortgaged Property
for loss due to flood, and such other hazards for which coverage
is available.
(c ) Lender shall have been provided with satisfactory
evidence that all utility services necessary for the operation of
the Improvements for the purposes intended by Borrower have been
extended to and are operational at the boundary of the Land,
which evidence may include commitment letters from applicable
utilities stating the above, and that there are no restrictions
on the time for the use of such facilities; that not fees,
charges, or assessments for their use exists; that sufficient
plant capacity is available to adequately service the
improvements; and that all of said rights as deemed necessary by
Lender shall be assignable to Lender.
(d) Lender's Origination Fee of Forty-Seven Thousand Five
Hundred Dollars ($47,500.00) shall have been received by Lender,
and a Project Advisory Fee of Forty Thousand Dollars ($40,000.00)
shall have been received by InterBank/Brener Brokerage Services.
In addition to the foregoing, the parties acknowledge and agree
to payments of management fees to Granjac Resorts, Inc. of 4% of
gross revenues, and to InterBank/Brener Hospitality of 1% of
gross revenues, the agreements for which shall not be changed
without unanimous approval of the Shareholders.
(e) Lender shall have received satisfactory evidence that
the Loan funds are being applied in accordance with Section 3.02
above.
(f) There shall not have occurred an Event of Default under
the Loan Documents.
(g) Lender shall have received originals or certified
copies of all executed leases, including any amendments, of the
Mortgaged Property or any portion thereof.
(h) Unless Lender hereafter waives any of the following
requirements in writing. Lender shall have received and approved
each of the following:
(i) Environmental Report: Borrower shall provide a
current "Phase One" environmental report regarding hazardous
wastes, toxic materials and other environmental hazards on
the Property, which report shall be certified by an
environmental consultant acceptable to Lender. If warranted
by the Phase One environmental report, borrower shall
provide a detailed audit of the same matters. Such
consultant must appear on Lender's list of approved
environmental consultants or be specifically approved in
writing by Lender.
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(ii) Zoning: Borrower shall provide evidence that
the Property is zoned to permit the development,
construction, use and operation of the Improvements, that
the referendum or appeal period has expired for any
ordinance, resolution, variance or special permit
establishing the zoning and that there is no pending action,
either administrative, legislative or judicial, which could
adversely affect the zoning of the Property or the
development, construction, use or operation of the
Improvements.
(iii) Utilities: Borrower shall provide letters
from the appropriate provider that public water, sanitary
sewer, storm sewer, electricity, gas and other required
utilities are available to the Property in quantities
sufficient for the successful use and operation of the
Improvements. Each such letter shall clearly identify the
Property and describe the location at which each such
utility is available to the Property. If any utility
easement, then Borrower shall provide evidence of the
easement through the adjoining private land for such utility
line.
(iv) Survey: Borrower shall provide a current
survey of the Property, which survey shall be certified by a
licensed surveyor and shall conform in all respects with
Lender's "Survey Requirements." Such surveyor must appear
on Lender's list of approved surveyors or be specifically
approved in writing by Lender.
(v) Tax Parcel: Borrower shall provide evidence
that the Property comprises one or more separate tax
parcels.
(vi) Title Insurance Commitment: Borrower shall
provide a current ALTA title issuance commitment for the
Property and all appurtenant easements, with such
reinsurance as Lender may require, which commitment shall be
issued by an agent and underwriter acceptable to Lender and
shall conform in all respects with Lender's "Title Insurance
Requirements."
(vii) Restrictive Covenants: In the event that
the title insurance commitment shows restrictive covenants
affecting the Property, Borrower shall provide evidence that
such restrictive covenants are not now being violated.
(viii) Preliminary chattel Search: Borrower shall
provide UCC-11 search reports from each office in which
Lender's financing statement will be filed.
(ix) Other Agreements and Contracts: Borrower shall
provide copies of all management agreements, leasing
agreements, operating agreements, franchise agreements and
other agreements and contracts affecting the Mortgaged
Property and entered into prior to loan closing.
(x) Insurance: Borrower shall provide evidence of
casualty and liability insurance for the Improvements and
the Property, which insurance shall be issued by
underwriters acceptable to Lender and shall conform in all
respects with Lender's "Insurance Requirements."
(xi) Equity: Borrower shall provide evidence that
funds aggregating not less than the required equity
contribution are available for timely contribution.
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(xii) Acquisition Documents: Borrower shall
provide a certified copy of the agreement for the
acquisition of the Shares and, if the Shares are acquired
prior to loan closing, original share certificates and
certified copies of the stock transfer, and closing
statement.
(xiii) Appraisal: Lender must be able to procure
from an independent appraiser selected by Lender an
appraisal of the Property and the Improvements evidencing a
value of not less than $4,150,000.00 and from its review
appraiser, a confirmation of such value. In the event such
appraisal or confirmation cannot be procured, this
requirement shall be deemed unsatisfied and Lender shall not
be obligated to attempt procurement from a second appraiser.
The appraisal shall be procured at Borrower's expense.
(xiv) Title to Shares: Lender must be able to
confirm that the Shares are owned free and clear of any
liens, encumbrances, hypothecations, or pledges.
Notwithstanding anything to the contrary herein, where
Borrower can demonstrate that any of the foregoing items have
been required, reviewed and accepted by Citrus, such items shall
be deemed acceptable to Lender upon their receipt by Lender. The
foregoing conditions precedent to making the Initial Disbursement
hereunder must have been completely fulfilled to Lender's
satisfaction on or before the Closing Date, unless waived by
Lender in writing. The failure of Borrower to meet this
requirement shall constitute an Event of Default under this
Agreement and Lender shall have no further obligations under this
Agreement and Lender may exercise its rights and remedies under
the Loan Documents. Lender shall not be obligated to make any
Disbursement if an Event of Default under the Loan Documents has
occurred.
SECTION 5.02. APPROVAL OF DOCUMENTS, ETC. All documents,
instruments, or other evidence of compliance with the terms and
conditions set forth in this Article V shall be subject to the
review and approval of Lender, its Inspector, or counsel, where
applicable, as to the sufficiency of the form and content of the
documents, instruments, or other evidence provided.
SECTION 5.03. NO WAIVER. Any waiver by Lender of any
condition of disbursement must be made in writing. The making of
a disbursement prior to fulfillment of one or more conditions
thereof shall not be construed as a waiver of such conditions,
and Lender reserves the right to require the fulfillment of each
and every condition prior to the making of any further
disbursement.
ARTICLE VI
COVENANTS
Until payment in full of Loan and performance of all of
Borrower's other obligations under the Loan Documents held by
Lender, and unless otherwise agreed by Lender in writing,
Borrower covenants as follows:
SECTION 6.01. GOVERNMENTAL REQUIREMENTS. Borrower shall
comply with all Governmental Requirements applicable to the
operation and rental of the Improvements, except where contested
in good faith and by appropriate proceedings, and with all
agreements, or instruments to which it is a party, or by which
its properties or assets may be bound, a breach of which would
materially adversely affect its financial condition or
operations, or to perform its other obligations under the Loan
Documents.
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SECTION 6.02 ACCESS TO BOOKS AND INSPECTION. Borrower
shall give any representative of Lender access to, and permit
such representative to examine, copy, or make extracts from, any
and all books, records, and documents in the possession of
Borrower relating to the Mortgaged Property, and to inspect the
Mortgaged Property, all at such times and as often as Lender may
reasonably request; provided, however, that Lender shall have no
obligation to make any such inspections.
SECTION 6.03. ASSIGNMENT OF LOAN DOCUMENTS; LOAN FUNDS.
Borrower shall not assign its rights in the Loan Documents,
including, without limitations, its right to receive any
disbursement, or allow the conveyance or transfer of Loan funds
hereunder.
SECTION 6.04 RESTRICTIVE COVENANTS AND DUE-ON CONVEYANCE.
Without the prior written consent of Lender (which consent may,
at Lender's sole option and discretion, be conditioned on (a)
modifications to the terms of payment of Loan; (b) modifications
of any terms of any instrument evidencing or securing Loan; and
(c) such other matters as Lender may reasonably require, Borrower
shall not:
(a) create or permit the creation of any security interests
in any furniture, furnishings, fixtures, or equipment by Borrower
and intended to be affixed to, incorporated in, or placed in the
Mortgaged Property or the appurtenances thereto, other than in
favor of Lender or acquire less than unconditional ownership and
title to any of such furniture, furnishings, fixtures, or
equipment, free from encumbrances other than in favor of Lender,
on delivery to the Mortgaged Property;
(b ) further mortgage, encumber, hypothecate, grant a
security interest in, or sell, covey, transfer, or assign
ownership or control of all or any party of the Mortgaged
Property (whether voluntary or involuntary, by outright
conveyance, deed, mortgage or deed of trust, lease, stock
transfer, sale of partnership (or any interest therein), land
installment contract, merge, or otherwise);
(c ) Consent to or permit any sale, conveyance, or other
disposition of any rents or other funds arising from the Land;
and
(d ) grant any other interest whatsoever, legal or
equitable, in the Mortgaged Property of any party thereof,
including a transfer of any interest in any entity holding such
title.
SECTION 6.05. ACCOUNTING: CHANGES IN THE CONDITION.
Borrower shall promptly supply Lender with any financial
statements or other information concerning its affairs and
properties as Lender may reasonably request, and shall promptly
notify Lender of any material adverse change in its financial
condition or in the physical condition of the Land or
Improvements. Updated financials on all Guarantors on proper
forms shall be submitted to Lender within thirty (30) days of
closing.
SECTION 6.06. INSURANCE. Borrower shall purchase or cause
to be purchased from insurers licensed to do business in Florida,
and acceptable to Lender, the Insurance coverages listed below
and such other or additional insurance coverage as Lender shall
require, and insuring Borrower and Lender, as their interests
shall appear, and Borrower shall cause such coverages to be
maintained throughout the term of the Loan.
Type of Insurance Minimum Limits of
Liability
FIRE AND EXTENDED COVERAGE The maximum loan amount
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Or the full insurable value of the
Mortgaged Property whichever is greater.
GENERAL LIABILITY $1,000.000.00 per occurrence and aggregate
Comprehensive form covering
Premises-operations, explosion and
Collapse hazard, underground hazard,
Contractual insurance, broad-form
Property damage, independent
Contractors, and personal injury
Each policy of insurance shall provide that it may not be
canceled by insurer without at least fifteen (15) days prior
written notice to Lender. Existence of the insurance coverages
required hereby shall be evidenced by Certificate(s) of Insurance
issued to Lender by the insurer(s) or its authorized agent, or
delivery of the original policies and endorsements to Lender.
SECTION 6.07. PAYMENT OF STAMP OR EXCISE TAX. Borrower
will pay documentary stamp taxes and intangible property taxes
applicable to the full fact amount of the Note and, if applicable
the Shareholder Agreement. If any stamp or excise tax shall
become applicable with respect to this agreement, the Note, any
loan or credit extended hereunder, the Shareholder Agreement, or
otherwise, Borrower will promptly pay such tax in full (including
interest and penalties, if any) and will indemnify and hold
Lender harmless with respect thereto.
SECTION 6.08. PAYMENT OF EXPENSES. Borrower will pay
Lender's out-of-pocket costs and expenses incurred in connection
with the making or disbursement of the Loan or in the exercise of
any of its rights or remedies under this Agreement, including,
but not limited to, title insurance and escrow charges, recording
charges, reasonable legal fees and costs, inspection fees, and
any other reasonable fees and costs for services which are not
customarily performed by Lender's salaried employees and are not
specifically covered by Lender's Loan Fees for the Loan. In lieu
of direct payment by Borrower, Lender is hereby authorized but
not obligated to advance the amounts due hereunder, and any sums
so advanced shall constitute a portion of the Loan evidenced and
secured by the Loan Documents.
SECTION 6.09. BUSINESS OPERATING ACCOUNTS. Borrower
shall maintain its principal operating account with Citrus Bank.
SECTION 6.10. NOTICE OF MATERIAL EVENTS. Borrower shall
promptly give Lender notice of (a) any Event of Default or any
event which, with notice or lapse of time or both, would
constitute such an Event of Default after the same becomes known
to Borrower, together with a written statement of the action
being taken by Borrower to remedy the same; (b) all litigation or
proceedings before any court of Governmental Authority affecting
Borrower or the Mortgaged Property, except litigation or
proceedings, which, if adversely determined, would not have a
material adverse effect on the financial condition or operations
of borrower or of the Mortgaged Property or any party thereof or
to perform any of its other obligations under the Loan Documents.
SECTION 6.11. LEASES; SUBORDINATION AGREEMENT. Borrower
shall deliver copies of all leases affecting the Mortgaged
Property entered into before or after the Closing Date, along
with a lease subordination agreement executed by each tenant in
form acceptable to Lender. Each lease shall
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contain a
requirement that the tenant, upon Lender's request, shall execute
and deliver an estoppel certificate stating that the lease is not
in default and that no defenses or set offs exist with regard
thereto.
SECTION 6.12. FURTHER DOCUMENTS. To the end that the
agreements of Borrower set forth in the Loan Documents shall be
effectively and fully performed and the intent and purpose of the
Loan Documents be fulfilled, Borrower agrees to execute such
additional instruments as may reasonably be required by Lender
from time to time in order to carry out the provisions of the
Loan Documents, or for the purpose of protecting, maintaining, or
enforcing Lender's security for Loan.
SECTION 6.13. LEGAL EXISTENCE, PROPERTIES, ETC. Borrower
will do or cause to be done substantially all things necessary to
preserve and keep in full force and effect its existence, rights,
and franchises, and comply with all laws applicable thereto; at
all times maintain, preserve, and protect all franchises and
trade names and preserve all of the remainder of its properties
used or useful in the conduct of its business, and keep the same
in good repair, working order, and condition, and from time to
time make, or cause to be made, all needful and proper repairs,
renewals, replacements, and improvements thereto so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times; and at all times keep its
insurable properties adequately insured and maintain such other
insurance as may be required by law or as may be reasonably
required in writing by Lender.
SECTION 6.14. CONDUCT OF BUSINESS. Borrower will continue
to conduct, in the ordinary course, the business in which it is
presently engaged, and in conduct of such business, to comply
with all applicable laws and regulations of the United States or
any state or states thereof, or of any political subdivision
thereof, and of any governmental authority. As long as Borrower
owes all or any part of its obligation to Lender, all "Major
Decisions" with respect to Borrower must receive the prior
written approval of Lender. For purposes of this Section 6.14,
"Major Decisions" shall mean and consist of the following:
(a) Increasing Borrower's line of credit above the amount of the
line that exists on the date of this Agreement or otherwise
obtaining credit for Borrower or refinancing existing
indebtedness;
(b) Relocating Borrower or opening a new location;
(c) Acquiring or entering into a new business or businesses,
merging with or into any other corporation, entering into a joint
venture, partnership or similar arrangement or conducting or
carrying on the business of Borrower through any business entity
other than Borrower;
(d) Making distributions to Shareholders;
(e) Selling, leasing, exchanging, mortgaging, pledging, or other
transfer of assets of Borrower, other than inventory sold in the
ordinary course of business;
(f) Approving all capital expenditures or individual
transactions, including any related series of transactions, in
excess of $10,000.
(g) Granting any mortgage, lien, or other encumbrance on any of
Borrower's property or giving any Company guarantee;
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(h) Approving all transactions between Borrower and a
Shareholder or related person of a Shareholder (except as
provided below);
(i) Changing any underwriter, broker, accountant, consultant, or
legal counsel for Borrower;
(j) Making any loans or extending any credit on behalf of
Borrower, except to customers in the ordinary course of business;
(k) Taking any action by Borrower to commence any case,
proceeding, or other action (a) under any existing or future law
of any jurisdiction relating to bankruptcy, insolvency,
reorganization, or relief of debtors seeking to have an order for
relief entered with respect to Borrower, or seeking to adjudicate
Borrower a bankrupt or insolvent, or seeking reorganization,
winding-up, liquidation, dissolution, or other relief with
respect to Borrower or Borrower's debts, or (b) seeking
appointment of a receiver, trustee, custodian, or other similar
official for Borrower or for all or any substantial part of
Borrower's assets, or making a general assignment for the benefit
of Borrower's creditors.
(l) Taking any action which would alter Borrower's status as a
Subchapter "S" corporation;
(m) Increasing the compensation of Granjac Resorts, Inc. above
the amount stated in any existing Management Agreement or
approving any amendment to or cancellation of the Management
Agreement on behalf of Borrower; and
(n) Taking any other action outside the normal and ordinary
course of business that has a material effect on Borrower's
business operation or financial position.
In addition, any action by Borrower to materially amend,
modify, or supplement any document, instrument, transaction, or
other matter described above as a Major Decision shall require
the approval of Lender of the same as so amended, modified, or
supplemented, if it would be inconsistent with the terms
previously approved with respect thereto. Notwithstanding
anything to the contrary contained herein, the parties
acknowledge and agree to payments of management fees to Granjac
Resorts, Inc. of 4% of gross revenues, and to InterBank/Brener
Hospitality of 1% of gross revenues, the agreements for which
shall not be changed without Lender' prior written approval.
Stephen C. Mullen shall have complete discretion over
matters involving Borrower's employees; provided, however, that
no family member of an officer or employee of Borrower may be
hired by Borrower without the prior approval of Lender, except
Grant S. Mullen, Secretary of Borrower, will be employed by
Borrower and his compensation shall be determined with the
approval of Lender. Notwithstanding the previous sentence, such
family members may be hired by Borrower without Lender's approval
at nominal compensation to assist with promotions, such as grand
openings.
SECTION 6.15. PAYMENT OF INDEBTEDNESS, TAXES, ETC.
Borrower shall (a) pay all of their indebtedness and obligations
promptly and in accordance with normal terms; and (b) pay and
discharge, or cause to be paid and discharged, promptly all
taxes, assessments, and governmental charges or levies imposed
upon either of them, or upon their income and profits, upon any
of their property, real personal, or mixed, and upon any part
thereof, before the same shall become in default, as well as all
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lawful claims for labor, materials, and supplies, or otherwise
which, if unpaid, might become a lien or a charge upon such
properties or any part thereof.
SECTION 6.16. OTHER INDEBTEDNESS. Borrower shall not
create, incur, or assume any indebtedness for borrowed money, the
deferred purchase price of property, or obligations pursuant to
lease agreements, except: (a) indebtedness represented by the
Note; (b) indebtedness subordinated to Lender in form and
substance satisfactory to Lender and its legal counsel; (c) short-
term indebtedness to Lender; and (d) unsecured indebtedness in
the ordinary course of business.
SECTION 6.17. GUARANTEES. Borrower shall not guarantee,
endorse, become a surety, or an accommodation party, or
otherwise, in any way, extend credit or become responsible for an
indebtedness or other liability of any other individual,
partnership, corporation, or other organization, except
guarantees and endorsements made in connection with the deposit
of items for collection or credit in the ordinary course of
business.
SECTION 6.18. CHANGES IN GOVERNING DOCUMENTS OR ACCOUNTING
METHODS. Borrower shall not amend in any respect its Partnership
Agreement, Articles of Incorporation, or Bylaws, or change its
accounting methods or practices or its depreciation or
amortization policies or rates, except as required to comply with
generally accepted accounting principles, which would adversely
affect Borrower's ability to perform the obligations under the
Loan Documents. Notwithstanding the foregoing, to the extent
economically feasible, Borrower agrees to cooperate with Lender's
reasonable requests in connection with Lender's efforts to
qualify the Loan for inclusion in a Real Estate Investment Trust
being established by Lender pursuant to the provisions of the
Internal Revenue Code. Borrower's cooperation may require, for
example but not by way of limitation, that Lender's interest in
the Loan be recast as a lessor's interest in a lease t Borrower,
or some other form of interest in real property.
SECTION 6.19. FINANCIAL STATEMENTS. Borrower will provide
Lender with current financial statements on a monthly basis on or
before the 15th day of each month and will provide complied
statements annually within 90 days of year end, with the
statements of income, retained earnings, and changes in financial
conditions of Borrower, all in reasonable detail and stating in
comparative form the corresponding figures for the previous
fiscal year. Guarantors shall provide personal financial
statements on Lender's form within 120 days of year end, and
copies of Federal Income Tax Returns within 30 days after filing.
Financial statements delivered shall be prepared on the basis of
Generally Accepted Accounting Principles, consistently applied.
SECTION 6.20. SALES OF ASSETS, CONSOLIDATION, MERGER, ETC.
Borrower will not (a) sell, lease, transfer, or otherwise dispose
of all or a substantial portion of its properties or assets to
any person or entity; or (b) consolidate with or merge into any
corporation; or (c) invest in, transfer any assets to, or do
business through any subsidiary; or (d) acquire all or
substantially all of the properties or assets of any other
person, enter into any arrangement, directly or indirectly, with
any person whereby Borrower shall sell or transfer any property,
real or personal, used or useful in its business, whether now
owned or hereafter acquired, and thereafter rent or lease such
property which Borrower intends to use for substantially the same
purposes as property being sold or transferred.
SECTION 6.21. HAZARDOUS MATERIALS; ENVIRONMENTAL LAWS.
Borrower shall keep and maintain the Mortgaged Property in
compliance with, and shall not cause or permit the Mortgaged
Property to be in violation of any federal, state or local laws,
ordinances or regulations relating to environmental conditions
on, under or about the Mortgaged Property, including but not
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limited to, soil and ground water conditions. Borrower shall
immediately advise Lender in writing of: (a) any and all
enforcement, cleanup, removal, or other governmental or
regulatory actions instituted, completed, or threatened pursuant
to any applicable federal, state or local laws, ordinances, or
regulations relating to any Hazardous Material affecting and
Mortgaged Property ("Hazardous Materials Laws"); (b) all claims
made or threatened by any third party against Borrower or the
Mortgaged Property relating to damage, contribution, cost
recovery compensation, loss or injury resulting from any
Hazardous Materials (the matters set forth in clauses (a) and (b)
above are hereinafter referred to as "Hazardous Materials
Claims"); and (c) Borrower's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of
the Property, which if any such occurrence or condition had
occurred on Borrower's property would have been an event
described as a Hazardous Materials Claim.
Without Lender's prior written consent, which shall not be
unreasonably withheld, Borrower shall not take any remedial
action in response to the presence of any Hazardous Materials on,
under, or about the Mortgaged Property, nor enter into any
settlement agreement, consent, decree or other compromise in
respect to any Hazardous Material Claims which remedial action,
settlement, consent or compromise might, in Lender's reasonable
judgement, impair the value of Lender's security hereunder,
provided, however, that Lender's prior consent shall not be
necessary in the event that the presence of Hazardous Materials
on, under, or about the Mortgaged Property either poses an
immediate threat to the health, safety, or welfare of any
individual or is of such a nature that immediate remedial
response is necessary and it is not possible to obtain Lender's
consent before taking such action, provided that in such event
Borrower shall notify Lender as soon as practicable of any action
so taken. Lender agrees not to withhold its consent, where such
consent is required hereunder, if either (a) a particular
remedial action is ordered by a court of competent jurisdiction;
or (b) Borrower establishes to the reasonable satisfaction of
Lender that there is no reasonable alternative to such remedial
action which would result in less impairment of Lender's security
hereunder.
SECTION 6.22. INDEMNIFICATION FOR HAZARDOUS MATERIAL
CLAIMS. Borrower hereby agrees to indemnify and hold harmless
Lender, its directors, officers, employees, agents, successors
and assigns from and against any and all claims, losses, damages,
liabilities, fines, penalties, charges, administrative and
judicial proceedings and orders, judgments, remedial action
requirements, enforcement actions or any kind and all costs and
expenses incurred in connection therewith (including but not
limited to attorneys' fees and expenses), arising directly or
indirectly, in whole or in part, out of, or attributable to:
(a) the presence on or under the Mortgaged Property of any
Hazardous Materials (as defined by applicable laws) or any
releases or discharges of any Hazardous Materials on, under, or
from the Mortgaged Property; or
(b) any activity on or undertaken on or off the Mortgaged
Property, whether prior to or during the term of this Loan, and
whether by Borrower or any predecessor in title or any employees,
agents, contractors or subcontractors of Borrower or any
predecessor in title, or any third persons at any time occupying
or present on the Mortgaged Property, in connection with the
handling, treatment, removal, storage, use, generation, release,
threatened release, discharge, or presence of any Hazardous
Materials at any time located or present on or under the
Mortgaged Property; and including, without limitation:
(c) all foreseeable consequential damages resulting from the
events described in (a) and (b);
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(d) the costs of any required or necessary repair, cleanup,
decontamination, detoxification of the Mortgaged Property,
transport, or disposal of any Hazardous Materials, and the
preparation and implementation of any closure, remedial, or other
required plans; and
(e) all reasonable costs and expenses incurred by Lender in
connection with clauses (a), (b), (c), or (d), including, but not
limited to, reasonable attorneys' fees.
The foregoing indemnity shall further apply to any residual
contamination on or under the Mortgaged Property, or affecting
any natural resources, and to any contamination of any property
or natural resources arising in connection with the generation,
use, handling, storage, transport, or disposal of any such
Hazardous Materials, and irrespective of whether any of such
activities were or will be undertaken in accordance with
applicable laws, regulations, codes, and ordinances.
ARTICLE VII
EVENTS OF DEFAULT: NOTICE: REMEDIES
SECTION 7.01. EVENTS OF DEFAULT. An "Event of Default"
shall exist if any one or more of the following events or
conditions shall occur and be continuing:
(a) A default or an "Event of Default", as defined in the
Shareholder Agreement, the Security Agreement, Note, or any other
Loan Documents, shall occur and be continuing for any period of
time in excess of the grace period, if any, applicable to that
default.
(b) Any representation or warranty made by or on behalf of
Borrower in, or relating to, the Loan Documents, or in any
certificate, financial statement, or other document furnished to
Lender pursuant to the provisions hereof, shall prove to have
been raise or misleading in any material respect when made.
(c) Borrower shall fail to perform or observe any covenant,
condition, or provision contained in this Agreement, or other
Loan Documents, and such failure shall not be remedied within any
period of time, if any, that Lender may elect to grant, in
writing, to Borrower to cure this failure.
(d) An order or decree is issued by any court of competent
jurisdiction or any Governmental Authority enjoining or
prohibiting the carrying out of the terms and conditions hereof
or of any other Loan Documents, and such proceedings are not
discontinued or such order or decree is not vacated within thirty
(30) days.
(e) Borrower shall (i ) apply for or consent to the
appointment of a receiver, trustee, or liquidator of itself, or
of all or of a substantial party of its assets; (ii) to be unable
or admit in writing its inability to pay its debts as they come
due; (iii) make a general assignment for the benefit of
creditors; (iv) be adjudicated a bankrupt or insolvent; or (v)
file a voluntary petition in bankruptcy or a petition or an
answer seeking reorganization or an arrangement with creditors or
seeking to take advantage of any insolvency law.
(f) An attachment or any other lien against the Mortgaged
Property shall be issued or entered and shall remain undischarged
or unbonded for more than ten (10) days after filing thereof.
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(g) Levy is made under any process on, or a receiver be
appointed for the Mortgaged Property.
(h) Lender determines that a material adverse change has
occurred in the financial condition of Borrower or Guarantors.
(i) A default by Borrower in the performance or observance
of any provision of any lease, contract, agreement, mortgage,
promissory note, instrument, or other obligation, running in
favor of, or to which Lender is a party, or any default under any
other note, mortgage or other document, evidencing or securing
indebtedness of Borrower, in favor of the Lender or any affiliate
of the Lender.
SECTION 7.02 NOTICE OF DEFAULT. Notwithstanding any of the
provisions in the Loan Documents, Lender shall provide Borrower
by United States mail, prepaid postage, written notice of any
nonmonetary Event of Default under the Loan Documents, and
Borrower shall have twenty (20) days from receipt thereof to cure
said Event of Default. If Borrower fails to so cure the Event of
Default, Lender may then proceed, without further notice to
Borrower, to exercise any and all remedies available to it.
Borrower shall be deemed to have received said written notice
three (3) days after it is deposited in the United States mail
unless it is actually received earlier. Lender, however, shall
have no obligation to provide notice of an occurrence of any
monetary Event of Default to Borrower. Lender may, upon the
occurrence of any monetary Event of Default, proceed to exercise
any remedy it has under the Loan Documents or applicable law
without giving notice thereof to Borrower.
SECTION 7.03. REMEDIES. If an Event of Default shall
occur, Lender may, at its option:
(a) Terminate any obligation of Lender to make any further
Disbursements.
(b) Declare all amounts previously disbursed to or for the
account of Borrower under the Loan Documents, and all accrued and
unpaid interest thereon, and all other amounts due under the Loan
Documents to be immediately due and payable without presentment,
demand, protest, or further notice of any kind (all of which are
expressly waived.)
(c) Exercise its rights and remedies under the Loan
Documents in accordance with the respective terms contained
therein.
(d) Apply for the appointment of a receiver for the purpose
of preserving the Mortgaged Property and/or Borrower's business.
Borrower shall be entitled to the appointment of said receiver as
a matter of right, and without regard to the value of any
collateral or other security held by Lender, and Borrower hereby
waives and relinquishes the right to prior notice of the
appointment of such receiver.
(e) Employ security watchmen in order to protect and
preserve the Mortgaged Property.
(f) Cumulatively, exercise any other remedy specifically
granted hereunder or now or hereafter existing in equity at law,
by virtue of statute or otherwise.
The failure by Lender to exercise the remedies herein
provided shall not preclude the resort to any other remedy or
remedies, nor shall the exercise of the remedies herein provided
prevent the subsequent or concurrent resort to any other remedy
or remedies which by law or equity shall be vested in Lender for
the recovery of damages or otherwise upon the Event of a Default.
No delay or omission by Lender in exercising any right or remedy
accruing upon the happening of an Event of Default shall
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impair
any such right or remedy or shall be construed as a waiver of any
such default, and every right and remedy hereby conferred upon
Lender may be exercised from time to time and as often as shall
be deemed expedient by Lender. No waiver of any Event of Default
shall extend to or affect any other Event of Default.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. JOINT AND SEVERAL LIABILITY. If Borrower
consists of more than one person or entity, each will be jointly
and severally liable to Lender for the faithful performance of
the Loan Documents.
SECTION 8.02. AUTHORITY TO FILE NOTICES. Borrower
Irrevocably appoints Lender as its attorney-in-fact, with full
power of substitution, to file for record, at Borrower's cost and
expense, and in Borrower's name, any notices of abandonment or
any other notices that Lender considers necessary or desirable to
protect its security.
SECTION 8.03. ACTIONS. Lender shall have the right, but
not the obligation, to commence, appear in, and defend any action
or proceeding which might affect its security or its rights,
duties, or liabilities relating to Loan, the Mortgaged Property,
or this Agreement. Borrower will pay promptly on demand all of
Lender's reasonable out-of-pocket costs, expenses, legal fees,
and disbursements incurred in those actions or proceedings.
SECTION 8.04. SUCCESSORS AND ASSIGNS; PARTICIPATIONS. This
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns;
provided, however, that Borrower may not assign this Agreement or
any Loan funds, or assign or delegate any of its rights or
obligations under this Agreement or the Loan Documents, without
the prior written consent of Lender. Lender shall have the right
to sell participations in Loan to any other persons or entities
without the consent of or notice to Borrower; provided that no
such action by Lender shall relieve Lender of its obligations to
make disbursements of Loan funds when required by this Agreement.
Lender may disclose to any participants or prospective
participants any information or other data or material in
Lender's possession relating to Borrower, Loan, and the Mortgaged
Property, without the consent of, or notice to, Borrower. Lender
may also assign all or a portion of its rights under this
Agreement and the Loan Documents to another person or entity. In
such event, Borrower agrees to attorn to such assignees and to
execute such modifications thereto, or other documentation as may
be required to facilitate such assignment, providing such
modifications do not materially add to the obligations of
Borrower.
SECTION 8.05. PAYMENTS, ETC. All payments and prepayments
of principal, interest, and other amounts payable to Lender
hereunder or under any other Loan Document shall be made and in
such coin or currency of the United States of America, as of the
time of that payment is legal tender for the payment of public
and private debt, and in immediately available funds at Lender's
principal offices at 1733 Connecticut Avenue, NW, Washington, DC
20009, at not later than 2:00 p.m., Eastern Standard Time, on the
date on which such payment shall become due. If any principal or
interest on Loan or any other amount payable by Borrower
hereunder falls due on a Saturday, Sunday, or public holiday at
the place of payment, then such due date shall be extended to the
next succeeding full business day at such place, and interest
shall be payable in respect of each such extension of principal.
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SECTION 8.06. NO WAIVER; CONSENT. Any waiver by Lender
must be in writing and will not be construed as a continuing
waiver. No waiver will be implied from any course of conduct, or
any delay or failure by Lender to take action on account of any
Event of Default. Consent by Lender to any act or omission by
Borrower will not be construed to be a consent to any other
subsequent act or omission.
SECTION 8.07. RECEIPT OF MONIES. The receipt by Lender of
any sum of money pursuant to this Agreement with knowledge of the
breach of any term, covenant, or provision of this agreement
shall not be deemed a waiver of such breach. No payment by
Borrower or receipt by Lender of a lesser amount of any sum of
money herein stipulated shall be deemed to be other than on
account of the next due payment under the Loan or this Agreement,
nor shall any endorsement or statement on any check, or any
letter accompanying any check, be deemed an accord and
satisfaction, and Lender may accept such payment or check without
prejudice to Lender's right to recover the balance of any payment
or other monies under this Agreement, or pursue any of the
remedies in this Agreement or the Loan Documents provided.
SECTION 8.08. ENTIRE AGREEMENT; AMENDMENTS. This Agreement
and the other Loan Documents represent and constitute the entire
understanding and agreement between the parties hereto with
respect to the subject matter hereof, superseding all prior oral
or written negotiations or understandings between the parties.
Neither this Agreement nor the other Loan Documents, nor any
provisions thereof, may be changed, waived, discharged, or
terminated, except by an instrument in writing signed by the
party against whom enforcement of the change, waiver, discharge,
or termination is sought.
SECTION 8.09. NO THIRD-PARTY RIGHTS. This Agreement is
intended for the sole and exclusive benefit of the parties
hereto, and nothing in this Agreement whether expressed or
implied, shall be construed to give to any person, other than the
parties hereto, any legal or equitable right, remedy, or claim in
respect to this Agreement or the loan funds to be disbursed
hereunder.
SECTION 8.10. INDEMNIFICATION. Borrower agrees to
protect, indemnify, defend, and save harmless, Lender and its
directors, officers, agents, and employees from and against any
and all liabilities, expense, damage of any kind or nature, and
from any suits, claims, or demands, including, without
limitation, reasonable legal fees and expenses on account of or
resulting from (a) the development, ownership, condition, sale,
financing, management, or operation of the Improvements and the
Mortgaged Property; or (b) this Agreement (Including expenses and
costs that Borrower is obligated to pay hereunder) or other Loan
Documents, unless said suit, claim, or demands are caused by
negligence or willful malfeasance of Lender. Upon demand by
Lender, Borrower will defend any action or proceeding brought
against Lender alleging a claim covered by this section, or
Lender may elect to conduct its own defense at the expense of
Borrower. The provisions of this section will survive the
termination of this Agreement and the repayment of loan.
SECTION 8.11. ATTORNEYS' FEES. If any lawsuit is commenced
to enforce any of the terms of the Loan Documents, the prevailing
party will have the right to recover its reasonable attorneys'
fees and costs of suit, both at the trail and appellate level,
from the other party.
SECTION 8.12. SEVERABILITY. The invalidity or
unenforceability of any one or more of the provisions of this
Agreement will in no way affect any other provisions.
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SECTION 8.13. INTERPRETATION; CONFLICTS. Whenever the
context requires, all words used in the singular will be
construed as having been used in the plural, and vice versa, and
each gender will include any other gender. The captions of the
sections of this Agreement are for convenience only and do not
define or limit any terms or provisions. Nothing herein shall be
construed to waive or diminish any right or security of Lender
under the other Loan Documents. It is the purpose and intent
hereof to provide safeguards, protections, and rights for Lender
in addition to those provided in the other Loan Documents and to
better secure Loan. This Agreement shall not be construed more
strongly against any party regardless of who was more responsible
for its preparation. In the event of a conflict between
provisions in the Loan Documents, the more specific provision
shall prevail.
SECTION 8.14. COUNTERPARTS. This Agreement and any other
agreement executed pursuant to it may be executed in any number
of counterparts, each of which shall be deemed to be an original,
all of which taken together shall constitute one and the same
instrument, and shall become effective when one or more
counterparts have been signed by each party hereto and delivered
to Lender.
SECTION 8.15 TIME IS OF THE ESSENCE. Time is of the essence
of this Agreement.
SECTION 8.16. INTEREST. Anything in this Agreement or the
Loan Documents to the contrary notwithstanding, it is understood
and agreed by the parties that in no event shall interest
(including any charge or fee held to be interest by a court of
competent jurisdiction ) accrue or be payable under Loan in
excess of the highest contract rate allowed by law for the time
such indebtedness shall be outstanding and unpaid, and if by
reason of the acceleration of maturity of such indebtedness, or
for any other reason, interest in excess of the highest legal
rate shall be due or paid, any such excess shall constitute and
be treated as a payment on the principal thereof, and shall
operate to reduce such principal by the amount of such excess, or
if in excess of the principal indebtedness, such excess shall be
waived or refunded to Borrower, as appropriate, provided such
credit will not cure any Even of Default.
SECTION 8.17 ADDITIONAL TAXATION. If in the future, the
interest payable to Lender under the Loan Documents, or any other
amount received by lender from Borrower under Loan, shall be
taxable, in whole or in part, pursuant to the laws of the United
States of American, State of Florida, or any subdivision thereof
(excluding federal or state income tax), Borrower shall pay the
same. In the even such payment, when added to interest, shall
exceed the lawful interest rate under the laws of Florida,
Lender, or its assigns, may at Lender's option, require full
payment of Loan, including principal and accrued interest thereon
upon sixty (60) days prior written notice.
SECTION 8.18. RELIANCE O COVENANTS. All covenants,
agreements, representations, and warranties made herein or in any
other documents delivered by or on behalf of borrower pursuant to
or in connection herewith are material and shall be deemed to
have been relied upon by Lender, notwithstanding any
investigation heretofore or hereafter made by Lender, and, except
as may otherwise be exclusively set forth herein, all such
covenants, agreements, warranties, and representations shall
survive the making of Loan herein contemplated, and shall remain
in effect until payment in full of Loan.
SECTION 8.19. NO AGENCY. Lender is not the agent or
representative of Borrower, and Borrower is not the agent or
representative of Lender, and nothing in this Agreement shall be
construed to make Lender liable to anyone for goods delivered or
services performed by them upon the Land or for debts or claims
accruing to them against Borrower. Nothing herein shall be
construed to create a contractual relationship between Lender and
anyone supplying labor or Materials to the Land. The Lender's
obligations are not for the benefit of or enforceable by any
successor to or assignee of Borrower except as specifically
provided otherwise herein.
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SECTION 8.20. LENDER NOT PARTNER OF BORROWER.
Notwithstanding anything to contrary herein contained or implied,
Lender by this Agreement or by any action pursuant thereto, shall
not be deemed a partner of or a joint venturer with Borrower, and
Borrower hereby indemnifies and agrees to hold Lender harmless
(including payment of all reasonable attorneys' fees) from any
and all claims or damages resulting from such a construction of
the parties' relationship.
SECTION 8.21. BORROWER'S ESTOPPEL CERTIFICATE. At Lender's
request at any time or times after Closing Date, borrower shall
execute an estoppel certificate stating the unpaid amount of Loan
and that no defense or setoffs exist with respect thereto.
SECTION 8.22. CHOICE OF LAW; VENUE. The validity,
interpretation, and enforcement of the Loan documents, and all
other instruments and documents executed and delivered in
connection with this transaction shall be governed by the laws of
Florida, excluding those laws relating to resolution of conflict
between laws of different jurisdictions. The parties agree that
in the even of the institution of a legal or equitable proceeding
arising out of the Loan Documents that the venue for any such
proceeding or action shall be in Collier County, Florida.
SECTION 8.23. COMMUNICATIONS. Any notice, request, demand,
consent, approval, or other communication provided or permitted
hereunder shall be in writing and be sent by United States first
class mail or registered mail return receipt requested, postage
prepaid, addressed to the party for whom it is intended at the
following addresses:
If to Borrower:
GANESH HOSPITALITY, INC.
GRANJAC RESORTS, INC.
Attention: Stephen C. Mullen
8440 North Tamiami Trail
Sarasota, FL 34243
If to Lender:
INTERBANK FUNDING CORPORATION
1733 Connecticut Avenue NW
Washington, DC 20009
providing, however, that either party may change its address or
specify additional copy recipients for purposes of receipt of any
such communication by giving at least ten (10) days written
notice of such change to the other party in the manner above
prescribed.
SECTION 8.24. FREE AND VOLUNTARY ACT OF BORROWER. This
Agreement is freely and voluntarily entered into by Borrower upon
advice of legal counsel or following reasonable opportunity to
consult legal counsel, and following negotiations with Lender
and/or Lender's counsel concerning various provisions hereof.
SECTION 8.25 WAIVER OF JURY TRIAL. FOR AND IN CONSIDERATION
OF LENDER'S ADVANCEMENT OF THE PRINCIPAL SUM, HEREUNDER IN THE
AMOUNT OF $950,000.00, THE UNDERSIGNED, BEING AN EXPERIENCED
PARTICIPANT IN
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SOPHISTICATED LOAN TRANSACTIONS, AND HAVING
CONSULTED WITH COUNSEL OF ITS CHOOSING, HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY WITH RESPECT TO ANY ACTION OR PROCEEDING (1)
BROUGHT BY THE UNDERSIGNED, THE HOLDER OR ANY OTHER PERSONS
RELATING TO (A) THE LOAN OR (B) THE SECURITY DOCUMENTS OR (2) TO
WHICH THE HOLDER IS A PARTY. THE UNDERSIGNED HEREBY AGREES THAT
THIS NOTE CONSTITUTES A WRITTEN CONSENT TO WAIVER OF TRAIL BY
JURY, AND THE UNDERSIGNED DOES HEREBY CONSTITUTE AND APPOINT THE
HOLDER ITS TRUE AND LAWFUL ATTORNEY IN FACT, WHICH APPOINTMENT IS
COUPLES WITH AN INTEREST, AND THE UNDERSIGNED DOES HEREBY
AUTHORIZE AND EMPOWER THE HOLDER, IN THE NAME, PLACE, AND STEAD
OF THE UNDERSIGNED, TO FILE THIS NOTE WITH THE CLERK OR JUDGE OF
ANY COURT OF COMPETENT JURISDICTION AS A WRITTEN CONSENT TO
WAIVER OF TRIAL BY JURY. THE UNDERSIGNED ACKNOWLEDGES THAT ITS
WAIVER OF TRIAL BY JURY HAS BEEN MADE KNOWINGLY, INTENTIONALLY
AND WILLINGLY BY THE UNDERSIGNED AS PART OF A BARGAINED FOR LOAN
TRANSACTION.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement the day and year first above written.
"LENDER"
INTERBANK FUNDING CORPORATION
A Delaware Corporation
By:
"BORROWER"
GANESH HOSPITALITY, INC.
A Florida Corporation
By:
AND
GRANJAC RESORTS, INC.
A Florida Corporation
By:
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INTERBANK FUNDING CORPORATION
COMMERICAL LOAN NOTE
Business Purpose
$950,000.00 Sarasota
Florida
June 23, 1999
FOR VALUE RECEIVED, the undersigned ("Borrower"), jointly
and severally if more than one, promise to pay to the order of
INTERBANK FUNDING CORPORATION (hereinafter called the "Lender")
which term shall include any holder hereof) at such place as the
Lender may designate or, in the absence of such designation, at
any of the Lender's offices, the sum of Nine Hundred Fifty
Thousand and No/100 Dollars ($950,000.00) (hereinafter called the
"Principal Sum"), together with interest as hereinafter provided.
The undersigned promise to pay the Principal Sum and the interest
thereon at the time(s) and in the manner(s) hereinafter provided
in this note (this "Note").
This Note is executed and the advances contemplated
hereunder are to be made pursuant to a Loan Agreement
(hereinafter called the "Loan Agreement") of even date herewith,
and all the covenants, representations, agreements, terms and
conditions therein, including but not limited to additional
conditions of default, are incorporated herein as if fully
rewritten.
INTEREST
Interest will accrue on the unpaid balance of the Principal Sum
until paid at a rate of twelve percent (12%) per annum, which
interest shall be paid monthly by Borrower as a preferred return
to Lender after payment of operating cost and fixed expenses, all
reserves, taxes and debt service on the first mortgage
encumbering real property owned by Ganesh Hospitality, Inc., but
excluding management fees (the "Preferred Returned").
Upon default, whether by acceleration or otherwise, interest will
accrue on the unpaid balance of the Principal Sum and unpaid
interest if any, until paid at a rate of interest per annum,
equal to the highest interest rate permitted by law.
All interest shall be calculated on the basis of a 360 day year
for the actual number of days the Principal Sum of any part
thereof remains unpaid. There shall be no penalty for
prepayment.
GAURANTEED RATE OF RETURN AND EQUITY PARTICIPATION
After payment to lender of the Preferred Return and payment of
management fees, Borrower will pay to Lender fifty percent (50%)
of remaining cash flow from operations of Ganesh Hospitality,
Inc., until Lender has received a twenty percent (20%) internal
rate of return ("IRR") on its capital (including in IRR all fees
paid to Lender in connection with the Loan). Notwithstanding
anything to the contrary herein, following any fiscal year (June
23 to June 22) prior to the maturity date of extended maturity
date in which Lender does not receive and IRR of 20%, the
shortfall will be accrued and all cash flow of Ganesh
Hospitality, Inc. shall be paid to Lender until Lender's IRR for
the term of the Loan through the applicable date of payment
equals 20%.
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<PAGE>
After an IRR of 20% has been achieved, and continuing until a
Final Disposition, the cash flow of Ganesh Hospitality, Inc.
shall be distributed forty percent (40%) to Lender, and sixty
percent (60%) to Stephen C. Mullen and Grant S. Mullen, as their
interests may appear. For purposes of this provision, "the cash
flow of Ganesh Hospitality, Inc." shall mean Ganesh Hospitality,
Inc.'s total receipts from operations, including any proceeds of
refinance of sale, less payment of all operating costs and fixed
expenses, including management fees, taxes all reserves, debt
service on the fist mortgage encumbering the real property owned
by Ganesh Hospitality, Inc., the Preferred Return and Lender's
IRR. "Final Disposition" shall mean conveyance of the real
property of Ganesh Hospitality, Inc. to an unrelated third party
for consideration equal to or greater than the fair market value
of the property. A sale to a related party shall not constitute
a Final Disposition.
MANNER OF PAYMENT
Interest on the unpaid principal balance of the Note shall be
paid monthly, commencing on the first day of August 1999, and on
the first day of each month thereafter. The Principal Sum and
any accrued interest shall be due and payable on or before June
22, 2002; provided however, that Borrower is not then in default.
Borrower shall have the option to extend the maturity date for an
additional year, upon the approval of the Lender, which approval
shall not be unreasonably withheld.
LATE CHARGE
Any installment of other payment not made within 10 days of the
date such payment or installment is due shall be subject to a
late charge equal to 5% of the amount of the installment or
payment.
SECURITY
As security for the payment of the obligations evidenced hereby,
and of all other obligations and liabilities of the undersigned,
and each of them, to the Lender, whether now existing or
hereafter arising, the undersigned hereby grant the Lender a
security interest or mortgage in the following property,
including all substitutions and additions thereto, and the
proceeds thereof (all, together with any other property in which
the Lender shall at any time be given a security interest,
hereinafter referred to as the "Collateral"):
25% of the outstanding shares of Ganesh Hospitality,
Inc., by pledge or transfer; and all of the shares of
Granjac Resorts, Inc., by pledge, and an assignment of
the Management Contract between the undersigned and
Granjac Resorts, Inc.
If, at the time of payment and discharge hereof, any of the
undersigned shall be then directly or contingently liable to the
Lender as maker, endorser, surety or guarantor of any other note,
bill of exchange, or other instrument, then the Lender may
continue to hold any of the Collateral as security therefor, even
though this Note shall have been surrendered to the undersigned.
The Lender shall not be bound to take any steps necessary to
preserve any rights in the Collateral against prior parties. If
any obligation evidenced by this Note is not paid when due, the
Lender may, at its option, demand, sue for, collect or make any
compromise or settlement it deems desirable with reference to the
Collateral, and shall have the rights of a secured party under
the laws of the State of Florida, and the undersigned shall be
liable for any deficiency.
DEFAULT
- -E-138-
<PAGE>
Upon the occurrence of any of the following events:
(a) the undersigned fail to make any payment of principal on any
note executed in connection with the Loan Agreement on or before
the date such payment is due;
(b) the undersigned fail to make any payment of interest on any
note executed in connection with the Loan Agreement on or before
five days after the date such payment is due;
(c) the undersigned fail to perform or observe any covenant
contained in the Loan Agreement;
(d) the undersigned fail to comply with any other provision of
the Loan Agreement, and such failure continues for more than 30
days after such failure shall first become known to any officer
of the undersigned;
(e) any warranty; representation or other statement by or on
behalf of the undersigned contained in the Loan Agreement or in
any instrument furnished in compliance with or in reference to
the Loan Agreement is false or misleading in any material
respect;
(f) the undersigned become insolvent or bankrupt, or make an
assignment for the benefit of creditors, or consent to the
appointment of a trustee, receiver or liquidator;
(g) bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings are instituted by or against the
undersigned and, in the case of any such proceedings being
instituted against the undersigned, remain undismissed for a
period of 60 days;
(h) a final judgment or judgments, from which no further right
of appeal exists, for the payment of money aggregating in excess
of $50,000.00 is or are outstanding against the undersigned and
any one of such judgments has been outstanding for more than 30
days from the date of its entry and has not been discharged in
full or stayed;
(i) the undersigned fail to make any payment or to perform or
observe any covenant owing to the Lender or to any third party
pursuant to any agreement (other than in connection with accounts
payable arising in the ordinary course of business), and any
applicable grace period has expired; or
(j) the property furnished as security declines in value, and
the undersigned do not immediately, upon demand, furnish
additional security satisfactory to the Lender; or
then the Lender may, at its option, without notice or demand,
accelerate the maturity of the obligations evidenced hereby,
which obligations shall become immediately due and payable. In
the event the Lender shall institute any action for the
enforcement or collection of the obligations evidenced hereby;
the undersigned agree to pay all costs and expenses of such
action, including reasonable attorneys' fees, to the extent
permitted by law.
GENERAL PROVISIONS
All of the parties hereto, including the undersigned, and
any indorser, surety, or guarantor, hereby severally waive
presentment, notice of dishonor, protest, notice of protest and
diligence in
- -E-139-
<PAGE>
bringing suit against any party hereto, and consent
that, without discharging any of them, the time of payment may be
extended an unlimited number of times before or after maturity
without notice. The Lender shall not be required to pursue any
party hereto, including any guarantor, or to exercise any rights
against any Collateral herefor before exercising any other such
rights.
The obligations evidenced hereby may from time to time be
evidenced by another note or notes given in substitution, renewal
or extension hereof. Any security interest or mortgage which
secures the obligations evidenced hereby shall remain in full
force and effect notwithstanding any such substitutions, renewal
or extension.
The captions used herein are for reference only and shall
not be deemed a part of this Note. If any of the terms or
provisions of this Note shall be deemed unenforceable, the
enforceability of the remaining terms and provisions shall not be
affected. This Note shall be governed by and construed in
accordance with the law of the State of Florida.
WAIVER OF JURY TRIAL
FOR AND IN CONSIDERATION OF LENDER'S ADVANCEMENT OF THE PRINCIPAL
SUM HEREUNDER IN THE AMOUNT OF $950,000.00, THE UNDERSIGNED,
BEING AN EXPERIENCED PARTICIPANT IN SOPHISTICATED REAL ESTATE
VENTURES, AND HAVING CONSULTED WITH COUNSEL OF ITS CHOOSING,
HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY
ACTION OR PROCEEDING (1) BROUGHT BY THE UNDERSIGNED, THE HOLDER
OR ANY OTHER PERSONS RELATING TO (A) THE LOAN OR (B) THE SECURITY
DOCUMENTS OR (2) TO WHICH THE HOLDER IS A PARTY. THE UNDERSIGNED
HEREBY AGREES THAT THIS NOTE CONSTITUTES A WRITTEN CONSENT TO
WAIVER OF TRIAL BY JURY, AND THE UNDERSIGNED DOES HEREBY
CONSTITUTE AND APPOINT THE HOLDER ITS TRUE AND LAWFUL ATTORNEY IN
FACT, WHICH APPOINTMENT IS COUPLED WITH AN INTEREST, AND THE
UNDERSIGNED DOES HEREBY AUTHORIZE AND EMPOWER THE HOLDER, IN THE
NAME, PLACE, AND STEAD OF THE UNDERSIGNED, TO FILE THIS NOTE WITH
THE CLERK OR JUDGE OF ANY COURT OF COMPETENT JURISDICTIONAS A
WRITTEN CONSENT TO WAIVER OF TRIAL BY JURY. THE UNDERSIGNED
ACKNOWLEDGES THAT ITS WAIVER OF TRIAL BY JURY HAS BEEN MADE
KNOWINGLY, INTENTIONALLY AND WILLINGLY BY THE UNDERSUGBED AS PART
OF A BARGAINED FOR LOAN TRANSACTION.
BORROWER
GANESH HOSPITALITY, INC
A Florida corporation
By: _______________________
Stephen C. Mullen, President
AND
GRANJAC RESORTS, INC.,
A Florida corporation
By: _____________________
Stephen C. Mullen, President
- -E-140-
<PAGE>
AGREEMENT NOT TO FURTHER ENCUMBER
THIS AGREEMENT (hereinafter referred to as "this
Agreement"), made and entered into as of the 23 day of June,
1999, by and between INTERBANK FUNDING CORPORATION, a Delaware
corporation (hereinafter referred to as "InterBank"), 1733
Connecticut Avenue, NW, Washington, DC 20009, and GANESH
HOSPITALITY, INC., a Florida corporation, (hereinafter referred
to as "Owner"), 8440 North Tamiami Trail, Sarasota, Florida 34243
WITNESSETH
WHEREAS, Owner has requested InterBank to participate in the
purchase of its corporate stock, and InterBank desires to
participate upon the terms and subject to the conditions set
forth in a certain Agreement between the parties of even date
herewith; and
WHEREAS, the principal asset of Owner, a hotel property, is
encumbered by a Mortgage, Security Agreement, and Assignment of
Rents made by Owner to Citrus Bank as security for the
obligations of Owner to Citrus (the "Mortgage"), creating a first
lien on, and security interest in, the property described
therein, as the same may be supplemented or amended from time to
time; and
WHEREAS, InterBank desires certain assurances with respect
to title to the real and personal property and rights in property
described in, and encumbered by the Mortgage (the "Mortgaged
Property"), the real property being more particularly described
in Exhibit A attached hereto and incorporated herein: and
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, and intending to be legally
bound hereby the parties covenant and agree as follows:
1. Owner shall not, without the prior written consent of
InterBank, which consent
may be withheld in InterBank's sole discretion, grant or permit
to be created any lien, security interest or other encumbrance,
other than encumbrances existing and of record on the date
hereof, covering any of the Mortgaged.
2. Owner agrees to provide to InterBank Funding Corporation,
Attention: Simon A. Hershon,
1733 Connecticut Avenue, NW, Washington, DC 20009 ("InterBank"),
copies of all notices to Borrower received by Owner pursuant to
the Mortgage, within 3 business days after receipt of same by
Owner.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement the day and year first written.
"INTERBANK"
INTERBANK FUNDING CORPORATION,
A Delaware corporation
__________________________
Print Witness Name:______________
_____________________________
By:__________________________________________
Simon A. Hershon, CEO
- -E-141-
<PAGE>
Print Witness Name:_______________
________________________________
"OWNER"
GANESH HOSPITALITY, INC.
A Florida corporation
__________________________
Print Witness Name:______________
_______________________________ By:
______________________________________
Stephen C. Mullen,
President
Print Witness Name:______________
STATE OF District of Columbia
COUNTY OF ________________
The foregoing instrument was acknowledged before me this
13th day of July, 1999, by Simon A. Hershon as Ceo of INTERBANK
FUNDING CORPORATION, a Delaware corporation, on behalf of the
corporation. He is / X / personally known to me or /____/ has
produced _______________________ as identification and did (did
not) take and oath.
My Commission Expires: 2-14-01
______________________________
NOTARY PUBLIC
______________________________
(Type or Print Name)
(NOTARY SEAL)
STATE OF FLORIDA
COUNTY OF ____________
The foregoing instrument was acknowledged before me
this 23 day of June, 1999, by Stephen C. Mullen as President
of GANESH HOSPITALITY, INC., a Florida corporation. He is
/___/ personally known to me or /___/ has produced
______________ as identification and did (did not) take an
oath.
My Commission Expires:
______________________________
NOTARY PUBLIC
______________________________
(Type or Print Name)
(NOTARY SEAL)
- -E-142-
<PAGE>
EXHIBIT A
Legal Description
- -E-143-
<PAGE>
GUARANTY OF PAYMENT AND PERFORMANCE
FOR VALUE RECEIVED and for the purpose of inducing INTERBANK
FUNDING CORPORATION, a Delaware corporation (hereinafter referred
to as "Lender"), 1733 Connecticut Avenue, NW, Washington, DC
20009, to make and/or renew loans in the amount of Nine Hundred
Fifty Thousand Dollars ($950,000.00) to GANESH HOSPITALITY, INC.
and GRANJAC RESORTS, INC., (hereinafter together called
"Borrower"), 8440 North Tamiami Trail, Sarasota, Florida 34243,
from which the undersigned, STEPHEN C. MULLEN, ("Guarantor")
expects to derive direct monetary benefit, agrees for the benefit
of IFC as follows:
1. Guarantor hereby guarantees to IFC the full and prompt
payment, whether ate stated or accelerated maturity or otherwise,
of any and all principal, interest, damages, losses, costs,
charges, expenses and liabilities, whether fixed or contingent
(collectively the "Indebtedness") and the complete, faithful and
punctual performance of any and all other obligations
(collectively) the "Obligations") of Borrower to IFC under the
terms and conditions of (a) the Loan Agreement, of even date
herewith, by and between Borrower and IFC (the "Loan Agreement")
pertaining to such loan; (b) the Note, of even date herewith,
made by Borrower to IFC, in the principal amount of Nine Hundred
Fifty Thousand Dollars (950,000.00) and any and all renewals,
amendments, modifications, reductions and extensions thereof, and
substitutions therefor (the "Note") evidencing such loan; (c) the
Security Agreement, of even date herewith, granted by Borrower to
IFC (the "Security Agreement") securing such loan; and (d) any
other instrument, document, certificate or affidavit heretofore,
now or hereafter given by Borrower evidencing or securing all or
any part of the foregoing ( the same, together with the Loan
Agreement and the Note collectively the "Loan Documents"),
provided Borrower's nonpayment or nonperformance arises from any
of the following acts of Borrower, or any agent, employee,
officer, director or principal of Borrower:
(a) Any loss, damages, or costs (including attorneys' fees and
litigation
expenses) caused by fraud or intentional material
misrepresentation by any of said parties; or
(b) The intentional misappropriation by Borrower of
any condemnation or insurance proceeds, or other
similar funds or payments attributable to Borrower's
real property which may be paid to Borrower and which
under the terms of the Mortgage (as defined in the Loan
Agreement) or any other Loan Documents should be paid
to Lender; or
(c) The intentional misapplication by Borrower of any
rentals from Borrower's real property received by or on
behalf of Borrower and not used in connection with said
property or as otherwise required by and Loan Document
subsequent to the date on which Lender gives Borrower
written notice of an Event of Default; or
(d) Borrower's intentional failure to pay any
Preferred Return or Internal Rate of Return
attributable to funds received by or on behalf of
Borrower relating to transactions giving rise to
lender's entitlement thereto.
2. Guarantor agrees that, if any of the Indebtedness shall not
be paid or any of the Obligations shall not be performed by
Borrower in accordance with the terms and conditions of the
- -E-144-
<PAGE>
Loan
Documents due to any of the foregoing acts, Guarantor shall
immediately so pay such Indebtedness and so perform such
Obligations and the same shall become the direct and primary
indebtedness and obligation of Guarantor.
3. The liability of Guarantor under this Guaranty of Payment
and Performance (the "Guaranty") is independent of the
Indebtedness and Obligations of Borrower, and a separate action
or actions may be brought and prosecuted against Guarantor
regardless of whether any action is brought against Borrower or
whether Borrower be joined in any such action or actions. There
shall be no duty or obligation of IFC to exhaust any remedy in
law or in equity against Borrower or any security before bringing
suit or instituting proceedings of any kind against Guarantor.
4. Guarantor represents that, at the time of the execution and
delivery of the Guaranty, nothing exists to impair the liability
of Guarantor hereunder or the immediate effectiveness of the
Guaranty.
5. The liability of Guarantor hereunder shall continue until
full payment of the Indebtedness and full performance of the
Obligations, it being the intention hereof that Guarantor shall
remain liable for the payment of the Indebtedness and for the
performance of the Obligation notwithstanding any act, omission
or event which might, but for the provisions hereof, otherwise
operate as a legal or equitable discharge of Guarantor. Without
limiting the generality of the foregoing, the liability of
Guarantor hereunder shall not be affected or impaired on account
of the following events:
(a) any execution of any guaranty by any other Guarantors,
whether now or hereafter, or any invalidity or unenforceability
of any such guaranty;
(b) any impairment, modification, release, discharge or
limitation of liability of Borrower or any other Guarantors, or
any stay of lien enforcement proceedings against any of the same
or their respective property, resulting from any receivership,
insolvency, bankruptcy, dissolution, merger, reorganization or
other similar proceeding under any present or future provision of
the United States Bankruptcy Code or any other similar federal or
state law or under the decision of any court;
(c) any voluntary or involuntary liquidation, sale or other
disposition of all or substantially all of the assets of
Borrower;
(d) any determination the Borrower is not liable for the payment
of the Indebtedness or the performance of the Obligations because
the act creating the Indebtedness or obligations is ultra vires,
because the officers or persons creating the Indebtedness or
Obligations acted in excess of their authority, because of any
exculpatory provision in the Loan Documents, because of any
federal or state law or decision of any court, because of any
illegality, irregularity, invalidity or unenforceability, in
whole or in part, of the Loan Documents or otherwise; or
(e) any failure of IFC to accelerate the maturity of the
Indebtedness or the Obligations upon default thereon, to preserve
the liability of any person for payment of the Indebtedness or
performance of the Obligations, to take security therefor, to
perfect its interest in any security taken or to exercise or
enforce, by legal proceedings or otherwise, its rights against
Borrower, any other person or any security taken;
- -E-145-
<PAGE>
whether or not Guarantor shall have any notice or knowledge
of any of the foregoing. Further, no delay in exercising
any right, power or privilege under this Guaranty or the
Loan Documents shall operate as a waiver of such right,
power or privilege.
6. Guarantor authorizes IFC to deal in any manner with the
Indebtedness and the Obligations and with the security of
every kind and character given to secure the payment and
performance thereof, provided that the principal portion of
the Indebtedness shall not be increased above the amount
aforesaid without the written consent of Guarantor, and
consents to each action or omission of IFC pursuant to such
authority. Without limiting the generality of the
foregoing, Guarantor authorizes IFC, form time to time and
whether one or more times. To amend, modify or supplement
any or all of the Loan Documents or any right, remedy or
power thereunder, including without limitation, any
condition precedent to loan advances or any right with
respect to requiring additional security; accept additional
or replacement security; or release or surrender security.
7. The liability of Guarantor hereunder and the rights of
IFC hereunder shall be reinstated and revived with respect
to any amount at any time paid against the Indebtedness that
thereafter is required to be resorted or returned by IFC as
a result of insolvency, bankruptcy, reorganization or other
similar proceedings affecting Borrower, Guarantor, any other
Guarantors or any other person, or any of the assets of the
same, or as a result of any other fact or circumstances, all
as though such amount had not been paid.
8. Guarantor waives:
(a) notice of acceptance of the Guaranty by IFC, of loan
advances by IFC and of presentment for payment, nonpayment or
dishonor or protest of any of the Indebtedness of any person or
entity pledged to IFC as security for the Indebtedness or the
Obligations;
(b) any and all defenses, offsets and counterclaims of Borrower
to liability under the Loan Documents or of Guarantor under this
Guaranty, whether now existing or hereafter arising;
(c) any duty on the part of IFC to disclose to Guarantor any
fact or facts it may now of hereafter know about Borrower,
regardless of whether IFC has reason to believe that any such
facts materially increase the risk beyond that which Guarantor
intends to assume, has reason to believe that such facts are
unknown to Guarantor or has a reasonable opportunity to
communicate such facts to Guarantor, it being understood and
agreed that Guarantor is fully responsible for being and
remaining informed of the financial condition of Borrower and of
all circumstances bearing on the risk of nonpayment of the
Indebtedness or nonperformance of the Obligations; and
(d) any and all rights of subrogation, contribution,
reimbursement, indemnity, exoneration, implied contract, recourse
to security or any other claim, as that term is defined in the
United States Bankruptcy Code and any amendments, which Guarantor
may now have or later acquire against Borrower, against any other
entity directly or contingently liable for the payment of the
indebtedness or performance of the Obligations or against the
security for the Indebtedness or the Obligations, arising from
- -E-146-
<PAGE>
the existence or payment of the Indebtedness or existence or
performance of the Obligations under this Guaranty.
9. Whether or not due IFC from Borrower, Guarantor agrees to
pay to IFC all damages, losses, cost, charges, expenses, and
liabilities of every kind, nature and description suffered or
incurred by IFC, including without limitation attorneys' fee,
arising in any manner out of, growing out of or connected in any
way with the enforcement of this Guaranty.
10. Guarantor subordinates any and all indebtedness of Borrower
now or hereafter owed to Guarantor to the Indebtedness and agrees
that Guarantor shall not demand or accept any payment of
principal or interest from Borrower, shall not claim any offset
or other reduction of Guarantor's liability hereunder because of
any such indebtedness and shall not take any action to obtain any
of the security for the Indebtedness or the Obligations.
11. Guarantor warrants and represents to IFC that all financial
statements heretofore delivered by Guarantor to IFC are true and
correct and that there have been no material adverse changes as
of the date hereof. Guarantor shall deliver to IFC then current
balance sheets, income and expenses statements and such other
financial information as IFC may require, within ninety (90) days
after the end of each fiscal year of Guarantor and when otherwise
requested by IFC, and tax returns, within thirty (30) days after
the last date that the same can be filed without imposition of a
penalty for late filing. All financial statements shall be
prepared in accordance with generally accepted accounting
principles or otherwise in form acceptable to IFC. IFC reserves
the right to require not more often than annually audited or
certified financial information by a certified public accountant
acceptable to IFC.
12. Nothing herein contained, nor contained in any of the other
Loan Documents, shall be construed or so operate as to require
Guarantor to pay interest in an amount or at a rate greater than
higher rate permissible under applicable law. Should any
interest or other charges paid by Guarantor result in the
computation or earning of interest in excess of the highest rate
permissible under applicable law, then any and all such excess
shall be and the same is waived IFC, and all such excess shall be
automatically credited against and in reduction of the principal
sum, and any portion of said excess which exceeds the principal
sum shall be paid by IFC to Guarantor, it being the intent of the
parties hereto that under no circumstances shall Guarantor be
required to pay interest in excess of the highest rate
permissible under applicable law. All interest paid or agreed to
be paid to IFC shall, to the extent permitted under applicable
law, be amortized, prorated, allocated and spread throughout the
full period until payment in full of the indebtedness, including
the period of any renewal or extensions thereof, so that interest
thereon for such full period shall not exceed the maximum amount
permitted by applicable law. Notwithstanding anything to the
contrary herein contained, in the event that the interest rate to
be charged hereunder ever exceeds the highest rate permissible
under applicable law, thereby causing the interest accruing to be
limited to such rate, then any subsequent reduction in the
interest rate to which Guarantor would otherwise be entitled
shall be held in abeyance until the total amount of interest
accrued equals the amount of interest which would have accrued
had the interest rate not been limited to the highest rate
permissible under applicable law.
13. Any notice required or permitted to be given hereunder shall
be writing. If mailed by fist class United States mail, postage
prepaid, registered or certified with return receipt requested
then such notice shall be effective upon its deposit in the
mails. Notice given in any other
- -E-147-
<PAGE>
manner shall be effective only
if and when received by the addressee. For purposes of notice,
the addresses of Guarantor of IFC shall be set forth below;
provided however, that wither party shall have the right to
change such party's address for notice hereunder to any other
location within the continental United States by the giving of
thirty (30) days' written notice to the other party.
If to Guarantor: STEPHEN C. MULLEN
GANESH HOSPITALITY, INC.
8440 North Tamiami Trail
Sarasota, Florida 34243
If to IFC: SIMON A. HERSHON
INTERBANK FUNDING CORPORATION
1733 Connecticut Avenue, NW
Washington, DC 20009
14. Whenever any amount is payable to IFC hereunder, IFC
shall have the right to set off such amount against amounts
owing to Guarantor by IFC, whether or not then due and
payable, and against all other funds or property of such
Guarantor on deposit with or otherwise held in the custody
of IFC, all without notice to or demand on Guarantor, such
notice and demand being waived.
15. All rights and remedies of IFC are cumulative and not
alternative. If any provision or any part of any provision
contained in the Guaranty shall for any reason be held or
deemed to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability
shall not affect any other provision or remaining part of
the affected provision of the Guaranty, and this Guaranty
shall be construed as if such invalid, illegal or
unenforceable provision or part thereof had never been
contained herein, and the remaining provisions of this
Guaranty shall remain in full force and effect.
16. Guarantor agrees that this Guaranty shall inure to the
benefit of and may be enforced by IFC or its endorses,
transferees, successors and assigns, and shall be binding
upon and enforceable against Guarantor and Guarantor's legal
representatives, heirs, successors, and assigns. This
Guaranty may be assigned by IFC in whole or in part.
17. This Guaranty is executed by Guarantor at Sarasota,
Sarasota County, Florida. This Guaranty is delivered in the
State of Florida and is to be governed by and construed in
accordance with the laws of the State of Florida. Guarantor
consents to, and by execution of this Guaranty submits to,
the personal jurisdiction of the Court of Collier County,
Florida and United States District Court for the purposes of
any judicial proceedings which are instituted for the
enforcement of this Guaranty. Guarantor agrees that venue
is proper in either of said courts.
18. This is the entire agreement and there are no other
oral or written agreements and no understandings affecting
the terms hereof. This Guaranty may be modified only by
subsequent written agreement executed by Guarantor and IFC
IFC, BY ACCEPTANCE OF THIS GUARANTY, AND GUARANTOR HEREBY
MUTUALLY, VOLUNTARILY, IRREVOCABLY AND UNCONDITIONALLY WAIVE
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<PAGE>
FOR THE BENEFIT OF THE OTHER ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOULDING IN
CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, IN CONNECTION
WITH, RELATED TO, OR INCIDENTAL TO THIS GUARANTY OR THE LOAN
DOCUMENTS, THE TRANSACTIONS RELATED THERETO OR THE
RELATIONSHIP ESTABLISHED THEREBY. THIS PROVISION IS A
MATERIAL INDUCEMENT TO IFC AND GUARANTOR TO ENTER INTO THIS
TRANSACTION. IT SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT,
AMEND, OR MODIFY IFC'S ABILITY TO PURSUE ITES REMEDIES.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty
to be executed this 23 day of June, 1999.
__________________________________
STEPHEN C. MULLEN
STATE OF ____________
COUNTY OF ____________
The foregoing instrument was acknowledged before me
this 23 day of June, 1999, by STEPHEN C. MULLEN
NOTARY PUBLIC
Commission
Expiration________________
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<PAGE>
COLLATERAL ASSIGNMENT OF MANAAGEMENT CONTRACT
THIS COLLATERAL ASSIGNMENT OF MANAGEMENT CONTRACT (the
"Assignment"), made and entered into as of the 15th day of May,
1998, by and between INTERBANK FUNDING CORPORATION, a Delaware
corporation (hereinafter referred to as "Lender," such term to
include subsequent holders, if any, of the Note which this
Assignment secures), 1733 Connecticut Avenue, NW Washington, DC
20009, and GANESH HOSPITALITY, INC., a Florida corporation and
GRANJAC RESORTS, INC., (hereinafter together referred to as
"Borrower"), 8440 North Tamiami Trail, Sarasota, Florida 34243.
Recitals of Fact
A. Borrower is obtaining financing from Lender on
this date and, in connection therewith, has executed (i) a Loan
Agreement evidencing the loan ("Loan Agreement") this same date,
between Lender and Borrower (ii) a Commercial Loan Note ("Note")
this same date, payable to the order of Lender, in the principal
amount of Nine Hundred Fifty Thousand Dollars ($950,000.00),
bearing interest at the rate per annum specified therein; (iii) a
Security Agreement and Financing Statements ("Security
Agreement") encumbering all of the corporate shares of Borrower;
and (iv) certain other documents creating liens, granting
security interest, or otherwise evidencing or securing the loan
("Loan") by Lender to borrower (all of which such documents,
whether or not listed in the preceding sentence, are hereinafter
collectively referred to as the "Loan Documents").
C. In order to induce Lender to make the Loan, Borrower
has agreed to make the assignment herein as primary and not as
secondary security for the Note.
Agreement
In order to induce Lender to make the Loan, and as a
condition to the making of the Loan and in consideration thereof,
Borrower hereby covenants, warrants and agrees that the foregoing
recitals are true and correct, and incorporated herein by this
reference, and further agrees as follows:
1. Assignment. Borrower, as assignor, hereby
unconditionally assigns, transfers and sets over into Lender, as
assignee, all of Borrower's right, title and interest, whether
now or hereafter acquired, in and to that certain Management and
Operating Agreement by and between Granjac Resorts, Inc.
("Granjac") and Borrower, dated June 10,1999 (the "Contract").
2. Term of Assignment. This Assignment shall remain in
affect until (a) the Note is paid in full and all other
obligations contained in any of the Loan Documents are fully and
completely satisfied or (b) this Assignment is voluntarily
released by Lender (without thereby implying any obligation on
the part of Lender to do so). If at any time payment of any
amounts paid under any of the Loan Documents is rescinded or must
otherwise be restored or returned by Lender upon the insolvency,
bankruptcy or reorganization of Borrower or under any other
circumstances, this Assignment shall continue to be effective or
shall (if previously terminated) be reinstated, as the case may
be, as if such payment had not been made, notwithstanding the
release of this Assignment of public record. No judgement or
decree which may be entered on any debt secured or intended to be
secured by the Security Agreement or any other Loan Documents
shall lessen the effect of this instrument. This Assignment
shall remain in full effect during the pendency of any
foreclosure proceedings under the Security Agreement or any of
the other Loan Documents, both before and after sale, until the
issuance of a deed to the foreclosure sale purchaser.
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3. Rights of Borrower Prior to Default. As of execution
of this Assignment and until Lender notifies Borrower or other
parties as provided below, and further provided that no Event of
Default (as defined in the Loan Documents) has occurred which
remains uncured, Lender elects not to exercise any rights under
the Contract. Rather, Lender agrees that Borrower may exercise
all such rights. However, if a default occurs in the making of
any payments due under the Note or such other Event of Default
(as that term is defined in the Note of the Security Agreement)
occurs, the Lender shall have the rights specified below.
4. Borrower's Covenants. Borrower covenants and agrees as
follows:
4.1 Lender shall not in any way be responsible to
Borrower for the performance of any obligations of Borrower under
the Contract, or for any failure to do any or all of the actions
for which rights, interests, power and authority are herein
granted. Borrower will make no claim against Lender respecting
the Contract and shall defend and indemnify Lender against any
claims by third parties against Lender alleging any liability of
Lender for any of the matters described in this Section 4.1. The
failure of Lender to take any of the actions or exercise any of
the rights, interest, powers and/or authority granted to Lender
hereunder, shall not be construed to be a waiver of any of the
rights, interest, powers, or authority granted to Lender
hereunder.
4.2 Borrower will execute upon the request of Lender
any and all further documents, assignments or instruments which
Lender deems appropriate or necessary to evidence or effectuate
this Assignment or grant or confirm the right and authority
assigned to Lender hereunder.
4.3 During the term of this Assignment, Borrower will
not cancel or terminate the Contract, amend or modify any terms
of the Contract, other than in the reasonable and ordinary course
of business, without the written consent of Lender, which consent
shall only be required for amendments in excess of $1,000.00.
However, Borrower shall notify Lender of any cancellation of or
amendments or modifications to the Contract.
4.4 After an Event of Default as defined in the Loan
Documents has occurred which remains uncured, Borrower
specifically gives its consent and authorization to any court of
competent jurisdiction to issue, by ex-parte hearing, such order
or orders as may be appropriate or necessary to enforce there
terms of this Assignment, granting to Lender such powers, orders
or authority as Lender shall need or desire to enforce this
Assignment. Any such court is directed not to require any bond
of Lender, the parties agreeing that time is of the essence to
protect the interests of Lender and Borrower.
4.5 Borrower will, at Borrower's sole cost and
expense, appear in and defend any action growing out of or in any
manner connected with the Contract or any of the obligations or
liabilities of the Borrower or any persons in connection
therewith. Borrower will, at least 20 days prior to the filing
of any litigation or responsive pleading, first notify Lender, in
writing, of such intended action, reserving unto Lender the right
to take any such action as Lender may deem reasonably necessary
under the circumstances.
4.6 Borrower will fulfill and perform each and every
obligation which is incumbent upon Borrower under the Contract.
4.7 In the ordinary course of business Borrower will
enforce, at its sole cost and
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expense, short of termination of the Contract, the performance
and observance of each and every covenant and condition required
of the other contracting party under the Contract
5. Representations and Warranties: Additional Covenants.
Borrower makes the following representations and warranties to
Lender, and enters into the following additional covenants, with
the intention and expectation that Lender will rely upon the same
in entering into this Assignment:
5.1 Borrower knows of no present defaults in the
performance of any of the terms and conditions contained in the
Contract, which would substantially affect the operation of the
Property.
5.2 Borrower has not executed any prior assignments of
the Contract, and will not in the future execute any assignments
of the same, other than this Assignment.
5.3 Borrower has not performed any acts or executed
any other documents, and will not take any action or execute any
other documents, which might prevent, limit or restrict Lender
from enforcing any of the terms or conditions of this Assignment,
exercising any of its rights or remedies hereunder, or
functioning as the successor to Borrower under the Contract.
5.4 Borrower will take all steps necessary to ensure that all
contracting parties and all
other parties and all other parties affected by the Contract will
look to, and accept Lender in substitution of Borrower if Lender
elects to exercise its rights hereunder.
5.5 No oral agreements or contracts shall be binding upon Lender
unless otherwise
agreed to and accepted by Lender.
6. Events of Default. An event of default shall exist
under this Assignment upon the happening of any one or more of
the following events (each an "Event of Default"):
6.1 Failure of Borrower to pay any principal of,
interest on or other amount due under the Note within no later
than five days from when the same is due, whether at maturity by
acceleration or otherwise.
6.2 An Event of Default, as defined in the Note or the
Security Agreement, occurs.
6.3 Borrower's breech of any covenant, agreement or obligation
under this
Assignment.
7. Lender's Remedies Upon Default.
7.1 Upon the occurrence of an Event of Default as
defined above, Borrower's right to enjoy the privileges under the
Contract shall immediately terminate, and Lender's right under
the assignments created by this Assignment shall become fully
effective. Lender will have the rights at its option, to enforce
and to exercise any or all of its rights under this Assignment or
otherwise, but Borrower expressly agrees that Lender's exercise
of any rights hereunder shall not be prerequisite or precondition
to the full effectiveness and enforceability, of Lender's rights
hereunder.
7.2 In such event, and upon Lender's election,
Borrower shall deliver to Lender the Contract. Any oral
contracts shall be described in a writing delivered by Borrower
to Lender.
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<PAGE>
7.3 Lender, at its option, and without any notice
whatsoever to Borrower, shall have the right and is hereby
authorized to: (a) notify the other party to the Contract that
Lender is exercising its rights under this Assignment; (b) take
such further action as may be appropriate or necessary to take
its position as the assignee of Borrower's rights under the
Contract; (c) sue to enforce the performance of the Contract in
the name of Borrower or Lender: (d) delegate any and all rights
and powers given to Lender by this assignment; (e) have a
receiver appointed; and (f) use such measures, legal or
equitable, as in its sole discretion may carry out and effectuate
the provisions of this Assignment. All such actions shall be
taken at the sole expense of the Borrower, who agrees to
reimburse Lender for all amounts expended, together with interest
thereon from the date of expenditure at the Default Rate stated
in the Note, upon demand.
8. Instructions to Other Contracting Parties. This
Assignment constitutes an express direction and full authority to
any other party to the Contract to render any performance
directly to Lender, upon Lender's request. No proof of default
shall be required. Any such other contracting party is hereby
irrevocable authorized to rely upon and comply with any notice or
demand by the Lender for the rendering of any performance to the
Lender under the Contract. The other contracting party shall not
be liable to Borrower, or any person claiming under Borrower, for
rendering any performance to Lender. The other contracting party
shall have no obligation or right to inquire whether any default
has actually occurred or is then existing. By its execution of
this Assignment, Borrower irrevocably joins in, consents to, and
makes and delivers the above instructions to all of the other
parties under the Contract.
9. Lender as Agent. Lender is and will be acting solely
as an agent of Borrower in taking any actions in connection with
the Contract. Lender assumes no responsibility or liability in
any other capacity. Lender shall not be obligated to perform any
obligation or duty, or discharge any liability under the
Contract, or under or by reason of this Assignment.
10. Remedies Cumulative. The remedies provided in this
Assignment and in the other Loan Documents are cumulative and not
mutually exclusive. The remedies can be exercised successively
or concurrently, as many times as and whenever the occasion may
arise, and the exercise of any one or more remedies shall not be
a waiver of or preclude the exercise of any one or more remedies
at the same or any later time for the same or any later default.
11. Liability of Lender.
11.1 In Lender's exercise of the powers granted Lender
by this Assignment, no liability shall be asserted or enforced
against Lender, and Borrower expressly waives and releases Lender
from all such liability.
11.2 Lender shall not be responsible for any failure to
perform any covenants in the Contract, either before or after the
exercise of any assignments or remedies contained in this
Assignment.
11.3 In accepting the assignments herein described, and
in exercising any of the remedies provided herein or taking any
of the actions which are authorized herein, Lender will be acting
solely and exclusively as agent for Borrower in attempting to
obtain payment to Lender of the amounts which Lender is to
receive pursuant to the Note. The parties acknowledge that in so
doing, Lender will not be or be deemed to be an "owner" or
"operator" of the Property under any environmental statute, law,
regulation or ordinance, or for any other purpose and will not be
assuming any obligations of Borrower to fully comply with all
such statutes, laws, regulations, or ordinances, as more
particularly
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<PAGE>
described I the Security Agreement. Borrower will
specifically defend and indemnify Lender against any such
liability, cost, loss, or expense.
12. Indemnity.
12.1 Borrower agrees to defend and indemnify the Lender
from and against any and all liability, loss, damage, and expense
(including all attorneys' fees and expenses through litigation
and all appeals) which Lender may or might incur under the
Contract, or under or by reason of this Assignment, from any
violation of law for which Borrower is responsible, and from any
and all claims and demands whatsoever which may be asserted
against the Lender in connection with the Property or respecting
any alleged obligations or undertakings to perform or discharge
any terms, covenants or agreements contained in the Contract,
except for losses or demands resulting from willful or negligent
actions of Lender. This indemnity shall include specifically,
but without limitation, any indemnity against any of the matters
described in Section 11 above.
12.2 Should Lender incur any such liability, loss or
damage, the payment and amount thereof, including costs, expenses
and attorneys' fees, with interest at the Default Rate stated in
the Note, from the date the cost or loss is incurred, shall be
secured by this Assignment and by the other Loan Documents.
Borrower shall pay all such amounts immediately upon demand.
13. Bankruptcy
13.1 The parties agree that Borrower has substantial duties of
performance apart from
its mere financial obligations under this Assignments, the Note,
and other Loan Documents, and that parties other than the
Borrower could not adequately and fully perform the covenants to
be performed by Borrower in this Assignment. The parties also
agree that this Assignment is an agreement for the making of
loans and for the extending of debt financing or financial
accommodations. No assumption of or assignment of this
Assignment shall be allowed in bankruptcy. Should an assumption
of or assignment of this Assignment be permitted in violation of
this covenant, the parties agree that Lender will not have
adequate assurance of performance unless and until Lender is
allowed access to adequate financial and other information to
satisfy itself that the trustee or proposed assignee is fully
able to assume the financial and personal covenants of Borrower
under this Assignment, in full accordance with its terms, and
that sufficient collateral is pledged and sufficient bonds or
letters of credit are posted by the bankruptcy trustee or
proposed assignee to guarantee performance of such obligations.
The parties further agree that the definition of the term
"adequate assurance" as set forth in section 365 9b) (3) of the
Bankruptcy Code of 1978, as amended, shall be applicable directly
or by analogy to any determination of adequate assurance in
connection with this Assignment.
13.2 In the event of Borrower's bankruptcy, the debtor in
possession or trustee shall
not be permitted to use, sell or assign the Contract, whether or
not in the ordinary course of business, without providing
adequate protection to Lender. The parties agree that the
language in Section 361 of the Bankruptcy Code of 1978, as
amended, shall be the exclusive definition of the term "adequate
protection" in connection with any use or enforcement of the
Contract. The cash payment referred to in that section shall
mean liens on property the actual market value of which is equal
to or greater than the replacement cost of the Contract, and the
term "indubitable equivalent" as used in that section shall mean
protection afforded by either grants of administrative expense
priority, grants to Lender of ownership interests in a continuing
business surviving the bankruptcy or grants to Lender of
protected securities issued by a continuing business surviving
the bankruptcy, which completely compensate Lender for the loss
of the present value (computed at the then market rate of
interest for commercial loans) of its
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<PAGE>
interest in the Contract.
For purposes of computation, the value of the Contract is deemed
to be the replacement cost.
13.3 The parties agree that because of the extreme
financial importance to Lender of this transaction, and because
of the nature of the Contract, and the likelihood that its value
will quickly decrease over time, Lender will be irreparable
harmed by any stay of its collection efforts or the exercise of
its remedies under this Assignment.
13.4 The parties agree that in the event a plan of
reorganization is proposed under Chapter 11 of the Bankruptcy
Code of 1978, as amended, the plan will be fair and equitable to
Lender, as a secured creditor, only if Lender realizes under the
plan the indubitable equivalent of its interests in the Contract.
The term "indubitable equivalent" in such context shall have the
same meaning as that given in Section 13.2 of this Assignment.
14. Waiver of Jury Trial. Borrower hereby irrevocably
waives all rights to trial by Jury in an action, proceeding or
counterclaim arising out of or relating to this assignment, any
course of dealings, or any of the Loan Documents or the
transactions contemplated thereby.
15. Notice. The notice provisions of the Security
Agreement shall be in force and effect for this Assignment and
incorporated herein by this reference as though the express terms
were stated in this Assignment.
16. Miscellaneous. This Assignment shall be binding upon
Borrower and its successors and assigns and shall inure to the
benefit of Lender and its successors, transferee and assigns, and
all parties who may become holders of the Note. This assignment
is made and executed under and shall in all respects be governed
and enforced by and construed in accordance with the laws of the
State of Florida, including without limitation matters of
construction, validity and performance. Each party acknowledges
that it has reviewed this Assignment, and the parties hereby
agree that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Assignment. In the
event any terms or provisions of this Assignment are held invalid
or unenforceable, the remaining terms and conditions of this
Assignment shall continue to be fully enforceable without change,
and this Assignment shall be interpreted as if the invalid or
unenforceable provision had not been a part hereof.
17. Acknowledgement by Granjac. Granjac hereby
acknowledges this Collateral Assignment, and individually joins
herein for the purpose of consenting to same as the manager under
the Contract, and to further agree that in the event Lender
exercises its rights hereunder, the Contract may be terminated by
Lender upon thirty (30) days written notice to Granjac, anything
to the contrary in the Contract notwithstanding.
IN WITNESS WHEREOF, Borrower has executed or caused this
Assignment to be executed by its duly authorized agents as of the
date first set forth above.
"BORROWER"
GANESH HOSPITALITY, INC.
A Florida Corporation
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<PAGE>
By:
GRANJAC RESORTS, INC.
A Florida Corporation
By:
"LENDER"
INTERBANK FUNDING CORPORATION
A Delaware Corporation
By:
"GRANJAC as manager"
GRANJAC RESORTS, INC.,
A Florida Corporation
By:
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<PAGE>
E-170
Exhibit No. 10
IBF VI - Participating Income Corporation
Form SB-2, Amend. No. 2
File No. 333-71091
PROMISSORY NOTE
$840,000 Washington, DC
November 1998
FOR VALUE RECEIVED, we promise to pay to the order of
InterBank Funding Corporation, a Delaware Corporation with
offices at 1733 Connecticut Avenue, N. W., Washington, D. C.
20009-1137, or such other place as the holder hereof may from
time to time designate in writing, the sum of EIGHT HUNDRED FORTY
THOUSAND, AND NO/100 DOLLARS ($840,000.00), or so much thereof as
may be advanced, in lawful money of the United States, with
interest on the amount from time to time outstanding at the rate
of fifteen percent (15.00%) per annum, payable as hereinafter
stipulated.
THE ENTIRE PRINCIPAL BALANCE and all unpaid and accrued
interest on this Note shall be due and payable on the 10th day of
November, 1999.
Upon not less than ten (10) days prior written notice of its
intent to do so, Maker shall have the privilege of prepaying all
or any part of this Note on the last day of any month, without
penalty.
The principal of this Note after maturity and all past due
interest shall bear interest until paid at that rate that shall
be ten per cent (10%) per annum in excess of the rate above
stated, or the maximum permissible by law, whichever is the
lesser.
Default in the payment of any part of the principal or
interest, when due, or failure to comply with any of the
obligations, agreements and conditions contemplated by the Loan
Agreement of even date herewith pursuant to which this Note is
issued or in the instrument given to secure this Note shall, at
the option of the Holder hereof, mature the whole of this Note,
upon notice to Maker.
In the event this Note is placed into the hands of an
attorney for collection, or if collected through Probate or
Bankruptcy proceedings, then an additional ten per cent (10%) on
the amount of principal and interest then owing hereon, shall be
added to the same as attorney's fees.
To the extent permitted by law, the makers and all endorsers,
sureties and guarantors of this Note hereby severally waive
notice of intention to accelerate, notice of acceleration,
presentment for payment, notice of nonpayment, protest and
diligence in bringing suite, against any party hereto, and
consent to any renewal, extension, or rearrangement, or other
indulgence with respect to this Note any time without notice to
any of them.
It is the intent of Maker and Payee in the making of the
loan represented by this Note, including all obligations arising
hereunder (the "Loan"), to contract in strict compliance with
applicable usury law, In furtherance thereof, Maker and Payee
stipulate and agree that none of the terms and provisions
contained herein, or in any instrument executed in connection
herewith, shall ever be construed to create a contract to pay for
the use, forbearance or detention of money or to pay interest at
a rate in excess of the maximum interest rate permitted to be
charged by applicable law. Neither the Maker nor any
- -E-157-
<PAGE>
guarantors,
endorsers or other parties now or hereafter becoming liable for
payment of the Loan shall ever be required to pay interest
thereon at a rate in excess of the maximum interest that may be
lawfully charged under applicable law, and the provisions of this
Note or any other instruments now or hereafter executed in
connection herewith which may be in apparent conflict herewith
shall be deemed inoperative. If the maturity of the Loan shall be
accelerated for any reason or if the principal of the Loan is
paid prior to the end of the term thereof, and as a result
thereof the interest received for the actual period of existence
of the Loan exceeds the applicable maximum lawful rate, the
Holder of the Loan shall refund to Maker the amount of such
excess or shall credit the amount of such excess against the
principal balance of the Loan then outstanding. In the event that
Payee or any other holder of the Loan shall collect monies which
are deemed to constitute interest in an amount sufficient to
increase tile effective interest rate on the Loan to a rate in
excess of that permitted to be charged by applicable law, all
such sums deemed to constitute interest in excess of the lawful
rate shall, upon such determination, at the option of the Payee,
be immediately returned to the Maker or credited against the
principal balance of the Loan then outstanding. The term
"applicable Law" as used herein shall mean the laws of the
District of Columbia or the laws of the United States, whichever
laws allow the greater rate of interest, as such laws now exist
or may be changed or amended or come into effect in the future.
This Note has been issued pursuant to a Loan Agreement of
even date herewith between Maker and Payee, to which reference is
made for all purposes. Advances against this note and required
reductions in the outstanding principal balance of this Note
shall be governed by the Loan Agreement. Payee is entitled to the
benefits of tile security provided for in the Loan Agreement,
including a security interest in the designated accounts
receivable of Maker created by a Security Agreement of even date
herewith.
INVESTMENT & BENEFIT SERVICES, INC.
Name:
Title:
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<PAGE>
LOAN AGREEMENT
LOAN AGREEMENT (hereinafter referred to as "the Agreement"), made
as of this 10th day of November, 1998 between INVESTNIENT &
BENEFIT SERVICES, INC. (hereinafter referred to as "Borrower"),
having an offices at 279 South Bald Hill Road, New Canaan, CT,
06840 and InterBank Funding Corporation, (hereinafter referred to
as "Lender"), a Delaware corporation having an office at 1733
Connecticut Avenue, N. W., Washington, D. C. 20009-1137.
WITNESSETH:
The Borrower desires to borrow and the Lender desires to
lend to Borrower, the principal amount of up to Eight Hundred
Forty Thousand, and 00/100 Dollars ($840,000), pursuant to the
terms of this Agreement.
NOW THEREFORE, the parties hereto agree as follows:
Article I
The Loan
Section 1.01 Loans. Lender agrees, upon the terms, and
subject to the conditions hereof, to make advances to the
Borrower up to the sum of Eight Hundred Forty Thousand, and
no/100 Dollars ($840,000), (the amount so advanced, including
interest and all other costs and obligations pertaining thereto,
hereinafter referred to as the "Loan"). The Loan shall be
evidenced by a Promissory Note of even date herewith in the face
amount of Eight Hundred Forty Thousand, and no/100 Dollars
($840,000), (hereinafter referred to as the "Note").
Section 1.02 N/A
Section 1.03 N/A
Section 1.04 Commitment Fee. A commitment fee equal to
Eighty Five Thousand and no dollars will be due at the time of
the closing of the loan; additional commitment fees will be due
upon the granting of further extensions, which is at the sole
discretion of the Lender
Article II
Representations and Covenants
Section 2.01 Representations. The Borrower represents and
warrants to the Lender that
(a) The Borrower has the power and authority to execute,
deliver and perform this Agreement, and each of the other
documents executed in connection therewith (collectively, the
"Loan Documents") to own its properties and to carry on its
business as now conducted;
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<PAGE>
(b) The execution, delivery and performance of the Loan
Documents (i) have been duly authorized by all requisite action
of the Borrower, and (H) does not violate any provision of law,
any order of any court or other agency, or any agreement to which
the Borrower is a party or by which the Borrower is bound;
(c) As of the date hereof, there are no actions, suits, or
proceedings before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality pending against the Borrower which if determined
adversely to the Borrower, would have a material effect on the
Borrower;
(d) No Event of Default has occurred under this Agreement
and no default has occurred under any of the other Loan
Documents;
(e) The Borrower makes no claim that the terms of the Note,
including without limitation the interest rate thereon, nor
anything contained herein is usurious nor that there exists any
offset, deduction or defense with respect to the Borrower's
obligations under the Loan Documents;
(f) There are no outstanding judgments against the Borrower
which have not been paid;
(g) There are no impediments to the full and complete
performance by the Borrower hereunder or under any of the Loan
Documents.
Section 2.02 Certain Covenants. The Borrower covenants and
agrees that so long as this Agreement shall remain in effect or
any principal of or interest on said Loan shall be unpaid, to:
(a) Pay all sums due and owing under the Note pursuant to
its terms;
(b) Give prompt notice to the Lender of (i) any proceedings
of which the Borrower has notice instituted by or against the
Borrower, and (ii) any other action, event or condition of any
nature which the management of the Borrower reasonably believes
could have, lead to, or result in a material adverse effect upon
the business, assets of financial condition of the Borrower;
(c) Refrain from selling, assigning, mortgaging, pledging,
granting or permitting any security interest, lien or
encumbrances of any nature in any amount to exist with respect to
any of the Borrower's accounts receivable or inventory, except
where such sale, assignment, security interest, lien or
encumbrance is for the benefit of the Lender.
(d) Provide the Lender on or before the 10th day of each
month Borrower's financial statements, and providing such other
information, including interim financial statements, concerning
the Borrower's business affairs and financial condition as the
Lender may from time to time request;
(e) Not incur any additional indebtedness except, in the
ordinary course of business, with customary time payment
arrangements with vendors and suppliers; and
(f) Pay all sums that may be necessary to be paid in order
to enforce the Note and to enforce and/or to record any agreement
or any other documentation executed and delivered in connection
with the Note, including but not limited to, this Agreement,
whether such sums be in the nature of recording fees, mortgage
tax or any other expense in connection with such recording.
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<PAGE>
Section 2.03 Negative Pledge Covenants. The Borrower
pledges, covenants and agrees that so long as this Agreement
shall remain in effect or the principal of or interest on the
Loan shall remain unpaid it shall not, without the prior written
consent of the Lender, do any of the following:
(a) Sell, transfer or otherwise convey, either voluntarily
or involuntarily, all or any substantial portion of its business
or assets or any interest or estate therein;
(b) Suffer or permit any mechanics' or other statutory lien
which is filed against any of its assets to remain undischarged
or not bonded for a period exceeding sixty (60) days beyond the
filing date thereof
Article III
Voluntary Prepayments
Section 3.1 Voluntary Prepayments. Borrower shall have the
right, without payment of any premium or penalty, to make total
or partial prepayments on the Note on the last day of any month,
provided Borrower has given Lender not less than ten (10)
business days prior written notice of its intention to do so.
Article IV Collateral
Section 4.1 Collateral.
(a.) Borrower shall execute and deliver a Security Agreement
(the "Security Agreement") granting Lender a security interest in
all of Borrower's ownership interest in Preferred Pension
Administrators.
Article V
Renewal Option
Section 5.1 Renewal Option. Borrower, upon five (5)
business days advance notice, may apply to Lender for an
extension. The extension shall be for a term of no more than one
hundred eighty (180) days, and shall otherwise be on the same
terms and conditions, and with the same security, as the Loan.
The extension will be made only at the sole discretion of the
Lender and provided that all of the Mowing conditions are met:
(a) Borrower is not at the time of the request to extend in
default hereunder or under the Note:
(b) Borrower has furnished timely the reports as set forth
in Section 2.02, Paragraph (d);
(c) All sums then due Lender have been paid.
Article VI
Default
Section 6.01 Event of Default. Each of the following shall
constitute an "Event of Default" under this Agreement:
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<PAGE>
(a) If any representation or warranty made in connection
with this Agreement shall prove to be incorrect in any material
respect,
(b) The failure to make any payment of principal or
interest under the Note on or before the due date thereof,
(c) A default in respect of any liabilities or obligations
(present or future, absolute or contingent, secured or unsecured,
matured or unmatured, joint or several, original or acquired) of
the Borrower, or any of its affiliates, to the Lender or any of
its affiliates, after the expiration of any applicable grace,
notice or cure period;
(d) The admission (whether in writing or otherwise) by
Borrower of its inability to pay its debts generally as they
become due;
(e) The commencement by the Borrower of a voluntary case
(or other proceeding) under the Federal Bankruptcy Code, as now
constituted or hereafter amended, or under any other applicable
foreign or state bankruptcy, insolvency or other similar law; or
the continued existence for more than thirty (30) days in respect
of the Borrower of any involuntary case (or other proceeding)
under the Federal Bankruptcy Code, as now constituted or
hereafter amended, or under any other applicable bankruptcy,
insolvency or other similar law; or the appointment of a
receiver, liquidator, assignee, custodian, manager, trustee,
sequestrator or similar official of the Borrower or for any
substantial part of its business; or the making by the Borrower
of any assignment for the benefit of creditors; or the failure of
the Borrower generally to pay its debts as they become due; or
the taking by the Borrower of action to do or authorize any of
the foregoing or in the furtherance of any of the foregoing.
Section 6.02 Effect of Default.
(a) Upon the occurrence of an Event of Default, the Lender,
in its sole and absolute discretion, may (i) declare all of the
Loan to be immediately due and payable and/or exercise such of
the other remedies provided for in the Loan Documents as the
Lender may elect; and/or (H) pursue any other rights or remedies
available to the Lender under this Agreement or the other Loan
Documents.
(b) Without limiting any remedy otherwise available to the
Lender, and at Lender's option, the Borrower shall pay as a late
charge, to the extent permitted by law, five cents ($.05) per
each dollar ($1.00) of each payment more than ten (10) days in
arrears and accepted by the Lender, to cover the extra expense
involved in handling delinquent payments.
(c) If the Borrower fails to observe or perform any of the
covenants or agreements on the part of the Borrower to be
performed hereunder, then the Lender may, but shall not be
obligated to, perform the same, and all necessary and reasonable
costs incurred by the Lender in performing the Borrower's
covenants and agreements, including reasonable counsel fees,
shall be repaid by the Borrower upon demand, together with
interest thereon at the default rate under the Note.
Section 6.03 No Waiver.
(a) Any failure of the Lender to exercise its option to
declare the Loan immediately due and payable, or any forbearance
by the Lender before or after any exercise of such option, or any
forbearance to exercise any other remedy of the Lender, or any
withdrawals or abandonment of the Lender of any of its fight in
any one circumstance, shall not be construed as a waiver of any
option, power, remedy or
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<PAGE>
fight of the Lender hereunder except to
the extent, if any, the action of the Lender constitutes an
express waiver with respect to such one circumstance. The fights
and remedies of the Lender expressed and contained in this
Agreement and in the other Loan Documents are cumulative, and
none of them shall be deemed to be exclusive of any other or of
any right or remedy the Lender may now or hereafter have in law
or in equity. The election of any one or more remedies shall not
be deemed to be an election of remedies under any statute, rule,
regulation or other law.
(b) The obligations of the Borrower (and the rights and
remedies of the Lender against the Borrower) hereunder shall in
no way be modified, abrogated, terminated or adversely affected
by (i) any forbearance by the Lender in collecting any sums due,
or (ii) the granting of any extension of time to perform any
obligation hereunder, or (iii) any impairment of the collateral,
if any, which may now or hereafter be assigned or delivered to
Lender to secure payment of the Loan, by reason of any act,
failure to act or negligence of the Lender.
Article VII
Miscellaneous
Section 7.01 Notices. All notices to be given hereunder
shall be delivered by hand, or sent to the party to be notified
via Certified Mail, Return Receipt Requested, or sent by a
recognized overnight courier which provides evidence of receipt,
and shall be deemed given when delivered by hand or one (1) day
after delivery to such recognized overnight courier, or three (3)
days after being posted with the United States Postal Service
addressed to the parties as follows:
If to the Lender at: InterBank Funding
Corporation
1733 Connecticut Avenue, N.W.
Washington, D. C. 20009-1137
If to the Borrower at: Investment & Benefit
Services, Inc.
279 South Bald I-Ell Road
New Canaan, CT 06840
Section 7.02 Successors and Assigns. The terms Borrower and
Lender shall include the named Borrower and the named Lender and
their respective legal representatives, successors and assigns.
Section 7.03 Severability. If any one or more of the
provisions contained in this Agreement or in any of the other
Loan Documents shall for any reason be held to be invalid,
ifiegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
provision of this Agreement or any other of the other Loan
Documents, and in lieu of such invalid, illegal or unenforceable
provision, there shall be added automatically as a part of this
Agreement a provision as similar to such invalid, illegal or
unenforceable provision as may be possible and be valid, legal
and enforceable.
Section 7.04 Expenses of Lender. The Borrower shall pay all
out-of-pocket expenses, including but not limited to, reasonable
counsel fees incurred by Lender in connection with the
preparation, execution and delivery of this Agreement and the
enforcement or amendment of any of its rights or provisions
hereunder. Expenses for the preparation and review of the
documents shall be collected at the closing. Any other expenses
incurred will be collected at the time of the final
reconciliation.
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<PAGE>
Section 7.05 Indemnity . The Borrower shall indemnify and
hold harmless the Lender from and against any and all
liabilities, obligations, losses, damages, penalties, claims,
actions, suits, proceedings, judgments, costs, expenses, and
disbursements, including but not limited to, counsel fees, in any
way relating to or arising out of the failure of the Borrower to
perform in full its obligations under this Agreement or under any
of the other Loan Documents.
Section 7.06 Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the
District of Columbia without regard to conflict of laws or
principles.
Section 7.07 Jurisdiction. ANY ACTION OR PROCEEDING IN
CONNECTION WITH THIS AGREEMENT MAY BE BROUGHT IN A COURT OF
RECORD OF THE DISTRICT OF COLUMBIA. THE PARTIES HEREBY CONSENTING
TO THE JURISDICTION THEREOF.
Section 7.08 Waiver of Certain Defenses. IN ANY ACTION OR
PROCEEDING IN CONNECTION WITH THIS AGREEMENT, OR ANY OTHER LOAN
DOCUMENTS, THE BORROWER WAIVES ANY CLAIM THAT THE DISTRICT OF
COLUMBIA IS AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO
INTERPOSE ANY DEFENSE BASED UPON ANY STATUTE OF LMTATIONS OR ANY
CLAIM OF LACHES AND ANY SET-OFF OR COUNTERCLAIM[ OF ANY NATURE OR
DESCRIPTION EXCEPT FOR ANY COUNTERCLAIMS DEEMED COM[PULSORY UNDER
APPLICABLE COURT RULES OR STATUTES.
Section 7.09 Waiver of Jury Trial and Waiver of Certain
Damages IN ANY
ACTION OR PROCEEDING IN CONNECTION WITH THIS AGREEMENT OR ANY
OTBER LOAN DOCUNENTS, TBE LENDER AND BORROWER MUTUALLY WAIVE,
TO TBE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY AND
BORROWER BEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY CLAIM FOR CONSEQUENTIAL, PUNTTIVE OR SPECIAL DAMAGES.
Section7.10 Joint and Several Liability. If this Agreement
is executed by `more than one person or entity, all
representations, warranties, obligations and covenants made by
the Borrower hereunder shall be deemed to have been made by each
of such persons and entities and the obligations and duties of
such parties hereunder shall be deemed to be joint and several in
all respects.
Section 7.11 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be
an original, but all of which, when taken together, shall
constitute one and the same instrument and shall become effective
when copies hereof, when taken together, bear the signatures of
each of the parties hereto and it shall not be necessary in
making proof of this instruments to produce or account for more
than one of such fully executed counterparts.
IN WITNESS WHEREOF, this Agreement has been fully executed
by the Borrower and Lender as of the day and year first above
written.
BORROWER:
INVESTMENT & BENEF1T SERVICES, INC.
Name
Title:
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<PAGE>
LENDER:
INTERBANK FUNDING CORPORATION
By:
Title:
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<PAGE>
SECURITY AGREEMENT
This Security Agreement (the "Agreement") dated as of the
10th day of November 1998, is made by and between Investment &
Benefit Services, Inc. (the "Debtor"), and InterBank Funding
Corporation, a Delaware corporation (the "Secured Party").
RECITALS:
A. The Debtor and the Secured Party have entered into that
certain Loan Agreement (the "Loan Agreement") of even date
herewith under the terms of which the Secured Party has committed
to provide to the Debtor a loan in the original aggregate
principal amount of up to Eight Hundred Forty Thousand, and
no/100 Dollars ($840,000), and Debtor has agreed to repay such
loan, pursuant to a Promissory Note of even date herewith (the
"Note"). The obligations of Debtor arising under the Note, the
Loan Agreement and all other documents executed in connection
therewith are hereinafter sometimes collectively referred to as
the "Secured Obligations."
B. This Agreement is issued pursuant to, and is subject to
all terms, provisions, conditions and limitations set forth in
the Loan Agreement, and if any provision contained in this
Agreement is in conflict with or inconsistent with any provision
contained in the Loan Agreement, the Loan Agreement shall govern
and control. Capitalized terms used but not otherwise defined
herein shall have the meanings as ascribed to them in the Loan
Agreement.
C. Pursuant to the Loan Agreement, the Secured Party has
this day provided all or a portion of such funds to the Debtor.
D. As a condition to providing such funds to the Debtor,
the Secured Party requires that the Debtor grant a security
interest in certain property owned by the Debtor to secure
payment and performance of certain obligations of the Debtor,
including its obligations under the Note.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, the
parties hereto agree as follows:
1. Security Interest . The Debtor hereby grants to the
Secured Party security interests in and to any and all present or
future rights of the Debtor in and to all of the following
fights, interests, and property (all of the following being
herein sometimes called the "Collateral"):
(a) Debtor's ownership interest in Preferred Pension
Administrators
2. The Obligation . The security interests herein granted
(the "Security Interests") shall secure full payment and
performance of all of the Secured Obligations.
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<PAGE>
3. Representations and Warranties of the Debtor. The
Debtor represents and warrants to the Secured Party that (a) the
Debtor is the owner of the Collateral; (b) the Security Interests
are first and prior security interests in and to all of the
Collateral; and (c) to the Debtor's knowledge, except as
disclosed in the Loan Agreement, no dispute, right of setoff,
counterclaim, or defenses exist with respect to all or any part
of the Collateral. The delivery at any time by the Debtor to the
Secured Party of Collateral shall constitute a representation and
warranty by the Debtor under this Agreement that, with respect to
such Collateral, and each item thereof, the matters heretofore
warranted in clauses (a) through (c) of this Section 3 are true
and correct in all material respects.
4. Defaults. As used herein, the term "Event of Default"
has the meaning given to such term in the Loan Agreement, all of
the terms, covenants, conditions and provision of which are
incorporated herein by reference the same as if set forth herein
verbatim.
5. Remedies. Subject to Section 19 hereof, without
limiting or affecting any fights, remedies or privileges
unrelated to any Event of Default that Secured Party may have
under the Loan Agreement, the Note or any Other Agreements, upon
the occurrence of an Event of Default and during the continuance
thereof, the Secured Party may exercise any and all fights,
remedies, and privileges it may have under the District of
Columbia Business and Commerce Code and any of the Loan
Agreement, the Note and the Other Agreements that are triggered
by an Event of Default. Without limiting the generality of the
foregoing, before or after default Secured Party may contact
account debtors directly to verify information furnished by
Debtor; notify obligors on the Collateral to pay Secured Party
directly; take control of all proceeds of and payments on any
Collateral and apply them against the Secured Obligations; and,
as Debtor's agent endorse any documents or chattel paper that is
Collateral or that represents Collateral. Secured Party has no
obligation to collect any account and will not be liable for
failure to collect any account or for any act or omission on the
part of Secured Party or Secured Party's officers, agents or
employees, except willful misconduct.
6. Costs, Risks. Subject to Section 19 hereof, should any
part of the Collateral come into the possession of Secured Party,
whether before or after an Event of Default, Secured Party may
use or operate such Collateral for the purpose of preserving it
or its value, or pursuant to the order of a court of appropriate
jurisdiction or in accordance with any other rights held by
Secured Party in respect of the Collateral. Debtor covenants to
promptly reimburse and pay to the Secured Party, at the Secured
Party's request, the amount of all reasonable expenses (including
the cost of any insurance and payment of taxes or other charges )
incurred by the Secured Party in connection with its custody,
preservation, use, or operation of the Collateral, and, all such
expenses, costs, taxes, and other charges shall be a part of the
Secured Obligations and shall bear interest as provided under the
Loan Agreement from the date incurred until the date repaid to
the Secured Party. It is agreed, however, that the risk of loss
or damage to such Collateral is on the Debtor, and the Secured
Party shall have no liability whatsoever for failure to obtain or
maintain insurance, nor to determine whether any insurance ever
in force is adequate as to amount or as to the risks insured.
7. Notice. Reasonable notification of the time and place
of any public sale of the Collateral, or reasonable notification
of the time after which any private sale or other intended
disposition of the Collateral is to be made (including retention
thereof in satisfaction of the Liabilities), shall be sent to the
Debtor and to any other person entitled under the Code to notice.
It is agreed that notice sent or given at least ten (10) Business
Days prior to the taking of the action to which the notice
relates is reasonable notification and notice for the purposes of
this paragraph.
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<PAGE>
8. Rights Cumulative. All rights and remedies of the
Secured Party hereunder are cumulative of each other and of every
other right or remedy which the Secured Party may otherwise have
at law or in equity or under any other contract or other writing
for the enforcement of the Security Interests herein or in the
payment of the Note or the Secured Obligations, and the exercise
of one or more rights or remedies shall not prejudice or impair
the concurrent or subsequent exercise of other rights or
remedies.
9. Assignment. The rights, powers and interests held by
the Secured Party hereunder, together with the Security Interests
in the Collateral, may be transferred and assigned by the
Security Party in accordance with the terms of the Loan
Agreement.
10. No Waiver. No failure on the part of the Secured Party
to exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise by the Secured Party of any right,
power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
11. Binding Effect. This Agreement shall be binding on the
Debtor and the Secured Party and their respective successors and
permitted assigns and shall inure to the benefit of the Secured
Party, and the Secured Party's successors and permitted assigns.
12. Termination. This Agreement and the Security Interests
in the Collateral will terminate when the Secured Obligations
have been paid in fully by extinguishment thereof but not by
renewal, modification or extension thereof Upon such termination,
the Secured Party agrees to execute and to deliver to Debtor upon
request appropriate termination statements and releases of lien
evidencing such termination.
13. Governing Law. THIS AGREEMENT CONSTITUTES A SECURED
COMMERCIAL LENDING TRANSACTION GOVERNED BY THE UNIFORM COMMERCIAL
CODE (TO THE EXTENT APPLICABLE). THIS AGREEMENT SHALL BE DEEMED
TO HAVE BEEN MADE AT THE DISTRICT OF COLUMBIA AND SHALL BE
INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES
APPLICABLE THERETO AND THE INTERNAL LAWS OF THE DISTRICT OF
COLUMBIA APPLICABLE TO AGREEMENTS EXECUTED, DELIVERED AND
PERFORMED WITHIN SUCH STATE, AND THE DEBTOR HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED
TO SUCH PARTY AT ITS ADDRESS SET FORTH IN THE LOAN AGREEMENT.
DEBTOR WAIVES TRIAL BY JURY, ANY OBJECTION BASED ON FORUM NON
CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS
PARAGRAPH 13 SHALL AFFECT THE RIGHT OF THE SECURED PARTY TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE
RIGHT OF SECURED PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST
DEBTOR AND/OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION WHERE SUCH PARTY MAINTAINS OFFICES OR HAS PROPERTY.
14. Mailings . Unless otherwise required herein, any
notice, request, instruction or other document required or
permitted to be delivered hereunder by either party hereto to the
other shall be given as set forth in the Loan Agreement, and
shall be deemed to have been delivered as set forth therein.
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<PAGE>
15. Agreement as Financing Statement. The Secured Party
shall have the right at any time to execute and file a copy of
this Agreement as a financing statement, but the failure of the
Secured Party to do so shall not impair the validity or
enforceability of this Agreement.
16. Severability. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under present or
future laws effective during the term of this Agreement, the
legality, validity, and enforceability of the remaining
provisions of this Agreement shall not be affected thereby, and
in lieu of each such illegal, invalid, or unenforceable provision
there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid,
and enforceable.
17. Counterparts. This Agreement may be executed in a
number of identical counterparts, each of which, for all
purposes, is to be deemed an original, and all of which
collectively constitute one agreement, but in making proof of
this Agreement, it shall not be necessary to produce or account
for more than one such counterpart.
18. Number and Gender of Words. Whenever herein the
singular number is used, the same shall include the plural where
appropriate, and words of any gender shall include each other
gender where appropriate.
19. Further Assurances. Debtor agrees to execute, deliver
and file any and all other agreements, assignments, conveyances,
mortgages, financing statements and/or other instruments and
documents as may be requested by Secured Party in order to
evidence or perfect Secured Party's security interests in the
Collateral
20. Matters pertaining to Collateral. Debtor has delivered
or will deliver to Secured Party certificate(s) representing the
Collateral, either endorsed or with a fully executed
Collateral power attached to be held by Secured party in
accordance with the terms of this Agreement.
(a) The Debtor grants the Secured Party and its
assigns full power to sell, assign, and deliver the whole or
any part of the Collateral, or any additions thereto, at any
brokers exchange or elsewhere, at public or private sale, at
the Secured party's option, in order to satisfy any part of
the obligations of Debtor now existing or hereafter arising,
which are in default. On any such sale Secured Party or its
assigns may purchase all or any part of the Collateral. Out
of the proceeds of any sale, Secured Party shall retain an
amount equal to the principal and interest then due under
the Loan plus attorney's fees and costs of sale, and shall
pay any remaining balance to the Debtor. The rights and
remedies provided for herein shall be in addition to the
rights of Secured Party under applicable law, the Loan
Agreement, the Note or any other Agreements.
(b) The Debtor authorizes Secured Party to deliver at
any time all or any portion of the Collateral, to deal with
the Collateral in the same manner as if it stood in the name
of Secured Party, and to apply the proceeds of sale in
payment or reduction of any Secured Obligations of Debtor.
Debtor waives any notice of any kind relative to the sale or
other disposition of the Collateral.
(c) During the term of this Agreement, all cash
dividends or other distributions made or paid on the
Collateral shall become part of the security pledged
hereunder, and on the
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<PAGE>
occurrence of an Event of Default, any
dividends paid on the Collateral shall be paid to Secured
Party in partial satisfaction of the Secured Obligations of
Debtor.
(d) During the term of this Agreement, and so long as
no Event of Default has occurred and is continuing, the
Debtor shall have the right to vote the Collateral on all
corporate questions. If an Event of Default occurs, and so
long as it continues, then, at Secured Party's election in
its sole discretion indicated by written notice to Debtor,
all of Debtor's rights to exercise any voting or other
consensual rights pertaining to the Collateral or any part
thereof shall cease, and all such rights shall thereupon
become vested in Secured Party, which shall thereupon have
the sole right to exercise such voting and other consensual
rights. In furtherance of the immediately preceding
sentence, Debtor irrevocably constitutes and appoints
Secured Party, effective upon Secured Party's giving of the
foregoing notice after the occurrence and during the
continuance of any Event of Default, as Debtor's proxy with
full power, in the same manner, to the same extent and with
the same effect as if Debtor were to do the same, and
whether or not the Collateral has been transferred into the
name of Secured Party or its nominee: (a) to attend all
meetings of stockholders of Preferred Pension Administrators
and to vote the Collateral at such meetings in such manner
as Secured Party shall, in its sole discretion, deem
appropriate, including, without limitation, in favor of the
liquidation of Preferred Pension Administrators; (b) to
consent, in the sole discretion of Secured Party, to any and
all action by or with respect to Preferred Pension
Administrators for which the consent of the stockholders of
Preferred Pension Administrators is or may be necessary or
appropriate; and (c) without limitation, to do all things
which Debtor can or could do as a stockholder of Preferred
Pension Administrators, giving to Secured Party full power
of substitution and revocation. The foregoing proxy shall
terminate when this Agreement is no longer in full force and
effect as hereinafter provided. Debtor hereby revokes any
proxy or proxies heretofore given by Debtor to any person or
persons whatsoever and agrees not to give any other proxies
in derogation hereof until this Agreement is no longer in
full force and effect as hereinafter provided.
(e) In the event that, during the term of this
Agreement, any stock dividend, reclassification,
readjustment, or other change is declared or made in the
capital structure of the issuer of the Collateral, all new,
substituted and additional shares, or other securities,
issued by reason of any such change shall be held by Secured
Party tinder the terms of this Agreement in the same manner
as the Collateral originally pledged hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day, month and year first
above written.
SECURED PARTY:
INTERBANK FUNDING CORPORATION
By:
Name:
Title:
DEBTOR:
INVESTMENT & BENEFIT SERVICES,
INC.
Name:
Title:
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<PAGE>
Exhibit No. 10(a)
IBF VI - Participating Income Corporation
Form SB-2, Amend. No. 2
File No. 333-71091
THIS INSTRUMENT IS SUBJECT TO AN INTERCREDITOR AND SUBORDINATION
AGREEMENT DATEIJ AS OF THE DATE HEREOF (THE "SUBORDINATION
AGREEMENT') AMONG THE BORROWER, THE LENDER AND SOVEREIGN BANK
(THE "BANK") WHICH, AMONG OTHER THINGS, SUBORDINATES THE
BORROWER'S OBLIGATIONS TO THE LENDER TO THE BORROWER'S
OBLIGATIONS TO THE BANK.
SECURED SUBORDINATED TERM NOTE
$3,000,000 August 25,
1999
Boston,
Massachusetts
FOR VALUE RECEIVED, the undersigned USM ACQUISITION CORP., a
Massachusetts corporation (the "Borrower"), promises to pay to
INTERBANK FUNDING CORP. (the "Lender", or order, at its office at
1733 Connecticut, N.W., Washington DC 20009, the principal sum of
THREE MILLION DOLLARS ($3,000,000)
with interest from the date hereof on the unpaid balance of said
principal sum from time to time outstanding at the Interest Rate
as stated below, paid in arrears on the first day of each month
beginning on September 1, 1999, and on the Maturity Date (as
defined below).
Interest Rate. This Note shall bear interest at the rate
equal to 13.46% per annum (the "Interest Rate"). Upon the
occurrence of an Event of Default, (to the extent allowable by
law) overdue interest shall bear interest, and the Borrower
agrees to pay, at a rate ("Post-Default Rate") equal to two
percent (2%) in excess of the Interest Rate, payable on demand.
Prepayment. Subject to the restrictions set forth in the
Subordination Agreement, the Borrower, at its option, shall have
the right from time to time, without premium or penalty, to
prepay this Note at any time in part or in whole. The Borrower
shall also pay all accrued but unpaid interest at the time of any
such prepayment. Any partial payment of the indebtedness
evidenced by this note shall be applied first to interest hereon
accrued to the date of payment, then to the payment of other
amounts (except principal) at the time unpaid hereunder, and
finally to the unpaid principal hereof.
Payments. All payments of principal, interest and other
amounts payable on or in respect of this Note or the indebtedness
evidenced hereby shall be made to the Lender at the address
specified above and in lawful money of the United States of
America, in funds immediately available to the Lender as it may
direct. Whenever any payment to be made in respect hereto becomes
due on a day which is a Saturday, Sunday or legal holiday, the
maturity thereof shall be extended to the next succeeding
business day and interest hereon shall accrue at the applicable
rate during such extensions. Unless previously terminated by
agreement of the Lender and Borrower or otherwise, this Note
shall terminate and be due and payable at the close of business
on August 16, 2002 (the "Maturity Date").
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<PAGE>
Events of Default and Acceleration. Each of the following
events shall constitute an event of default (an "Event of
Default") hereunder: (a) the failure to make any payment of
principal or interest hereunder when due; (b) any representation
or warranty made by the Borrower shall prove to be materially
incorrect when made; (c) the Borrower defaults on any other
indebtedness or obligations owed to the Lender with an original
principal amount greater than $50,000.00 in the aggregate
(including but not limited to Borrower's obligations under the
Security Agreement between Lender and Borrower of even date
herewith); (d) the Borrower defaults on any other indebtedness
owed to anyone other than the Lender beyond any applicable period
of grace; or (e) the Borrower makes an assignment for the benefit
of creditors, or bankruptcy or similar proceedings are commenced
by or against the Borrower, or all or a substantial part of the
Borrower's property is attached or a receiver, trustee or other
custodian is appointed therefor. At the option of the Lender,
this Note shall become immediately due and payable without notice
or demand upon the occurrence at any time of any Event of
Default, provided, however, that upon any event of Default
specified in subsection (e) above this Note shall become
immediately due and payable without any demand, notice or other
action by the Lender.
Costs of Collection. Should the indebtedness evidenced by
this Note or any part thereof be collected by action at law, or
in bankruptcy, receivership or other court proceedings, or should
counsel be retained for collection of this Note after default,
the Borrower agrees to pay, upon demand by the Lender, in
addition to principal and interest and other sums, if any, due
and payable hereon, court costs and reasonable attorneys' fees
and other collection charges, together with interest thereon at
the rate applicable under this Note to amounts past due, unless
prohibited by law, all without relief from valuation or
appraisement laws.
Waiver. No delay or omission on the part of the holder in
exercising any right hereunder shall operate as a waiver of such
right or of any other right of such holder, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion. The
Borrower and every indorser or guarantor of this Note regardless
of the time, order or place of signing waives presentment,
demand, protest and notices of every kind and assents to any one
or more extensions or postponements of the time of payment or any
other indulgences, to any substitutions, exchanges or releases of
collateral if at any time there be available to the holder
collateral for this Note, and to the additions or releases of any
other parties or persons primarily or secondarily liable.
Massachusetts Law; Seal. All rights and obligations
hereunder shall be governed by the law of the Commonwealth of
Massachusetts, and this Note shall be deemed to be under seal.
Witness: USM ACQUISITION CORP.
By:
Title:
Witness:
- -E-172-
<PAGE>
THIS INSTRUMENT IS SUBJECT TO AN INTERCREDITOR AND SUBORDINATION
AGREEMENT DATED AS OF THE DATE HEREOF (THE "SUBORDINATION
AGREEMENT") AMONG THE BORROWER, THE LENDER AND SOVEREIGN BANK
(THE "BANK") WHICH, AMONG OTHER THINGS, SUBORDINATES THE
BORROWER'S OBLIGATIONS TO THE LENDER TO THE BORROWER'S
OBLIGATIONS TO THE BANK.
SECURED SUBORDINATED REVOLVING CREDIT NOTE
$900,000 August- 25,1999
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned USM ACQUISITION CORP., a
Massachusetts corporation (the "Borrower"), promises to pay to
INTERBANK FUNDING CORP. (the "Lender"), or order, at its office
at 1733 Connecticut, N.W., Washington DC 20009 the principal sum
of
NINE HUNDRED THOUSAND DOLLARS ($900,000)
or, if less, the principal amount of all Advances (as defined
below) made by the Lender from time to time hereunder, with
interest from the date hereof on the unpaid balance of said
principal sum from time to time outstanding at the Interest Rate
as stated below, paid in arrears on the first day of each month
beginning on August 1, 1999, and on the Maturity Date (as defined
below).
Advances. (a) Subject to the terms and conditions set forth
herein, the Lender agrees to make Advances to the Borrower from
time to time until the Maturity Date (as defined below) in an
aggregate principal amount that will not result in the Lender's
Advances exceeding the lesser of (i) the principal amount of this
Note or (ii) the Borrowing Base. The "Borrowing Base" shall be
determined by the Lender by reference to the most recent
Borrowing Base Certificate delivered by the Borrower to the
Lender as provided below and shall equal the sum of 20% of
Accounts and 45% of Inventory.
(b) The Borrower shall deliver a Borrowing Base Certificate
signed by the Chief Financial Officer of the Borrower in the form
attached hereto as Exhibit A to the Lender monthly no later than
15 days after the end of each month. "Accounts" means the face
amount of accounts of the Borrower located in the United States
for which goods have been shipped or delivered to an account
debtor in the United States, which are subject to a security
interest in favor of the Lender and which are not more than 60
days past due. "Inventory" means inventory of the Borrower in
good and marketable condition located in the United States,
valued on a first-in-first-out basis at fair market value, and
subject to a security interest in favor of the Lender. Within the
foregoing limits and subject to the terms and conditions set
forth herein, the Borrower may borrow, prepay and reborrow
Advances. The Borrower hereby agrees to deliver promptly a
written notice to the Lender specifying any change in the
Borrower's borrowing base with the Bank. Upon receipt of any such
notice, the Lender reserves the right to adjust the Borrowing
Base .
(c) To make a request for Advances, Borrower shall provide
Lender with a written borrowing request for such Advances, and
Lender shall fund such Advances within two business days after
the receipt of such written request. All advances made by Lender
to the Borrower hereunder ("Advances") and all payments of the
principal thereof shall be endorsed by the holder of this Note on
the Schedule of Advances and Repayments attached hereto and shall
be reflected in the business records of Lender. The entries in
the Schedule of Advances and Repayments attached hereto and in
the business records of
- -E-173-
<PAGE>
Lender shall constitute prima facie
evidence of the accuracy of the information so listed; provided,
however, that the failure of the holder of this Note to include
information as to any advance or payment on such Schedule of
Advances and Repayments or in such business records shall not in
any manner affect the obligation of the Borrower to repay any
advances made under this Note on or prior to the Maturity Date.
Lender Records. Lender is hereby irrevocably authorized (but
not required) to keep a record of the date and amount of each
payment of principal hereon. In the absence of manifest error,
such records shall constitute conclusive evidence thereof. No
failure on the part of Lender to establish such recordkeeping
system shall in any way affect the rights of Lender or the
obligations of the Borrower to repay advances under this Note on
or prior to the Maturity Date.
Interest Rate. This Note shall bear interest at the rate
equal to 12% per annum (the "Interest Rate"). Upon the occurrence
of an Event of Default, (to the extent allowable by law) overdue
interest shall bear interest, and the Borrower agrees to pay, at
a rate ("Post-Default Rate") equal to two percent (2%) in excess
of the Interest Rate, payable on demand.
Prepayment. Subject to the restrictions set forth in the
Subordination Agreement, the Borrower, at its option, shall have
the right from time to time, without premium or penalty, to
prepay this Note at any time in part or in whole. The Borrower
shall also pay all accrued but unpaid interest at the time of any
such prepayment. Any partial payment of the indebtedness
evidenced by this Note shall be applied first to interest hereon
accrued to the date of payment, then to the payment of other
amounts (except principal) at the time unpaid hereunder, and
finally to the unpaid principal hereof.
Payments. All payments of principal, interest and other
amounts payable on or in respect of this Note or the indebtedness
evidenced hereby shall be made to the Lender at the address
specified above and in lawful money of the United States of
America, in funds immediately available to the Lender as it may
direct. Whenever any payment to be made in respect hereto becomes
due on a day which is a Saturday, Sunday or legal holiday, the
maturity thereof shall be extended to the next succeeding
business day and interest hereon shall accrue at the applicable
rate during such extensions. Unless previously terminated by
agreement of the Lender and Borrower or otherwise, this Note and
the Advances hereunder shall terminate and be due and payable at
the close of business on August 16, 2002 (the "Maturity Date").
Events of Default and Acceleration. Each of the following
events shall constitute an event of default (an "Event of
Default") hereunder: (a) the failure to make any payment of
principal or interest hereunder when due; (b) any representation
or warranty made by the Borrower shall prove to be materially
incorrect when made; (c) the Borrower defaults on any other
indebtedness or obligations owed to the Lender with an original
principal amount greater than $50,000.00 in the aggregate
(including but not limited to Borrower's obligations under the
Security Agreement between Lender and Borrower of even date
herewith); (d) the Borrower defaults on any other indebtedness
owed to anyone other than the Lender beyond any applicable period
of grace; or (e) the Borrower makes an assignment for the benefit
of creditors, or bankruptcy or similar proceedings are commenced
by or against the Borrower, or all or a substantial part of the
Borrower's property is attached or a receiver, trustee or other
custodian is appointed therefor. At the option of the Lender,
this Note shall become immediately due and payable without notice
or demand upon the occurrence at any time of any Event of
Default, provided, however, that upon any event of Default
specified in subsection (e) above this Note shall become
immediately due and payable without any demand, notice or other
action by the Lender.
- -E-174-
<PAGE>
Costs of Collection. Should the indebtedness evidenced by
this Note or any part thereof be collected by action at law, or
in bankruptcy, receivership or other court proceedings, or should
counsel be retained for collection of this Note after default,
the Borrower agrees to pay, upon demand by the Lender, in
addition to principal and interest and other sums, if any, due
and payable hereon, court costs and reasonable attorneys' fees
and other collection charges, together with interest thereon at
the rate applicable under this Note to amounts past due, unless
prohibited by law, all without relief from valuation or
appraisement laws.
Waiver. No delay or omission on the part of the holder in
exercising any right hereunder shall operate as a waiver of such
right or of any other right of such holder, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion. The
Borrower and every indorser or guarantor of this Note regardless
of the time, order or place of signing waives presentment,
demand, protest and notices of every kind and assents to any one
or more extensions or postponements of the time of payment or any
other indulgences, to any substitutions, exchanges or releases of
collateral if at any time there be available to the holder
collateral for this Note, and to the additions or releases of any
other parties or persons primarily or secondarily liable.
Massachusetts Law; Seal. All rights and obligations
hereunder shall be governed by the law of the Commonwealth of
Massachusetts, and this Note shall be deemed to be under seal.
Witness: USM ACQUISITION CORP.
By:
Title:
Witness:
- -E-175-
<PAGE>
SCHEDULE OF ADVANCES AND REPAYMENTS
1. ADVANCES
Date of Advance Amount of Advance
2. REPAYMENTS
Date of Repayment Amount of Repayment
- -E-176-
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of August 25, 1999, is made
by and between USM ACQUISITION CORP., a Massachusetts corporation
having its principal place of business at 200 Reservoir Street,
Needham, Massachusetts 02494 (the "Compan "), and INTERBANK
FUNDING CORP. whose principal place of business is 1733
Connecticut, N.W., Washington DC 20009 (the "Secured Party").
WITNESSETH
WHEREAS, the Company has issued to the order of the Secured
Party on the date hereof its Secured Subordinated Term Note in
the original principal amount of $3,000,000 and a Secured
Subordinated Revolving Credit Note in the original principal
amount of $900,000 (as amended, the "Notes") pursuant to which
the Secured Party agreed, subject to the terms and conditions set
forth therein, to make a loan in such principal to the Company
(the "Loan");
WHEREAS, in connection with the execution and delivery of
the Notes, the Secured Party has requested and the Company has
agreed to enter into this Agreement, pursuant to which the
Company is granting liens and security interests in favor of the
Secured Party;
NOW, THEREFORE, in consideration of the willingness of the
Secured Party to agree, subject to the terms and conditions set
forth therein, to make the Loan to the Company, and for other
good and valuable consideration, receipt of which is hereby
acknowledged, it is hereby agreed as follows:
1. Security Interest . As security for the Secured
Obligations described in Section 2 hereof, the Company hereby
grants to the Secured Party a security interest in and lien on
all of the tangible and intangible personal property and fixtures
of the Company, including the property described below, whether
now owned or existing, or hereafter acquired or arising, together
with any and all additions thereto, replacements and
substitutions therefor, and proceeds and products thereof
(hereinafter referred to collectively as the "Collateral"):
(i) all inventory, goods, merchandise, raw materials,
supplies, goods in process, finished goods and other tangible
personal property held by the Company for processing, sale or
lease or furnished or to be furnished by the Company under
contracts of service or to be used or consumed in the Company's
business (the foregoing items in this clause (i) being sometimes
herein referred to collectively as "Inventory");
(ii) all accounts, accounts receivable and notes, drafts,
acceptances and other instruments representing or evidencing a
right to payment for goods sold or leased or for services
rendered whether or not earned by performance (the foregoing
items in this clause (ii) being sometimes herein' referred to
collectively as "Accounts Receivable"), as well as all right,
title and interest of the Company in the goods which have given
rise thereto, including the right of stoppage in transit;
(iii) all general intangibles of the Company, including
without limitation, goodwill and all present and future
intellectual property rights of the Company, including without
limitation, all trademark rights, all copyright rights, all
patent rights, all trade secrets, all know-how, and all causes of
action arising under all such intellectual property rights;
- -E-177-
<PAGE>
(iv) all of the Company's chattel paper of every kind and
description, including all additions thereto and substitutions
therefor;
(v) all other rights of the Company to the payment of
money, including without limitation, amounts due from affiliates,
all tax refunds of every kind and nature including loss carryback
refunds, insurance proceeds, under factoring agreements, and all
rights to deposits or advance payments;
(vi) all customer lists, files, records (including without
limitation computer programs, disks, tapes and related electronic
data processing media) and writings of the Company or in which
the Company has an interest in any way relating to the foregoing
property and all rights of the Company to retrieval from third
parties of electronically processed and recorded information
pertaining to any of such property;
(vii) all of the Company's documents and instruments
(whether negotiable or non-negotiable);
(viii) all funds and investments in any collateral account
or accounts maintained from time to time by the Company with the
Secured Party;
(ix) all guaranties and securities for any of the foregoing;
and
(x) all of the Company's equipment, machinery, fixtures,
furniture, office supplies and vehicles.
2. Secured Obligations. The security interest hereby
granted shall secure the due and punctual payment and performance
of the following liabilities and obligations (herein called the
"Secured Obligations"):
(a) Principal of and premium, if any, and interest on the
Notes; and
(b) Any and all other indebtedness or obligations of the
Company to the Secured Party, whether direct or indirect,
absolute or contingent, due or to become due or now existing or
hereafter arising including, without limitation, any and all
other fees, premiums or penalties payable by the Company to the
Secured Party.
3. Special Warranties and Covenants of Company. The
Company hereby warrants and covenants to the Secured Party that:
(a) The address shown as the principal place of business of
the Company set forth in the introductory paragraph to this
Agreement is the current principal place of business of the
Company, and all of the Company's current additional places of
business, if any, and the locations of all of the Collateral
currently are listed on Schedule 3. The Company will not change
its principal or any other place of business, or the location of
any Collateral from the locations set forth in Schedule 3, or
make any change in the Company's name or conduct the Company's
business operations under any fictitious business name or trade
name, without, in any such case, at least thirty (30) days' prior
written notice to the Secured Party.
(b) Except for the security interest created hereunder and
the security interest in favor of Sovereign Bank ("Sovereign"),
the Company is the owner of the Collateral free from any lien,
security
- -E-178-
<PAGE>
interest or encumbrance, and will defend the Collateral
against all claims and demands of all persons at any time
claiming the same or any interest therein nor will the Company
create, incur or permit to exist any mortgage, lien, charge,
encumbrance or security interest whatsoever with respect to its
Collateral except for the security interest in favor of
Sovereign.
(c) The Company will not sell or otherwise dispose of any
of the Collateral or any interest therein except in the ordinary
course of business.
(d) The Company will keep the Collateral in good order and
repair and adequately insured at all times in accordance with
commercially reasonable industry practice. The Company will pay
promptly when due all taxes and assessments on the Collateral or
for its use or operation, except for taxes and assessments to be
contested in good faith. The Secured Party may at its option
discharge any taxes, liens, security interests or other
encumbrances to which any Collateral is at any time subject, and
may, upon the failure of the Company so to do, purchase insurance
on any Collateral and pay for the repair, maintenance or
preservation thereof, and the Company agrees to reimburse the
Secured Party on demand for any payments made or expenses
incurred by the Secured Party pursuant to the foregoing
authorization and any unreimbursed amounts shall constitute
Secured Obligations for all purposes hereof.
(e) The Collateral may be transferred to a third party upon
an Event of Default without the consent of any other third party.
(f) The Company will promptly execute and deliver to the
Secured Party such financing statements, certificates and other
documents or instruments as may be necessary to enable the
Secured Party to perfect or from time to time renew the security
interest granted hereby, including, without limitation, such
financing statements, certificates and other documents as may be
necessary to perfect a security interest in any additional
Collateral hereafter acquired by the Company or in any
replacements or proceeds thereof. The Company authorizes and
appoints the Secured Party to execute such financing statements,
certificates and other documents in its stead, with full power of
substitution, as the Company's attorney in fact. The Company
further agrees that a carbon, photographic or other reproduction
of a security agreement or financing statement is sufficient as a
financing statement under this Agreement. With respect to any
investments or other Collateral hereunder which are book entry or
uncertificated securities, the Company authorizes the Secured
Party to cause its security interest therein to be noted on the
books and records of the issuer thereof or other registrar
therefor and to take such other actions as may be necessary to
perfect the Secured Party's security interest therein.
(g) The Company will give the Secured Party notice of each
office of the Company at which records of the Company pertaining
to all intangible items of Collateral are kept. Except as such
notice is given, the Company's records concerning all intangible
Collateral are and will be kept at the address shown at the
beginning of this Agreement as the principal place of business of
the Company.
4. Special Provisions Concerning, Accounts Receivable.
(a) Upon the occurrence and during the continuation of an
Event of Default, the Secured Party may notify or may require the
Company to notify account debtors obligated on any or all of the
Accounts Receivable to make payment directly to the Secured
Party.
(b) The Company hereby irrevocably appoints the Secured
Party the true and lawful attorney of the Company with full power
of substitution, in the name of the Secured Party or in the name of the
- -E-179-
<PAGE>
Company or otherwise, for the sole benefit of the Secured
Party but at the sole expense of the Company, without notice to
or demand upon the Company: (i) to demand, collect, receive
payment of, receipt for, settle, compromise or adjust, and give
discharges and releases in respect of the Accounts Receivable or
any of them; (ii) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent
jurisdiction to collect the Accounts Receivable or any of them
and to enforce any other rights in respect thereof or in respect
of the goods which have given rise thereto; (iii) to defend any
suit, action or proceeding brought against the Company with
respect to any Account Receivable or the goods which have given
rise thereto; (iv) to settle, compromise or adjust any suit,
action or proceeding described in clause (ii) or (iii) above,
and, in connection therewith, to give such discharges or releases
as the Secured Party may deem appropriate; (v) to endorse checks,
notes, drafts, acceptances, money orders, bills of lading,
warehouse receipts or other instruments or documents evidencing
or securing the Accounts Receivable or any of them; (vi) to
receive, open and dispose of all mail addressed to the Company
and to notify the post office authorities to change the address
of delivery of mail addressed to the Company to such address,
care of the Secured Party, as the Secured Party may designate;
and (vii) generally to sell, assign, transfer, pledge, make any
agreement in respect of or otherwise deal with any Account
Receivable or the goods which have given rise thereto as fully
and completely as though the Secured Party were the absolute
owner thereof for all purposes; provided, however, that the
foregoing rights granted to the Secured Party pursuant to this
subsection (b) shall not be exercised by the Secured Party unless
an Event of Default shall have occurred and be continuing. The
powers conferred on the Secured Party by this Agreement are
solely to protect any interest of the Secured Party and shall not
impose any duty upon the Secured Party to exercise any such
power, and if the Secured Party shall exercise any such power, it
shall be accountable only for amounts that it actually receives
as a result thereof and shall not be responsible to the Company
except for gross negligence or willful misconduct. The Secured
Party shall be under no obligation to take steps necessary to
preserve the rights in any Collateral against prior parties but
may do so at its option. The Secured Party may at its option
transfer at any time to itself or to its nominee any securities
held as Collateral hereunder and receive the income thereon and
hold the same as Collateral hereunder.
5. Fixtures. It is the intention of the parties hereto
that none of the Collateral shall become fixtures and the Company
will take all such reasonable action or actions as may be
necessary to prevent any of the Collateral from becoming
fixtures. Without limiting the generality of the foregoing, the
Company will, if requested by the Secured Party, use its best
efforts to obtain waivers of lien, in form satisfactory to the
Secured Party, from each lessor of real property on which any of
the Collateral is or is to be located.
6. Events of Default. The Company shall be in default
under this Agreement upon the happening of any of the following
events or conditions (herein called "Events of Default"):
(a) The occurrence of an Event of Default under the Notes;
or
(b) The breach, violation or other non-performance of any
term, covenant, condition, agreement or obligation of the Company
contained herein.
7. Rights and Remedies of Secured Party. Upon the
occurrence of any Event of Default, such default not having
previously been remedied or cured, the Secured Party may declare
all of the Secured Obligations to be immediately due and payable
and shall then have the following rights and remedies:
(a) All rights and remedies provided by law, including,
without limitation, those provided by the Uniform Commercial
Code;
- -E-180-
<PAGE>
(b) All rights and remedies provided in this Agreement; and
(c) All rights and remedies provided in the Notes, the
Guaranty or in any other agreement, document or instrument
pertaining to any of the Secured Obligations.
8. Royalty Free License. If at any time the Secured Party
has the right to dispose of any of the Collateral which is
subject to a patent, trademark or copyright which the Company
owns or controls through a license or otherwise, the Company
grants to the Secured Party a royalty free license to use any
such patent, trademark or copyright, in addition to the grant of
any security interest granted to the Secured Party in such
patent, trademark or copyright to dispose of any such Collateral.
Such royalty free license shall extend to any person or persons
purchasing such Collateral from the Secured Party.
9. Right of Secured Party to Dispose of Collateral. etc.
Without limiting the scope of Section 7 hereof, upon the
occurrence of any Event of Default, such default not having
previously been remedied or cured, but subject to the provisions
of the Uniform Commercial Code or other applicable law, the
Secured Party shall have the right to take possession of the
Collateral and, in addition thereto, the right to enter upon any
premises on which the Collateral or any part thereof may be
situated and remove the same therefrom. The Secured Party may
require the Company to make the Collateral (to the extent the
same is moveable) available to the Secured Party at a place to be
designated by the Secured Party which is reasonably convenient to
both parties. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, the Secured Party will give the Company at
least ten (10) days' prior written notice at the address of the
Company set forth above (or at such other address or addresses as
the Company shall specify in writing to the Secured Party) of the
time and place of any public sale thereof or of the time after
which any private sale or any other intended disposition thereof
is to be made. Any such notice shall be deemed to meet any
requirement hereunder or under any applicable law (including the
Uniform Commercial Code) that reasonable notification be given of
the time and place of such sale or other disposition. After
deducting all costs and expenses of collection, storage, custody,
sale or other disposition and delivery (including legal costs and
attorneys' fees) and all other charges against the Collateral,
the residue of the proceeds of any such sale or disposition shall
be applied to the payment of the Secured Obligations in such
order of priority as the Secured Party shall determine and any
surplus shall be returned to the Company or to any person or
party lawfully entitled thereto (including, if applicable, any
subordinated creditors of the Company). In the event the proceeds
of any sale, lease or other disposition of the Collateral
hereunder are insufficient to pay all of the Secured Obligations
in full, the Company will be liable for the deficiency, together
with interest thereon, at the maximum rate provided in the Notes,
and the cost and expenses of collection of such deficiency,
including (to the extent permitted by law), without limitation,
reasonable attorneys' fees, expenses and disbursements.
10. Right of Secured Party to Use and Operate Collateral.
Upon the occurrence and during the continuance of any Event of
Default, but subject to the provisions of the Uniform Commercial
Code or other applicable law, the Secured Party shall have the
right and power to take possession of all or any part of the
Collateral, and to exclude the Company and all persons claiming
under the Company wholly or partly therefrom, and thereafter to
hold, store, and/or use, operate, manage and control the same.
Upon any such taking of possession, the Secured Party may, from
time to time, at the expense of the Company, make all such
repairs, replacements, alterations, additions and improvements to
and of the Collateral as the Secured Party may deem proper. In
any such case the Secured Party shall have the right to manage
and control the Collateral and to carry on the business and to
exercise all rights and powers of the Company in respect thereto
as the Secured Party shall deem best, including the right to
enter into any and
- -E-181-
<PAGE>
all such agreements with respect to the
operation of the Collateral or any part thereof as the Secured
Party may see fit; and the Secured Party shall be entitled to
collect and receive all rents, issues, profits, fees, revenues
and other income of the same and every part thereof. Such rents,
issues, profits, fees, revenues and other income shall be applied
to pay the expenses of holding and operating the Collateral and
of conducting the business thereof, and of all maintenance,
repairs, replacements, alterations, additions and improvements,
and to make all payments which the Secured Party may be required
or may elect to make, if any, for taxes, assessments, insurance
and other charges upon the Collateral or any part thereof, and
all other payments which the Secured Party may be required or
authorized to make under any provision of this Agreement
(including legal costs and attorneys' fees). The remainder of
such rents, issues, profits, fees, revenues and other income
shall be applied as provided in Section 11. Without limiting the
generality of the foregoing the Secured Party shall have the
right to apply for a receiver appointed by a court of competent
jurisdiction in any action taken by the Secured Party to enforce
its rights and remedies hereunder in order to manage, protect,
preserve, sell and otherwise dispose of all or any portion of the
Collateral and continue the operation of the business of the
Company, and to collect all revenues and profits thereof and
apply the same to the payment of all expenses and other charges
of such receivership, including the compensation of the receiver,
and to the payment of the Secured Obligations as aforesaid until
a sale or other disposition of such Collateral shall be finally
made and consummated.
11. Proceeds of Collateral. After deducting all costs and
expenses of collection, storage, custody, sale or other
disposition and delivery (including legal costs and attorneys'
fees) and all other charges against the Collateral, the residue
of the proceeds of any such sale or disposition shall be applied
to the payment of the Secured Obligations in the order of
priority as the Secured Party shall otherwise determine and any
surplus shall be returned to the Company or to any person or
party lawfully entitled thereto (including, if applicable, any
subordinated creditors of the Company). In the event the proceeds
of any sale, lease or other disposition of the Collateral
hereunder are insufficient to pay all of the Secured Obligations
in full, the Company will be liable for the deficiency, together
with interest thereon at the Post-Default Rate (as defined in the
Notes), and the cost and expenses of collection of such
deficiency, including (to the extent permitted by law), without
limitation, reasonable attorneys' fees, expenses and
disbursements.
12. Waivers. etc. The Company hereby waives presentment
demand, notice, protest and, except as is otherwise provided
herein, all other demands and notices in connection with this
Agreement or the enforcement of the Secured Party's rights
hereunder or in connection with any Secured Obligations or any
Collateral; consents to and waives notice of the granting of
renewals, extensions of time for payment or other indulgences to
the Company or to any account debtor in respect of any Account
Receivable, or substitution, release or surrender of any
Collateral, the addition or release of persons primarily or
secondarily liable on any Secured Obligation or on any Account
Receivable or other Collateral, the acceptance of partial
payments on any Secured Obligation or on any Account Receivable
or other Collateral and/or the settlement or compromise thereof.
No delay or omission on the part of the Secured Party in
exercising any right hereunder shall operate as a waiver of such
right or of any other right hereunder. Any waiver of any such
right on any one occasion shall not be construed as a bar to or
waiver of any such right on any such future occasion. THE COMPANY
FURTHER WAIVES ANY RIGHT IT MAY HAVE UNDER THE CONSTITUTION OF
THE COMMONWEALTH OF MASSACHUSETTS (OR UNDER THE CONSTITUTION OF
ANY OTHER STATE IN WHICH ANY OF THE COLLATERAL MAY BE LOCATED),
OR UNDER THE CONSTITUTION OF THE UNITED STATES OF AMERICA, TO
NOTICE (OTHER THAN ANY REQUIREMENT OF NOTICE PROVIDED HEREIN) OR
TO A JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR
REMEDY PROVIDED BY THIS AGREEMENT TO THE SECURED PARTY AND WAIVES
ITS
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<PAGE>
RIGHTS, IF ANY, TO SET ASIDE OR INVALIDATE ANY SALE DULY
CONSUMMATED IN ACCORDANCE WITH THE FOREGOING PROVISIONS HEREOF ON
THE GROUNDS (IF SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED
WITHOUT A PRIOR JUDICIAL HEARING. The Company's waivers under
this Section have been made voluntarily, intelligently and
knowingly and after the Company has been apprised and counseled
by its attorneys as to the nature thereof and its possible
alternative rights.
13. Termination, Assignment; etc. This Agreement and the
security interest in the Collateral created hereby shall
terminate when all of the Secured Obligations have been paid and
finally discharged in full (provided that the Secured Party is no
longer obligated to make Loans under the Notes). No waiver by the
Secured Party or by any other holder of Secured Obligations of
any default shall be effective unless in writing nor operate as a
waiver of any other default or of the same default on a future
occasion. In the event of a sale or assignment by the Secured
Party of all or any of the Secured Obligations held by it, the
Secured Party may assign or transfer its rights and interests
under this Agreement in whole or in part to the purchaser or
purchasers of such Secured Obligations, whereupon such purchaser
or purchasers shall become vested with all of the powers and
rights of the Secured Party hereunder, and the Secured Party
shall thereafter be forever released and fully discharged from
any liability or responsibility hereunder with respect to the
rights and interests so assigned.
14. Reinstatement. Notwithstanding the provisions of
Section 13, this Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any amount
received by the Secured Party in respect of the Collateral is
rescinded or must otherwise be restored or returned by the
Secured Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company or upon the
appointment of any intervenor or conservator of, or trustee or
similar official for, the Company or any substantial part of its
properties, or otherwise, all as though such payments had not
been made.
15. Governmental Approvals, etc. Upon the exercise by the
Secured Party of any power, right, privilege or remedy pursuant
to this Agreement which requires any consent, approval,
registration, qualification or authorization of any governmental
authority or instrumentality, the Company will execute and
deliver, or will cause the execution and delivery of, all
applications, certificates, instruments and other documents and
papers that the Secured Party may be required to obtain for such
governmental consent, approval, registration, qualification or
authorization.
16. Certain Definitions. Capitalized terms used herein
without definition which are defined in the Notes shall have the
respective meanings ascribed to them in the Notes. In addition to
the descriptions contained in Section I hereof, the items of
Collateral referred to therein shall have all of the meanings
ascribed to them in the Uniform Commercial Code as in effect from
time to time.
17. Notices. Except as otherwise provided herein, notice to
the Company or to the Secured Party shall be deemed to have been
sufficiently given or served for all purposes hereof if mailed by
certified or registered mail, return receipt requested, as
follows:
(a) if to the Company, at the address set forth above in
this Agreement, to the attention of the President;
(b) if to the Secured Party, at the address set forth
above;
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<PAGE>
or at such other address as the party to whom such notice is
directed may have designated in writing to the other party
hereto.
18. Miscellaneous. This Agreement shall inure to the
benefit of and be binding upon the Secured Party and the Company
and their respective successors and assigns, and the term
"Secured Party" shall be deemed to include any other holder or
holders of any of the Secured Obligations. In case any provision
in this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby. The Section
headings in this Agreement are for convenience of reference only
and shall not be considered in construing this Agreement. This
Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of
which shall be an original, but all of which together shall
constitute one instrument.
19. Governing Law, Jurisdiction, Waiver of Jury Trial. This
Agreement shall be governed by the laws of the Commonwealth of
Massachusetts. The Company, to the extent that it may lawfully do
so, hereby consents to service of process and to be sued, in the
Commonwealth of Massachusetts and consents to the jurisdiction of
the courts of the Commonwealth of Massachusetts and the United
States District Court for the District of Massachusetts, as well
as to the jurisdiction of all courts to which an appeal may be
taken from such courts, for the purpose of any suit, action or
other proceeding arising out of this Agreement or any of its
obligations hereunder or with respect to the transactions
contemplated hereby, and expressly waives any and all objections
it may have as to venue in any such courts. The Company further
agrees that a summons and complaint commencing an action or
proceeding in any of such courts shall be properly served and
shall confer personal jurisdiction if served personally or by
certified mail to it at its address set forth above or as
otherwise provided under the laws of the Commonwealth of
Massachusetts. THE COMPANY IRREVOCABLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING INSTITUTED
BY OR AGAINST THE COMPANY IN RESPECT OF ITS OBLIGATIONS HEREUNDER
OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties have executed this Agreement
as a sealed instrument as of the date first above written.
USM ACQUISITION CORP.
By:
Name:
Title:
INTERBANK FUNDING CORP.
By:
Name:
Title:
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<PAGE>
SCHEDULE3
Location Of Collateral
200 Reservoir St.
Needham, MA 02494
4301 North 30t' St.
Omaha, NB 68111
- -E-185-
<PAGE>
Notice and Opportunity to Cure
Lender agrees to provide to InterBank Funding Corporation,
Attention: Simon A. Hershon, 1733 Connecticut Avenue, NW,
Washington, D.C. 20009 ("InterBank"), copies of all notices to
Borrower, together with an opportunity to cure any default by
Borrower within 21 days after delivery of written notice by from
Lender to InterBank.
- -E-186-
<PAGE>
E-188
Exhibit No. 11
IBF VI - Participating Income Corporation
Form SB-2, Amend. No. 2
File No. 333-71091
Lehman, Jensen & Donahue, L.C.
620 Judge Building
8 East Broadway
Salt Lake City, Utah 84111
January 13, 2000IBF VI - Participating Income Corporation
1733 Connecticut Avenue, NW
Washington, D.C. 20009
Re: Class A 10% Income Participating Bonds ("Bonds")
Ladies and Gentlemen:
You have requested our opinion as to the legality of the
above-referenced Bonds of IBF VI - Participating Income
Corporation, 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 Bonds 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 Bonds 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.
This opinion is limited to the matters set forth herein.
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<PAGE>
Sincerely,
Lehman, Jensen & Donahue, L.C.
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<PAGE>
E-189
Exhibit No. 12
IBF VI - Guaranteed Income Corporation
Form SB-2, Amend. No. 2
File No. 333-71091
INDEPENDENT ACCOUNTANT'S CONSENT
We hereby consent to the use of our report dated November 12,
1999 and the reference to us under Experts to be included in the
Registration Statement on Form SB-2 of IBF VI - Participating
Income Corporation on or about January 12, 2000.
Radin, Glass & Co., LLP
Certified Public Accountants
January 12, 2000
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<PAGE>
