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EXHIBIT 3.5
ZENITH NATIONAL INSURANCE CORP.
Certificate of Designations
Series A Cumulative Convertible Preferred Stock
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
ZENITH NATIONAL INSURANCE CORP., a corporation organized and
existing under the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY that, at a meeting duly held on September 6, 1985, the
following attached resolution was duly adopted by the Board of Directors of
this corporation pursuant to Section 151 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, Zenith National Insurance Corp. has caused
this Certificate to be executed by its duly authorized officers this 10th day
of September, 1985.
/s/ STANLEY R. ZAX
[SEAL] -------------------------------------
Stanley R. Zax, President
ATTEST:
/s/ DONALD LIEB
-----------------------------------
Donald Lieb, Secretary
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Resolution of
the Board of Directors
of Zenith National Insurance Corp.
Establishing a Series
of Preferred Stock
RESOLVED that, pursuant to the authority conferred upon the Board
of Directors by Article FOURTH of the Certificate of Incorporation of this
corporation, there is hereby established a series of the authorized preferred
stock of this corporation having a par value of $1.00 per share, which series
shall be designated as "Series A Cumulative Convertible Preferred Stock" (the
"Series A Preferred Stock"), shall consist of 270,000 shares and shall have
the following voting powers, designations, preferences and rights.
1. CERTAIN DEFINITIONS. Unless the context otherwise requires, the
terms defined in this paragraph shall have, for all purposes of this
resolution, the meanings herein specified.
BOARD OF DIRECTORS. The term "Board of Directors" shall mean the
Board of Directors of this corporation and, to the extent permitted by law,
any committee of such Board of Directors authorized to exercise the powers of
such Board of Directors.
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CLOSING PRICE. The term "Closing Price" for any day shall mean the
last reported sale price, regular way, of the Common Stock, or, in case no
such reported sale takes place on such day, the average of the closing bid
and asked prices, regular way, for such day, in either case on the principal
national securities exchange on which the Common Stock is listed or admitted
to trading, or if it is not listed or admitted to trading on any national
securities exchange, but is traded in the over-the-counter market, the
closing sale price of the Common Stock or, in case no sale is publicly
reported, the average of the closing bid and asked quotations for the Common
Stock, in either case, as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), or any comparable system or,
if the Common Stock is not quoted on NASDAQ or a comparable system, the
closing sale price of the Common Stock or, in case no sale is publicly
reported, the average of the closing bid and asked prices, in either case, as
furnished by two members of the National Association of Securities Dealers,
Inc. selected from time to time by this Corporation for that purpose.
COMMON STOCK. The term "Common Stock" shall mean the common stock,
par value $1.00 per share, of this
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corporation and all shares hereafter authorized of any class of common stock
of this corporation and any other shares of capital stock of this corporation,
howsoever designated, which have the right (subject always to prior rights of
any class or series of preferred shares) to participate in the distribution
of the assets and earnings of this corporation without limit as to per share
amount.
CONVERSION PRICE. The term "Conversion Price" shall mean the price
per share of Common Stock used to determine the number of shares of Common
Stock deliverable upon conversion of a share of the Series A Preferred Stock,
which price shall initially be $22.50 per share, but which shall be subject
to adjustment in accordance with the provisions of paragraph 8 below. On the
date on which a registration statement relating to the shares of the Series A
Preferred Stock is declared effective under the Securities Act of 1933, as
amended, the "Conversion Price" shall be adjusted to an amount equal to 115%
of the average Closing Price of the Common Stock during the 15 trading days
ending on the fifth trading day preceeding the date of such effectiveness;
provided, however, that such Conversion Price shall not be greater than
$22.50 per share or less than $20 per share and shall
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thereafter be subject to adjustment in accordance with the provisions of
paragraph 8 below.
DIVIDEND RATE. The term "Dividend Rate" shall mean the annual rate
used to determine the amount of dividends payable in cash each quarter on
each outstanding share of Series A Preferred Stock. The Dividend Rate shall
be $45 until August 31, 1995 at which time the Dividend Rate per share of
Series A Preferred Stock shall increase $2.50 and shall thereafter continue
to increase by $2.50 quarterly on each Dividend Payment Date.
Notwithstanding the foregoing, if this corporation has not caused a
registration statement (the "Registration Statement") relating to the Series
A Preferred Stock to become effective under the Securities Act of 1933, as
amended (the "Act"), by September 30, 1986, the Dividend Rate shall increase
immediately thereafter by $2.50 until such time as the Registration Statement
shall become effective under the Act, whereupon the Dividend Rate shall
immediately revert to the Dividend Rate in effect immediately prior (but
taking into account any adjustments in the Dividend Rate described in the
preceding sentence) to such $2.50 increase. If the Registration Statement
has not become effective by December 31, 1986, the Dividend Rate shall
increase immediately thereafter, in addition
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to the increase described in the preceding sentence, by $2.50 until such time
as the Registration Statement shall become effective under the Act, whereupon
the Dividend Rate shall immediately revert to the Dividend Rate in effect
immediately prior (but taking into account any adjustments in the Dividend
Rate described in the second sentence of this paragraph) to the increase
described in the preceding sentence.
The two immediately preceding sentences shall not prevent any
holder of Series A Preferred Stock from pursuing, and shall be in addition
to, and not in lieu of, any remedy at law or equity or otherwise which such
holder may have against this corporation for breach or violation of any
provisions of that certain Registration and Transfer Agreement dated as of
September 12, 1985 by and among this corporation and the persons listed as
"Purchasers" on the signature page thereto.
FINAL REDEMPTION DATE. The term "Final Redemption Date" shall mean
the date, if any, after a failure, if any, by this corporation to make a
payment for shares of Series A Preferred Stock on any date fixed for
redemption, when this corporation makes funds for payment of the appropriate
Redemption Price (as hereinafter defined) for all shares of Series A
Preferred Stock being re-
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deemed, together with accrued dividends to and including such date, whether
or not declared, available to the holders thereof.
ISSUE DATE. The term "Issue Date" shall mean the date that shares
of the Series A Preferred Stock are first issued by this corporation.
JUNIOR STOCK. The term "Junior Stock" shall mean, for the purposes
of paragraph 2 below, Common Stock and any other class or series of stock of
this corporation authorized or issued after the Issue Date not entitled to
receive any dividends in any dividend period unless all dividends required to
have been paid or declared and set apart for payment on the Series A
Preferred Stock shall have been so paid or declared and set apart for payment
and, for purposes of paragraph 7 below, shall mean any class or series of
stock of this corporation authorized or issued after the Issue Date not
entitled to receive any assets upon liquidation, dissolution or winding up of
the affairs of this corporation until the Series A Preferred Stock shall have
received the entire amount to which such Series A Preferred Stock is entitled
upon such liquidation, dissolution or winding up.
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LIQUIDATION PRICE. The term "Liquidation Price", with respect to
shares of Series A Preferred Stock, shall mean $500 per share of Series A
Preferred Stock, plus accrued and unpaid dividends, whether or not declared.
PARITY STOCK. The term "Parity Stock" shall mean, for purposes of
paragraph 2 below, the Exchange Preferred Stock (as defined in subparagraph
5(b) below) and any other class or series of stock of this corporation
authorized or issued after the Issue Date entitled to receive payment of
dividends on a parity with the Series A Preferred Stock and, for purposes of
paragraph 7 below, shall mean the Exchange Preferred Stock and any other
class or series of stock of this corporation authorized or issued after the
Issue Date entitled to receive assets upon liquidation, dissolution or
winding up of the affairs of this corporation on a parity with the Series A
Preferred Stock.
REDEMPTION AGENT. The term "Redemption Agent" shall have the
meaning set forth in subparagraph 4(c) below.
SENIOR STOCK. The term "Senior Stock" shall mean, for purposes of
paragraph 2 below, any class or series of stock of this corporation
authorized or issued
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after the Issue Date ranking senior to the Series A Preferred Stock in
respect of the right to receive dividends, and, for purposes of paragraph 7
below, shall mean any class or series of stock of this corporation authorized
or issued after the Issue Date ranking senior to the Series A Preferred Stock
in respect of the right to participate in any distribution upon liquidation,
dissolution or winding up of the affairs of this corporation.
2. DIVIDENDS.
(a) Subject to the prior preferences and other rights of any
Senior Stock, each issued and outstanding share of Series A Preferred Stock
shall entitle the holder of record thereof as of the "record date" (as
hereinafter defined) to receive, when and as declared by the Board of
Directors, out of any funds legally available therefor, cumulative cash
dividends (which may be payable by check in immediately available funds) in
equal quarterly installments of the Dividend Rate, which shall accrue from
the Issue Date and shall be payable quarterly on the first day of March,
June, September and December of each year commencing December 1, 1985 (each
such date shall hereinafter be referred to as a "Dividend Payment Date" and
the quarterly period between consecutive Divi-
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dend Payment Dates shall hereinafter be referred to as a "Dividend Period").
The cash dividend payable at the first Dividend Payment Date with respect to
any share of Series A Preferred Stock shall be the pro rata amount of the
Dividend Rate based upon the number of days from and including the Issue Date
up to and including such first Dividend Payment Date and a 360-day year of
twelve 30-day months. As used above, the term "record date" means, with
respect to the dividend payable on the first day of March, June, September
and December, respectively, of each year, February 15, May 15, August 15 and
November 15 of such year, or such other record date designated by the Board
of Directors of this corporation with respect to the dividend payable on such
respective dividend payment date.
(b) If for any Dividend Period holders of the Series A
Preferred Stock shall not receive the full dividends provided for in this
paragraph 2, such unpaid dividends for such Dividend Period shall be
cumulative and shall accrue without interest on a day-to-day basis, whether
or not declared and whether or not there shall be (at the time such dividend
shall become payable or at any other time) surplus, net profits or other
assets of this corporation legally available for the payment of divi-
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dends, from and after the date when payment thereof would have been due.
Dividends on the Series A Preferred Stock shall continue to accrue until the
date such shares are redeemed or converted, as the case may be.
(c) So long as any shares of Series A Preferred Stock shall be
outstanding, this corporation shall not declare or pay on any Junior Stock
any dividend whatsoever, whether in cash, property or otherwise, nor shall
this corporation or any of its subsidiaries make any distribution whatsoever,
whether in cash, property or otherwise on any Junior Stock, nor shall any
Junior Stock be purchased, redeemed or otherwise acquired by this corporation
or any of its subsidiaries nor shall any monies be paid, set aside for
payment or made available for a sinking fund for the purchase or redemption
of any Junior Stock, unless all dividends to which the holders of Series A
Preferred Stock shall have been entitled for all current and all previous
Dividend Periods shall have been paid or declared and a sum of money
sufficient for the payment thereof set apart.
(d) If full dividends are not paid or made available to the
holders of all outstanding shares of Series A Preferred Stock and of any
Parity Stock, and funds available shall be insufficient to permit payment
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in full to all such holders of the preferential amounts to which they are
then entitled, the entire amount available for payment of dividends shall be
distributed among the holders of the Series A Preferred Stock and of any
Parity Stock, ratably in proportion to the full amount to which they would
otherwise be respectively entitled.
3. OPTIONAL REDEMPTION.
(a) Subject to the provisions of subparagraph (c) of this paragraph
3, the shares of Series A Preferred Stock may be redeemed, at the option of
this corporation, by action of its Board of Directors, in whole or from time
to time in part, at any time after the Issue Date, at $545 per share if
redeemed on or before the expiration of 60 days after the end of the Rights
Period, and at $500 per share if redeemed at any time thereafter, plus, in
each case, any accrued and unpaid dividends thereon, whether or not declared,
to and including the date fixed for such redemption (the "Redemption Price").
(b) If this corporation shall fail to make a payment for shares of
Series A Preferred Stock on a date fixed for any redemption, the "Redemption
Price" (as used herein) shall also include any accrued but unpaid dividends
on such shares, whether or not declared,
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from and after the date fixed for redemption to and including the Final
Redemption Date.
(c) Notwithstanding the provisions of subparagraph (a) of this
paragraph 3, the shares of Series A Preferred Stock may not be redeemed prior
to September 1, 1987 unless the Closing Price of the Common Stock on any 20
trading days within a period of 30 consecutive trading days ending on the
fifth trading day prior to the date the notice of redemption is given has
been greater than or equal to 140% of the then effective Conversion Price (as
determined in accordance with paragraph 8).
4. METHOD OF REDEMPTION.
(a) Notice of every optional redemption under paragraph 3 hereof
shall be published at least once not less than 15 days nor more than 60 days
prior to the date fixed for redemption in a daily newspaper printed in the
English language and published and of general circulation in the City of Los
Angeles, California, and in a daily newspaper printed in the English language
and published and of general circulation in the Borough of Manhattan, City
and State of New York. Notice of every such redemption shall also be mailed,
first class, postage
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prepaid, not less than 15 days nor more than 60 days prior to the date fixed
for redemption to the holders of record of the shares of Series A Preferred
Stock to be redeemed, at their respective addresses as the same appear upon
the books of this corporation or supplied by them to this corporation for
the purpose of such notice; but no failure to mail such notice to particular
shareholders or any defect therein or in the mailing thereof shall affect the
validity of the proceedings for the redemption of any shares of Series A
Preferred Stock. Such notice shall (i) inform each holder of the election of
this corporation to redeem such shares and of the date of redemption (ii)
state the date on which the shares to be redeemed cease to be convertible,
the Conversion Price and a current Closing Price, (iii) state the Redemption
Price, (iv) the place at which the shares called for redemption will, upon
presentation and surrender of the certificates evidencing such shares, be
converted or redeemed, and (v) state the name and address of any Redemption
Agent selected by this corporation in accordance with subparagraph 4(c), and
the name and address of this corporation's transfer agent for the Series A
Preferred Stock.
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(b) In case of redemption of less than all of the Series A
Preferred Stock at the time outstanding, this corporation shall select shares
so to be redeemed as follows:
(1) each redemption shall be pro rata as between shares of Series A
Preferred Stock which have not been publicly resold pursuant to a
registration statement under the Act or Rule 144 (or any successor rule)
thereunder ("Restricted Shares") and the remaining shares of Series A
Preferred Stock,
(2) the Company shall select the Restricted Shares to be redeemed on a
substantially pro rata basis among the holders of Restricted Shares, and
(3) the Company shall select the remaining shares of Series A Preferred
Stock to be redeemed by lot among the holders of the remaining shares of
the Series A Preferred Stock in accordance with a method the Company
considers fair and appropriate (in such manner as complies with applicable
legal and stock exchange requirements, if any).
In the event of partial redemption by lot, the particular shares of Series A
Preferred Stock to be redeemed shall be selected, unless otherwise provided
herein, not less than 15 nor more than 60 days prior to the date fixed for
redemption by the Company from the outstanding shares of Series A Preferred
Stock not previously called for redemption, by such method as the Company
shall deem fair and appropriate; PROVIDED, HOWEVER, that between Restricted
Shares and the remaining shares of Series A
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Preferred Stock, such redemption shall be in accordance with clauses (1) through
(3) above.
(c) If notice of any redemption by this corporation pursuant to
paragraph 3 hereof shall have been mailed as provided in subparagraph (a) of
this paragraph 4, and if before the redemption date specified in such notice all
funds necessary for such redemption shall have been set apart so as to be
available therefor and only therefor, then on and after the close of business on
the date fixed for redemption, the shares of Series A Preferred Stock called for
redemption, notwithstanding that any certificate therefor shall not have been
surrendered for cancellation, shall no longer be deemed outstanding, and all
rights with respect to such shares shall forthwith cease and terminate, except
the right of the holders thereof to receive upon surrender of their certificates
the Redemption Price of such shares and the right of holders thereof to convert
shares of Series A Preferred Stock into shares of Common Stock pursuant to
paragraph 8; provided, however, that, if on or prior to the date fixed for such
redemption (but no earlier than 60 days prior to the date fixed for such
redemption) this corporation shall deposit, in a trust fund, with any bank or
trust company organized under the laws of the United
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States of America or any state thereof having capital, undivided profits and
surplus aggregating at least $50,000,000 (the "Redemption Agent"), a sum
sufficient to redeem on such redemption date the shares of Series A Preferred
Stock to be redeemed, with irrevocable instructions and authority to the
Redemption Agent, on behalf and at the expense of this corporation, to mail the
notice of redemption as soon as practicable after receipt of such irrevocable
instructions (or to complete such mailing previously commenced, if it has not
already been completed) and to pay, on and after the date fixed for such
redemption or prior thereto, the Redemption Price of the shares of Series A
Preferred Stock to be redeemed to their respective holders upon the surrender of
their share certificates, then, from and after the date of such deposit
(although prior to the date fixed for redemption) the shares of Series A
Preferred Stock to be redeemed shall be deemed to be redeemed (except that the
right of holders to convert such shares into shares of Common Stock in
accordance with paragraph 8 shall continue and be unaffected by such deposit)
and dividends on those shares shall cease to accrue after the date fixed for
such redemption. The deposit made in accordance with this subparagraph (c) of
this paragraph 3 shall be deemed
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to constitute full payment to their holders for shares of Series A Preferred
Stock to be redeemed and from and after the date of such deposit such shares
shall be deemed to be no longer outstanding and the holders thereof shall cease
to be shareholders with respect to such shares and shall have no rights with
respect thereto, except the right to receive payment of a sum sufficient to pay
the Redemption Price of the shares upon surrender of their certificates therefor
and the right of holders thereof to convert such of Series A Preferred Stock
into Common Stock pursuant to paragraph 8.
5. REDEMPTION AT HOLDER'S OPTION
(a) Each holder of Series A Preferred Stock shall have the right
for a period of fifteen consecutive business days commencing September 1, 1990
(the "Rights Period") to require this corporation to redeem all or any portion
of such holder's shares of Series A Preferred Stock in the manner set forth in
subparagraph (c) of this paragraph 5 and subject to the conditions described
below in this paragraph 5.
(b) A Preliminary Notice, setting forth the information
described below in this subparagraph 5(b), of the holders right to require
redemption under
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this paragraph 5 shall be published at least once not less than 30 days nor more
than 45 days prior to the commencement of the Rights Period, in a daily
newspaper printed in the English language and published and of general
circulation in the City of Los Angeles, California, and in a daily newspaper
printed in the English language and published and of general circulation in The
Borough of Manhattan, City and State of New York. A Preliminary Notice and a
Final Notice setting forth the information described below in this subparagraph
5(b), of such right to require redemption shall also be mailed, first class,
postage prepaid, at least once not less than 30 days nor more than 45 days prior
to the commencement of the Rights Period in the case of the Preliminary Notice
and not less than 5 business days prior to the commencement of the Rights Period
in the case of the Final Notice, to the holders of record of the shares of
Series A Preferred Stock at their respective addresses as the same appear upon
the books of this corporation or supplied by them to this corporation for the
purpose of such notice, but no failure to mail such notice to particular
shareholders or any defect therein or in the mailing thereof shall affect the
validity of the proceedings for the redemption of any shares of Series A
Preferred Stock.
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Each Final Notice published or delivered under this subparagraph
5(b) shall describe the Put Price (as defined below) to be delivered by this
corporation, and each Preliminary Notice shall (i) specify whether this
corporation will pay the Put Price in cash, Exchange Preferred Stock,
Exchange Debentures, or a combination thereof, and in the case of a
combination, specify the portion of the Put Price to be paid in cash,
Exchange Preferred Stock or Exchange Debentures, as the case may be, (ii)
instruct each holder of Series A Preferred Stock to notify this corporation
in a writing satisfying subparagraph (c) of this paragraph 5 of the number of
such holder's shares of Series A Preferred Stock it desires to have this
corporation redeem, (iii) instruct each holder of Series A Preferred Stock to
surrender the certificate or certificates evidencing the shares to be
redeemed to the office of the transfer agent for the Series A Preferred Stock
and (iv) provide the name and address of the transfer agent for the Series A
Preferred Stock.
The notice mailed to holders shall be accompanied by a form and a
return envelope addressed to the transfer agent for the Series A Preferred Stock
which a holder may use to notify this corporation to redeem all or a portion of
such holder's shares of Series A Pre-
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ferred Stock. Such form shall provide space for the holder to specify the
number of shares such holder wishes redeemed and the name or names and
address or addresses of the person or persons to whom the Put Price shall be
paid.
The term "Put Price" per share of Series A Preferred Stock shall
mean an amount equal to $532.50, plus all accrued and unpaid dividends, which
shall accrue until September 1, 1990, whether or not declared, on such share
of Series A Preferred Stock. At its option, subject to certain conditions
described below, this corporation may pay the Put Price in respect of each
share of Series A Preferred Stock which a holder is requiring this
corporation to redeem under this paragraph 5, (i) in an amount of cash equal
to the Put Price, (ii) by delivery of such number of full shares of a new
series of preferred stock of this corporation ("Exchange Preferred Stock"),
which shall have voting powers, designations, rights and preferences
substantially as set forth in the form of resolution of the Board of
Directors annexed hereto as Exhibit A, that has, in the aggregate, a
"Liquidation Price" (as defined in Exhibit A) equal to the dollar value of
the Put Price being satisfied by the delivery of Exchange Preferred Stock,
(iii) by delivery
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of a principal amount of Subordinated Debentures due 2000 of this corporation
(the "Exchange Debentures"), to be issued under an indenture (the "Exchange
Debenture Indenture") substantially in the form annexed hereto as Exhibit B,
in denominations of 1,000 or integral multiples of 1,000 equal to the dollar
value of the Put Price being satisfied by the delivery of Exchange Debentures
or (iv) by any combination thereof so long as the amount of cash, the
aggregate Liquidation Price of Exchange Preferred Stock and the principal
amount of Exchange Debentures paid per share of Series A Preferred Stock
equals the per share Put Price of Series A Preferred Stock being redeemed;
provided, however, that all accrued but unpaid dividends shall be paid only
in cash; and each holder shall receive the same form of consideration,
including if paid with a combination the same proportionate combination of
cash, Exchange Preferred Stock and Exchange Debentures; and further provided,
that this corporation may not pay any part of the Put Price in shares of
Exchange Preferred Stock or Exchange Debentures unless such Exchange
Preferred Stock or Debentures are issued pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act")
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or are otherwise transferable without restriction without registration under
the Securities Act.
(c) At any time during the Rights Period, a holder of Series A
Preferred Stock may give notice to this corporation as described in this
subparagraph 5(c) to redeem all or a portion of such holder's shares of
Series A Preferred Stock pursuant to this paragraph 5. The notice required by
a holder under this subparagraph (c) (the "Stockholder Notice") shall state
in writing the number of shares which such holder wishes this corporation to
redeem and the name or names and address or addresses of the person or
persons to whom the Put Price for such shares shall be paid; such Stockholder
Notice may be in the form delivered by this corporation to such holder under
subparagraph (b) hereof, but a written notice in any other form providing the
information described in this sentence shall also constitute a valid
Stockholder Notice to this corporation. This corporation shall pay all
transfer or similar taxes, if any. If a holder notifies this corporation that
such holder is electing to cause this corporation to redeem shares of Series
A Preferred Stock but fails to notify this corporation of the number of
shares of Series A Preferred Stock which such holder wishes this corporation
to re-
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deem, such holder shall be deemed to have elected to have the corporation
redeem all shares represented by the certificate or certificates subsequently
surrendered for redemption. A holder giving notice under this paragraph 5
shall surrender the certificate or certificates evidencing the shares of
Series A Preferred Stock to be redeemed, duly endorsed, at the office of the
transfer agent for the Series A Preferred Stock.
(d) Neither fractional shares of Exchange Preferred Stock nor
Exchange Debentures in principal amounts not equaling $1,000 or integral
multiples of $1,000 shall be issued upon any redemption pursuant to this
paragraph 5, but in lieu thereof, this corporation shall pay therefor in cash
an amount equal to the applicable fraction of the Put Price, including
accrued but unpaid dividends. If any portion of the Put Price to be delivered
to a holder of Series A Preferred Stock shall be paid in a form other than
cash in accordance with subparagraph (b) of this paragraph 5, as soon as
practicable (but no later than 30 days) after delivery of such holder's
Stockholder Notice, this corporation shall deliver (i) in the case of
Exchange Preferred Stock, through the transfer agent, a certificate for the
number of full shares of the Exchange Preferred Stock, if any,
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issuable, upon redemption of such holder's shares of Series A Preferred Stock
and cash for any remaining fractional share of Exchange Preferred Stock plus
an amount of cash equal to the sum of all accrued and unpaid dividends,
whether or not declared and a new certificate or certificates, as requested
by the holder, representing the unredeemed portion, if any, of the shares of
Series A Preferred Stock represented by the certificate or certificates
surrendered for redemption and (ii) in the case of Exchange Debentures,
through the trustee under the Exchange Debenture Indenture, Exchange
Debentures, if any, in the aggregate principal amount of $1,000 or integral
multiple of $1,000, as appropriate, issuable upon redemption of such holder's
shares of Series A Preferred Stock and cash for any remaining principal
amount not equaling $1,000 or integral multiple of $1,000 plus cash in an
amount equal to the sum of all accrued and unpaid dividends, whether or not
declared and a new certificate representing the unredeemed portion, if any,
of the shares of Series A Preferred Stock represented by the certificate or
certificates surrendered for redemption. If any portion of the Put Price is
to be delivered to a holder of Series A Preferred Stock shall be paid in the
form of cash in accordance with subparagraph (b) of this
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paragraph 5, this corporation shall deliver such cash to such holder in the
form of a Certified or official bank check payable to the order of such
holder in clearing house (next day) funds on the date of receipt of such
holder's certificate or certificates representing such holder's Preferred
Stock. The person in whose name any certificate representing any shares of
Exchange Preferred Stock or any Exchange Debenture is registered shall be
treated as a securityholder of record as of the day immediately succeeding
the date of surrender, pursuant to this paragraph 5, of the Series A Preferred
Stock for which such shares of Exchange Preferred Stock or Exchange Debenture
are issued.
6. RESTRICTIONS ON REDEMPTION. If at any time this corporation shall
have failed to pay all dividends accrued to date and until all dividends
accrued to date shall have been paid or declared and set apart for payment in
full, this corporation shall not redeem or acquire for value any shares of
any series of preferred stock of this corporation or any Common Stock, except
for shares of Series A Preferred Stock redeemed under paragraph 5 hereof,
unless all then outstanding shares of Series A Preferred Stock are redeemed.
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7. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP. In the
event of any voluntary or involuntary liquidation, dissolution, winding up of
the affairs of this corporation or other similar event, subject to the prior
preferences and other rights of any Senior Stock, but before any distribution
or payment shall be made to the holders of Junior Stock, the holders of the
Series A Preferred Stock shall be entitled to be paid an amount per share
equal to the Liquidation Price per share of Series A Preferred Stock in cash,
property at its fair market value (as determined by the Board of Directors in
good faith), or both. The holders of Series A Preferred Stock shall be
entitled to no further participation in any remaining assets of this
corporation after receiving such Liquidation Price per share. If such payment
shall have been made in full to the holders of Series A Preferred Stock, and
if payment shall have been made in full to the holders of all Senior Stock
and Parity Stock of all amounts to which such holders shall be entitled, the
remaining assets and funds of this corporation shall be distributed among the
holders of Junior Stock, according to their respective shares. If, upon
distribution of this corporation's assets in liquidation, dissolution, winding
up or other similar event, the assets of this
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corporation to be distributed among the holders of Series A Preferred Stock
and to all holders of all other Parity Stock shall be insufficient to permit
payment in full to such holders of the preferential amounts to which they are
entitled, then the entire assets of this corporation remaining after the
distributions to holders of any Senior Stock of the full amounts to which they
may be entitled shall be distributed among the holders of Series A Preferred
Stock and of any Parity Stock ratably in proportion to the full amounts to
which they would otherwise be respectively entitled. Neither the
consolidation or merger of this corporation with or into any other corporation
or corporations nor the sale or lease of all or substantially all the assets
of this corporation shall itself be deemed to be a liquidation, dissolution or
winding up of this corporation within the meaning of any of the provisions of
this paragraph 7.
8. CONVERSION RIGHTS.
(a) A holder of shares of Series A Preferred Stock may convert at
such holder's option all or any portion of such shares into shares of Common
Stock at any time prior to the close of business on the last business day
prior to the date fixed for redemption of
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<PAGE>
such shares or, if the Company shall fail to make the payment of the
appropriate Redemption Price, at any time prior to the close of business on
the last business day prior to the Final Redemption Date. For purposes of
conversion, each share of Series A Preferred Stock shall be valued at $500,
which shall be divided by the Conversion Price in effect on the Conversion
Date (as defined in subparagraph 8(b) below) to determine the number of
shares of Common Stock issuable upon conversion. No adjustment shall be made
in respect of accrued and unpaid dividends on shares of Series A Preferred
Stock surrendered for conversion or on Common Stock issued upon conversion.
No fractional share of Common Stock shall be issued upon any conversion, but
in lieu thereof, this corporation shall pay therefor in cash an amount equal
to the applicable fraction of the Closing Price on the last trading date
prior to the Conversion Date (as defined in subparagraph 8(b) below).
(b) To convert shares of Series A Preferred Stock into shares of
Common Stock, a holder shall surrender the certificate or certificates
evidencing the shares of Series A Preferred Stock to be converted, duly
endorsed, at the office of the transfer agent for the Series A Preferred
Stock, shall notify this corporation
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at such office of such holder's election to convert shares of Series A
Preferred Stock and of the number of such shares which such holder wishes to
convert and shall state in writing the name or names in which such holder
wishes the certificate or certificates for shares of Common Stock to be
issued. This corporation shall pay all transfer or similar taxes, if
required. If a holder fails to notify this corporation of the number of
shares of Series A Preferred Stock which such holder wishes to convert, such
holder shall be deemed to have elected to convert all shares represented by
the certificate or certificates surrendered for conversion. The date on which
the holder satisfies the last of such requirements is herein referred to as
the "Conversion Date" (or, in the event of a proposed redemption by this
corporation, on the date of receipt of satisfactory notice of conversion if
certificates evidencing the shares of Series A Preferred Stock to be
converted are thereafter delivered to this corporation within thirty (30)
days). As soon as practicable after the Conversion Date (but no later than 30
days after the Conversion Date) this corporation shall deliver through the
transfer agent a certificate for the number of full shares of Common Stock
issuable upon the conversion, cash for any remaining fractional share of
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Common Stock and a new certificate representing the unconverted portion, if any,
of the shares of Series A Preferred Stock represented by the certificate or
certificates surrendered for conversion. The person in whose name the
certificate is registered shall be treated as a shareholder of record of shares
of Common Stock on the Conversion Date.
(c) At any time a holder of Series A Preferred Stock surrenders
a certificate or certificates representing shares of Series A Preferred Stock
for conversion of such shares into Common Stock, if, on the Conversion Date,
this corporation does not have a sufficient number of authorized but unissued
shares of Common Stock to issue upon conversion of all such shares of Series A
Preferred Stock, this corporation will either (i) purchase from such holder all
such shares of Series A Preferred Stock at a price per share equal to the number
of shares of Common Stock into which a share of Series A Preferred Stock is
convertible (including fractional shares), multiplied by the Closing Price of
the Common Stock on the date on which such Series A Preferred Stock is
surrendered for conversion and a new certificate representing the unconverted
portion, if any, of the shares of Series A Preferred Stock represented by the
certifi-
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cate or certificates surrendered for conversion, or (ii) deliver or cause to be
delivered on the Conversion Date to such holder the number of full shares of
Common Stock issuable upon conversion of such shares of Series A Preferred
Stock, cash for any remaining fractional share of Common Stock and a new
certificate representing the unconverted portion, if any, of the shares of
Series A Preferred Stock represented by the certificate or certificates
surrendered for conversion.
(d) If this corporation shall at any time after the Issue Date
(i) pay a dividend in shares of Common Stock or make any other distribution in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock,
(iii) combine the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, or (iv) issue any shares of its capital stock or other
securities by reclassification of the shares of Common Stock, the conversion
privilege and the Conversion Price in effect at the time of the record date for
such dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted so that each
holder of shares of Series A Preferred Stock converted after such time shall be
entitled to receive the aggregate number and kind of
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shares of Common Stock or other securities of this corporation which, if such
shares of Series A Preferred Stock had been converted immediately prior to such
time, such holder would have owned upon such conversion and been entitled to
receive by virtue of such dividend, distribution, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.
(e) If this corporation shall fix a record date for the issuance
of rights, options or warrants ("Options") to all holders of shares of Common
Stock entitling such holders (for a period expiring within 45 days after such
record date) to subscribe for or purchase shares of Common Stock (or securities
convertible or exchangeable into shares of Common Stock) at a price per share
(or having a conversion or exchange price per share, in the case of a security
convertible or exchangeable into shares of Common Stock) less than the current
market price per share of Common Stock (as defined in subparagraph (g) of this
paragraph 8 below) on such record date, the current Conversion Price to be in
effect after such record date shall be determined by multiplying the current
Conversion Price in effect immediately prior to such record date by a fraction,
of which the numerator
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shall be the number of shares of Common Stock outstanding on such record date
plus the number of shares of Common Stock which the aggregate offering price of
the total number of shares of Common Stock so to be offered (or the aggregate
initial conversion or exchange price of the convertible or exchangeable
securities so to be offered) would purchase at the current market price per
Common Stock (as defined in subparagraph (g) below) and of which the denominator
shall be the number of shares of Common Stock outstanding on such record date
plus the number of additional shares of Common Stock to be offered for
subscription or purchase (or into which the convertible or exchangeable
securities so to be offered are initially convertible or exchangeable). Shares
of Common Stock owned by or held for the account of this corporation or any
majority-owned subsidiary shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed. If all of the shares of Common Stock or securities
convertible into or exchangeable for Common Stock subject to such Options shall
not have been issued when such Options expire, then the Conversion Price shall
promptly (but in no event later than 10 days after such expiration) be
readjusted to what it would
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have been if the number of additional shares of Common Stock offered or
initially issuable upon conversion or exchange of convertible or exchangeable
securities in the above computation had been the number of shares of Common
Stock actually issued upon the exercise of such Options or initially issuable
based upon the number of convertible securities or exchangeable securities
actually issued upon the exercise of such Options.
(f) In case this corporation shall fix a record date for the
making of a distribution to all holders of shares of its Common Stock or makes a
distribution to any holders of shares of its Common Stock of any of its assets
or evidences of its indebtedness or securities (other than cash dividends or
cash distributions payable out of funds legally available therefor or dividends
payable in shares of Common Stock or distributions referred to in subparagraph
(d) of this paragraph 8) or subscription rights, options or warrants (excluding
those referred to in subparagraph (e) of this paragraph 8), the current
Conversion Price to be in effect after such record date (or, as to distributions
not involving record dates, after the date of distribution) shall be determined
by multiplying the current Conversion Price in effect immediately prior to such
record date (or, as to
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distributions not involving record dates, after the date of distribution) by
a fraction, of which the numerator shall be the current market price per
share of Common Stock (as defined in subparagraph (g) of this paragraph 8
below) on such record date (or, as to distributions not involving record
dates, on the date of distribution) less the fair market value (as
determined in good faith by the Board of Directors) of the portion of the
assets or evidences of indebtedness or securities or of such subscription
rights, options or warrants so to be distributed applicable to one share of
Common Stock and of which the denominator shall be such current market price
per share of Common Stock. Such adjustment shall be made successively whenever
such a record date is fixed (or, as to distributions not involving record
dates, a distribution date is established). If such distribution is not so
made, the Conversion Price shall again be readjusted to be the Conversion
Price which would then be in effect if such record date had not been fixed
(or, as to distributions not involving record dates, such distribution date
had not been established.)
(g) For the purpose of any computation pursuant to subparagraphs
(e), (f) and (h) of this paragraph 8, the current market price per share of
Common
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Stock on any date shall be deemed to be the average of the Closing Prices for
thirty (30) consecutive trading days commencing forty-five (45) trading days
before the date in question.
(h) In case this corporation shall issue shares of its Common Stock
(excluding shares issued (i) in any of the transactions described in
subparagraphs (d), (e) and (m) of this paragraph 8; (ii) pursuant to this
corporation's currently effective Non-Qualified Stock Option Plan and its
Employee Stock Purchase Plan effective April 1, 1979 (but only to the extent
that the aggregate number of shares excluded hereby and issued after the
Issue Date shall not exceed 10% of the Common Stock outstanding at the time
of any such issuance), (iii) upon exercise of this corporation's currently
outstanding warrants to purchase Common Stock, expiring October 15, 1988, or
upon conversion or exchange of other securities convertible into or
exchangeable for Common Stock or (iv) to acquire, or in the acquisition of,
all or any portion of the business as a going concern, in an arm's length
transaction between the Company and an unaffiliated third party, whether such
acquisition shall be effected by purchase of assets, exchange of securities,
merger, consolidation or otherwise) for a consideration
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<PAGE>
per share less than the current market price per share of Common Stock on the
date this corporation issues such additional shares, the current Conversion
Price to be in effect after such date shall be determined by multiplying the
Conversion Price in effect immediately prior to such date by a fraction,
of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such additional shares plus
the number of shares of Common Stock which the fair market value (if other
than cash, as determined in good faith by the Board of Directors) of the
aggregate consideration received for the issuance of such additional shares
would purchase at the current market price per share of Common Stock (as
defined in subparagraph (g) above), and of which the denominator shall be the
number of shares of Common Stock outstanding immediately after the issuance
of such additional shares. Such adjustment shall be made successively whenever
such an issuance is made.
(i) No adjustment in the Conversion Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the
Conversion Price. Any adjustments which are not made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this paragraph 8
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<PAGE>
shall be made to the nearest cent or to the nearest 1/100th of a share, as the
case may be. The Conversion Price shall not be adjusted upward except in the
event of a combination of the outstanding shares of Common Stock into a
smaller number of shares of Common Stock or in the event of a readjustment of
the Conversion Price pursuant to the last sentence of subparagraph (e) or (f)
of this paragraph 8.
(j) Except as provided in this paragraph 8, no adjustment in the
Conversion Price shall be made because this corporation issues, in exchange
for cash, property or services, shares of Common Stock, or any securities
convertible into or exchangeable for shares of Common Stock, or securities
carrying the right to purchase shares of Common Stock or such convertible or
exchangeable securities. Furthermore, no adjustment in the Conversion Price
need be made under this paragraph 8 for sales of shares of Common Stock
pursuant to a plan providing for reinvestment of dividends or interest or in
the event the par value of the Common Stock is changed or in the event the
par value of the Common Stock is eliminated or subsequently reinstated.
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(k) Whenever the Conversion Price is adjusted, this corporation
shall promptly mail to holders of the Series A Preferred Stock and file with the
transfer agent therefor a notice of the adjustment and file with the transfer
agent for the Series A Preferred Stock an officer's certificate briefly stating
the facts requiring the adjustment and the manner of computing it.
(l) If this corporation proposes to (i) take any action which
would require an adjustment in the Conversion Price pursuant to subparagraph (e)
or (f), or clause (iv) of subparagraph (d), of this paragraph 8; (ii)
consolidate or merge with or into, or transfer all or substantially all of its
assets to, another corporation; or (iii) take any action which would result in
the dissolution, liquidation or winding up of this corporation, a holder of
shares of Series A Preferred Stock may desire to convert such shares into shares
of Common Stock prior to the record date for or the effective date of the
transaction so that such holder may receive the rights, warrants, securities or
assets which a holder of shares of Common Stock on that date may receive.
Therefore, this corporation shall mail to the holders of Series A Preferred
Stock, first class, postage prepaid, a notice
39
<PAGE>
stating the proposed record or effective date, as the case may be, for any such
proposed action.
This corporation shall mail the notice not later than the time such
record date or effective date, as the case may be, is required to be announced
pursuant to applicable rules of the principal securities exchange upon which
this corporation's securities are listed or, if not listed on any securities
exchange, not later than three business days after the date of such record date
or effective date, as the case may be, is first established by the Board of
Directors. Failure to mail the notice or any defect therein shall not affect the
validity of any transaction referred to in clause (i), (ii) or (iii) of this
subparagraph 8(l).
(m) In case of a merger or consolidation which reclassifies or
changes the shares of Common Stock of this corporation, or in case of the
consolidation or merger of this corporation with or into another corporation or
corporations or the transfer of all or substantially all of the assets of this
corporation to another corporation or corporations, each share of Series A
Preferred Stock shall thereafter be convertible into the number of shares of
stock or other securities or property to which a holder of the number of shares
of Common Stock
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<PAGE>
deliverable upon conversion of such shares of Series A Preferred Stock would
have been entitled upon such reclassification, consolidation, merger or
transfer; and, in any such case, appropriate adjustment (as determined in good
faith by the Board of Directors) shall be made in the application of the
provisions herein set forth with respect to the rights and interests thereafter
of the holders of the Series A Preferred Stock, to the end that the provisions
set forth herein (including provisions with respect to changes in and other
adjustments of the Conversion Price) shall thereafter be applicable, as nearly
as reasonably may be, in relation to any shares of stock or other securities or
property thereafter deliverable upon the conversion of shares of Series A
Preferred Stock. In case of any such merger or consolidation, the resulting or
surviving corporation (if not this corporation) shall expressly assume the
obligation to deliver, upon the exercise of the conversion privilege, such stock
or other securities or property as the holders of the Series A Preferred Stock
remaining outstanding, or other convertible preferred stock received by the
holders in place thereof, shall be entitled to receive pursuant to the
provisions hereof, and to make provisions for the protection of the conversion
right as provided above. If
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this subparagraph applies, subparagraph (d) of this paragraph 8 shall not apply.
If the Series A Preferred Stock becomes convertible solely into cash, no
adjustment need be made thereafter, and interest shall not accrue on such cash.
(n) In any case in which this paragraph 8 shall require that an
adjustment as a result of any event become effective from and after a record
date, this corporation may elect to defer until the occurrence of such event (i)
the issuance to the holder of any shares of Series A Preferred Stock converted
after such record date and before the occurrence of such event of the additional
shares of Common Stock issuable upon such conversion over and above the shares
issuable on the basis of the Conversion Price in effect immediately prior to
adjustment and (ii) the payment, if any, to such holder of an amount of cash in
lieu of a fractional share of Common Stock; provided, however, that this
corporation shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares of
Common Stock or such payment, if any, in lieu of such fractional share of Common
Stock.
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(o) This corporation will at all times after December 31, 1985
reserve and keep available out of its authorized but unissued shares of capital
stock, solely for the purpose of issuance upon the conversion of the Series A
Preferred Stock as provided in this paragraph 8, such number of shares of Common
Stock as shall then be issuable upon the conversion of all outstanding shares of
Series A Preferred Stock.
(p) The Company will not close its books against the transfer of
any share of Series A Preferred Stock or of any of the shares of Common Stock
issued or issuable upon the conversion of such shares of Series A Preferred
Stock in any manner which interferes with the timely conversion of such shares.
(q) This corporation may, at its option from time to time by
delivery of written notice to each holder of Series A Preferred Stock, decrease
the Conversion Price then in effect for the period of time specified in such
notice; provided such notice specifies that such period of time shall be at
least 15 days and such decrease of the Conversion Price shall be irrevocable for
the period of time specified in the notice.
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9. VOTING RIGHTS.
(a) The holders of Series A Preferred Stock shall have no right to
vote for any purpose, except as specifically required by the General Corporation
Law of the State of Delaware and except as described below; provided, however,
that notwithstanding anything to the contrary below, this corporation may,
without the vote or consent of any holder of the Series A Preferred Stock, amend
this corporation's Certificate of Incorporation to issue a new series of
preferred stock which is Senior Stock if all of such series of preferred stock
is exchanged for all or part of the corporation's outstanding 12-1/4% Senior
Subordinated Notes due October 15, 1988.
(b) If at any time the amount of any dividends which have accrued
(whether or not declared), and which have not been paid or declared and a sum
sufficient for the payment thereof set apart, is at least equal to the amount of
six quarterly dividends (whether or not consecutive) the holders of Series A
Preferred Stock voting separately as a class shall be entitled to and may elect
two directors. Upon election, such directors shall become additional directors
of this corporation and the authorized number of directors of this corporation
shall thereupon be automatically increased by
44
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such number of directors. In the event such holders, voting as a class, elect
two directors, the remaining directors shall be elected by the holders of the
other shares of capital stock of this corporation then entitled to vote for the
election of directors without right in the holders of Series A Preferred Stock
to participate in the election of such remaining directors. Such special voting
rights of the holders of Series A Preferred Stock shall continue only until all
quarterly dividends accrued as of the most recent quarterly period, whether or
not declared, have been paid or declared and a sum sufficient for the payment
thereof set apart, at which time the terms of said directors theretofore elected
by the holders of Series A Preferred Stock shall expire and the number of
directors constituting the entire Board of Directors shall thereupon return to
the number of authorized directors otherwise in effect (subject always to the
same provisions for the vesting of such special voting rights in the case of any
such future dividend default or defaults). The fact that dividends have been
paid and set apart as required by the preceding sentence shall be evidenced by a
certificate executed by the President and chief financial officer of this
corporation and delivered to the Board of Directors. The directors to be
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elected (or if such directors have been previously elected and any vacancy
shall exist, such vacancy to be filled) by the holders of Series A Preferred
Stock (voting as a class) shall be elected (or filled) at (i) annual meetings
of the shareholders of this corporation, or (ii) a special meeting of the
holders of Series A Preferred Stock for the purpose of electing such
directors (or filling any such vacancy), to be called by the Secretary of
this corporation upon the written request of the holders of record of 10% or
more of the number of shares of Series A Preferred Stock then outstanding;
provided, however, that if the Secretary of this corporation shall fail to
call any such meeting within 10 days after any such request, such meeting may
be called by any holder of Series A Preferred Stock designated for that
purpose by the holders of record of 10% or more of the number of shares of
Series A Preferred Stock then outstanding. Notwithstanding the foregoing, the
Secretary shall not be required, and the holders of Series A Preferred Stock
shall not be entitled, to call such meeting in the case of any such request
received by this corporation less than 45 days before the date fixed for any
annual meeting of shareholders, and if in such case such special meeting is
not called, the holders of Series
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A Preferred Stock shall be entitled to vote (voting as a class) at such annual
meeting to elect such directors (or fill any such vacancy). Except as
hereinbefore provided, the directors elected by the holders of Series A
Preferred Stock shall serve until the next annual meeting of the shareholders
and until their successors shall have been elected and qualified.
(c) Except as set forth in subparagraph (d) of this paragraph 9, the
Certificate of Incorporation of this corporation shall not be changed so as to
alter in an adverse manner the powers, preferences or special rights of the
Series A Preferred Stock without the consent, either in writing or by vote at a
meeting called for that purpose, of the holders of at least a majority of the
number of shares at the time outstanding of the Series A Preferred Stock. In
giving such consent, the holders of the Series A Preferred Stock shall vote as
a single class.
(d) Without the consent of the holders of at least 66-2/3% of the
number of shares of the Series A Preferred Stock at the time outstanding either
in writing or by vote at a meeting called for that purpose at which the holders
of the Series A Preferred Stock shall vote as a class, neither by modification
to the Certificate of
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Incorporation of this corporation nor by action of the Board of directors shall:
(i) a series of any class of Senior Stock be
established or enlarged; or
(ii) any additional class of Senior Stock be
authorized or the authorized number of shares of any class of
Senior Stock be increased.
10. EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by
law, the shares of Series A Preferred Stock shall not have any preferences or
relative, participating, optional or other special rights, other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) and in the Certificate of Incorporation of this corporation,
as amended. The shares of Series A Preferred Stock shall have no preemptive or
subscription rights.
11. HEADINGS OF SUBDIVISIONS. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
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12. SEVERABILITY OF PROVISIONS. If any right, preference or
limitation of the Series A Preferred Stock set forth in this resolution (as
such resolution may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule of law or public policy,
all other rights, preferences and limitations set forth in this resolution
(as so amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall, nevertheless, remain in
full force and effect, and no right, preference or limitation herein set
forth shall be deemed dependent upon any other such right, preference or
limitation unless so expressed herein.
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13. STATUS OF REACQUIRED SHARES. Shares of Series A Preferred Stock
which have been issued and converted or reacquired in any manner shall (upon
compliance with any applicable provisions of the State of Delaware) have the
status of authorized and unissued shares of preferred stock issuable in
series undesignated as to series and may be redesignated and reissued.
<PAGE>
EXHIBIT A
Resolution of
the Board of Directors
of Zenith National Insurance Corp.
Establishing a Series
of Preferred Stock
RESOLVED that, pursuant to the authority conferred upon the Board
of Directors by Article FOURTH of the Certificate of Incorporation of this
corporation, there is hereby established a series of the authorized preferred
stock of this corporation having a par value of $1.00 per share, which series
shall be designated as "Series B Cumulative Preferred Stock" (the "Series B
Preferred Stock"), shall consist of 5,751,000 shares and shall have the
following voting powers, designations, preferences and rights.
1. CERTAIN DEFINITIONS. Unless the context otherwise requires, the
terms defined in this paragraph shall have, for all purposes of this
resolution, the meanings herein specified.
BOARD OF DIRECTORS. The term "Board of Directors" shall mean the
Board of Directors of this corporation and, to the extent permitted by law,
any committee of such Board of Directors authorized to exercise the powers of
such Board of Directors.
<PAGE>
COMMON STOCK. The term "Common Stock" shall mean the common stock,
par value $1.00 per share, of this corporation and all shares hereafter
authorized of any class of common stock of this corporation and any other
shares of capital stock of this corporation, howsoever designated, which have
the right (subject always to prior rights of any class or series of
preferred shares) to participate in the distribution of the assets and
earnings of this corporation without limit as to per share amount.
DIVIDEND RATE. The term "Dividend Rate" shall mean the annual rate
used to determine the amount of dividends payable in cash each quarter on
each outstanding share of Series B Preferred Stock. The Dividend Rate
initially shall be the greater of (i) 125% of the Ten Year Treasury Rate as
calculated for September 1, 1990 of $25 or (ii) 225 basis points over the Ten
Year Treasury Rate as calculated for September 1, 1990 of $25 until August 31,
1995 at which time the Dividend Rate per share of Series B Preferred Stock
shall increase $.0625 and shall thereafter continue to increase quarterly by
$.0625 on the last day of each subsequent quarterly period.
FINAL REDEMPTION DATE. The term "Final Redemption Date" shall mean
the date, if any, after a default,
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if any, by this corporation in making payment for shares of Series B
Preferred Stock on any date fixed for redemption, when this corporation makes
funds for payment of the appropriate redemption price for all shares of
Series B Preferred Stock being redeemed, together with accrued dividends to
such date, whether or not declared, available to the holders thereof.
ISSUE DATE. The term "Issue Date" shall mean September 1, 1990.
JUNIOR STOCK. The term "Junior Stock" shall mean, for purposes of
paragraph 2 below, Common Stock and any other class or series of stock of
this corporation not entitled to receive any dividends in any dividend period
unless all dividends required to have been paid or declared and set apart for
payment on the Series B Preferred Stock shall have been so paid or declared
and set apart for payment and, for purposes of paragraph 6 below, shall mean
any class or series of stock of this corporation not entitled to receive any
assets upon liquidation, dissolution or winding up of the affairs of this
corporation until the Series B Preferred Stock shall have received the entire
amount to which such Series B Preferred Stock is entitled upon such
liquidation, dissolution or winding up.
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<PAGE>
LIQUIDATION PRICE. The term "Liquidation Price" shall mean $25 per
share of Series B Preferred Stock plus accrued and unpaid dividends, whether or
not declared.
PARITY STOCK. The term "Parity Stock" shall mean, for purposes of
paragraph 2 below, this corporation's Series A Cumulative Convertible Preferred
Stock and any other class or series of stock of this corporation entitled to
receive payment of dividends on a parity with the Series B Preferred Stock and,
for purposes of paragraph 6 below, shall mean this corporation's Series A
Cumulative Convertible Preferred Stock and any other class or series of stock of
this corporation entitled to receive assets upon liquidation, dissolution or
winding up of the affairs of this corporation on a parity with the Series B
Preferred Stock.
REDEMPTION AGENT. The term "Redemption Agent" shall have the meaning
set forth in subparagraph 4(c) below.
SENIOR STOCK. The term "Senior Stock" shall mean, for purposes of
paragraph 2 below, any class or series of stock of this corporation ranking
senior to the Series B Preferred Stock in respect of the right to receive
dividends, and, for purposes of paragraph 6 below,
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<PAGE>
shall mean any class or series of stock of this corporation ranking senior to
the Series B Preferred Stock in respect of the right to participate in any
distribution upon liquidation, dissolution or winding up of the affairs of this
corporation.
TEN YEAR TREASURY RATE. The term "Ten Year Treasury Rate" shall mean,
with respect to any date, the arithmetic average (rounded to the nearest basis
point) of the weekly average per annum yield to maturity values, adjusted to
constant maturities of ten years, for the three calendar weeks ending on the
last Friday that is more than six (6) business days prior to such date (the
"Rate Determination Period") as read from the yield curves of the most actively
traded marketable United States Treasury fixed interest rate securities (x)
constructed daily by the United States Treasury Department (i) as published by
the Federal Reserve Board in its Statistical Release H.15 (519), "Selected
Interest Rates," which weekly average yield to maturity values presently are set
forth in such statistical release under the caption "U.S. Government Securities
-- Treasury Constant Maturities -- ten years" or (ii) if said Statistical
Release H.15 (519) is not then published by the Federal Reserve Board in any
release comparable to its Statisti-
5
<PAGE>
cal Release H.15 (519), or (iii) if the Federal Reserve Board shall not be
publishing a comparable release, as published in any official publication or
release of any other United States Government department or agency, or (y) if
the United States Treasury Department shall not then be constructing such
yield curves, as constructed by the Federal Reserve Board or any other United
States Government department or agency and published as set forth in (x)
above. However, if the Ten Year Treasury Rate cannot be determined as
provided above, then such Ten Year Treasury Rate shall mean the arithmetic
average (rounded to the nearest basis point) of the per annum yields to
maturity for each Business Day during the Rate Determination Period of all of
the issues of actively traded marketable United States Treasury fixed
interest rate securities with a maturity not less than 117 months nor more
than 123 months from such Business Day (excluding all such securities which
can be surrendered at the option of the holder at face value in payment of
any Federal estate tax, which provide tax benefits to the holder or which
were issued at substantial discount) (1) as published in THE WALL STREET
JOURNAL or (2) if THE WALL STREET JOURNAL shall cease such publication, based
on average asked prices (or yields) as quoted by each of
6
<PAGE>
the three United States government securities dealers of recognized national
standing selected by the Company.
2. DIVIDENDS.
(a) Subject to the prior preferences and other rights of any
Senior Stock, each issued and outstanding share of Series B Preferred Stock
shall entitle the holder of record thereof as of the "record date" (as
hereinafter defined) to receive, when and as declared by the Board of Directors,
out of any funds legally available therefor, cumulative cash dividends in equal
quarterly installments of the Dividend Rate, which shall accrue from the Issue
Date and shall be payable quarterly on the first day of March, June, September
and December of each year commencing December 1, 1990 (each such date shall
hereinafter be referred to as a "Dividend Payment Date" and the quarterly period
between consecutive Dividend Payment Dates shall hereinafter be referred to as a
"Dividend Period"). As used above, the term "record date" means, with respect to
the dividend payable March, June, September and December, respectively, of each
year, February 15, May 15, August 15 and November 15 of such year, or such other
record date designated by the Board of Directors of this corporation with
respect to the
7
<PAGE>
dividend payable on such respective dividend payment date.
(b) If for any Dividend Period holders of the Series B Preferred
Stock shall not receive the full dividends provided for in this paragraph 2,
such unpaid dividends for such Dividend Period shall be cumulative and shall
accrue without interest on a day-to-day basis, whether or not declared and
whether or not there shall be (at the time such dividend shall become payable or
at any other time) surplus, net profits or other assets of this corporation
legally available for the payment of dividends, from and after the date when
payment thereof would have been due. Dividends on the Series B Preferred Stock
shall continue to accrue until the date such shares are redeemed or converted,
as the case may be.
(c) So long as any shares of Series B Preferred Stock shall be
outstanding, this corporation shall not declare or pay on any Junior Stock any
dividend whatsoever, whether in cash, property or otherwise, nor shall this
corporation make any distribution on any Junior Stock, nor shall any Junior
Stock be purchased, redeemed or otherwise acquired by this corporation or any of
its subsidiaries nor shall any monies be paid, set
8
<PAGE>
aside for payment or made available for a sinking fund for the purchase or
redemption of any Junior Stock, unless all dividends to which the holders of
Series B Preferred Stock shall have been entitled for all current and all
previous Dividend Periods shall have been paid or declared and a sum of money
sufficient for the payment thereof set apart.
(d) If full dividends are not paid or made available to the
holders of all outstanding shares of Series B Preferred Stock and of any
Parity Stock, and funds available shall be insufficient to permit payment in
full to all such holders of the preferential amounts to which they are then
entitled, the entire amount available for payment of dividends shall be
distributed among the holders of the Series B Preferred Stock and of any
Parity Stock, ratably in proportion to the full amount to which they would
otherwise be respectively entitled.
3. OPTIONAL REDEMPTION.
(a) The shares of Series B Preferred Stock may be redeemed,
at the option of this corporation, by action of its Board of Directors, in
whole or in part, at any time after September 1, 1993, at the following
redemption prices per share if redeemed during the
9
<PAGE>
twelve-month period beginning on September 1 in the years specified below:
<TABLE>
<CAPTION>
Redemption
Year Price per share
---- ---------------
<S> <C>
1993....................... $ *
1994....................... **
1995 and thereafter........ $500
</TABLE>
plus, in each case, any accrued and unpaid dividends thereon, whether or not
declared, to and including the date fixed for such redemption (the
"Redemption Price").
(b) If this corporation shall default in making payment for
shares of Series B Preferred Stock on a date fixed for any redemption, the
Redemption Price shall also include any accrued and unpaid dividends on such
shares, whether or not declared, from and after the date fixed for redemption
to and including the Final Redemption Date.
4. METHOD OF REDEMPTION.
(a) Notice of every optional redemption under paragraph 3
hereof shall be published at least once not less than 15 days nor more than
60 days prior to the
--------------
* The redemption price shall be the sum of (i) $500 plus (ii) 40% of the
Dividend Rate.
** The redemption price shall be the sum of (i) $500 plus (ii) 20% of the
Dividend Rate.
10
<PAGE>
date fixed for redemption in a daily newspaper printed in the English
language and published and of general circulation in the City of Los Angeles,
California, and in a daily newspaper printed in the English language and
published and of general circulation in The Borough of Manhattan, City and
State of New York. Notice of every such redemption shall also be mailed,
first class, postage prepaid, not less than 15 days nor more than 60 days
prior to the date fixed for redemption to the holders of record of the shares
of Series B Preferred Stock to be redeemed, at their respective addresses as
the same appear upon the books of this corporation or supplied by them to
this corporation for the purpose of such notice; but no failure to mail such
notice to particular shareholders or any defect therein or in the mailing
thereof shall affect the validity of the proceedings for the redemption of
any shares of Series B Preferred Stock. Such notice shall (i) inform each
holder of the election of this corporation to redeem such shares and of the
date of redemption (ii) state the Redemption Price and the place at which the
shares called for redemption will, upon presentation and surrender of the
certificates of stock evidencing such shares, be redeemed, and (iii) state
the name and address of any Redemption Agent
11
<PAGE>
selected by this corporation in accordance with subparagraph 4(c), and the
name and address of this corporation's transfer agent for the Series B
Preferred Stock.
(b) In case of redemption of less than all of the Series B
Preferred Stock at the time outstanding, this corporation shall select shares
so to be redeemed pro rata, by lot or by such other method as may be
determined by the Board of Directors to be fair and equitable to the holders
of the Series B Preferred Stock.
(c) If notice of any redemption by this corporation pursuant
to paragraph 3 hereof shall have been mailed as provided in subparagraph (a)
of this paragraph 4, and if before the redemption date specified in such
notice all funds necessary for such redemption shall have been set apart so
as to be available therefor and only therefor, then on and after the close of
business on the date fixed for redemption, the shares of Series B Preferred
Stock called for redemption, notwithstanding that any certificate therefor
shall not have been surrendered for cancellation, shall no longer be deemed
outstanding, and all rights with respect to such shares shall forthwith cease
and terminate, except the right of the holders thereof to receive upon
surrender of their certificates the amounts payable upon redemption thereof;
12
<PAGE>
provided, however, that, if on or prior to the date fixed for such redemption
(but no earlier than 60 days prior to the date fixed for such redemption)
this corporation shall deposit, in a trust fund, with any bank or trust
company organized under the laws of the United States of America or any state
thereof having capital, undivided profits and surplus aggregating at least
$50,000,000 (the "Redemption Agent"), a sum sufficient to redeem on such
redemption date the shares of Series B Preferred Stock to be redeemed, with
irrevocable instructions and authority to the Redemption Agent, on behalf and
at the expense of this corporation, to mail the notice of redemption as soon
as practicable after receipt of such irrevocable instructions (or to complete
such mailing previously commenced, if it has not already been completed) and
to pay, on and after the date fixed for such redemption or prior thereto, the
Redemption Price of the shares of Series B Preferred Stock to be redeemed to
their respective holders upon the surrender of their share certificates,
then, from and after the date of such deposit (although prior to the date
fixed for redemption) the shares of Series B Preferred Stock to be redeemed
shall be deemed to be redeemed and dividends on those shares shall cease to
accrue after the date fixed for such
13
<PAGE>
redemption. The deposit shall be deemed to constitute full payment to their
holders for shares of Series B Preferred Stock to be redeemed and from and
after the date of such deposit the shares shall be deemed to be no longer
outstanding and the holders thereof shall cease to be shareholders with
respect to such shares and shall have no rights with respect thereto, except
the right to receive payment of a sum sufficient to pay the Redemption Price
of the shares, including all accrued but unpaid dividends through the date
fixed for redemption, without interest, upon surrender of their certificates
therefor.
5. RESTRICTIONS ON REDEMPTION. If at any time this corporation shall
have failed to pay all dividends accrued to date and until all dividends
accrued to date shall have been paid or declared and set apart for payment in
full, this corporation shall not redeem or purchase any shares of Series B
Preferred Stock, unless all then outstanding shares of Series B Preferred
Stock are redeemed.
14
<PAGE>
6. DISTRIBUTION UPON LIQUIDATION, DISSOLUTION OR WINDING UP. In the
event of any voluntary or involuntary liquidation, dissolution, winding up of
the affairs of this corporation or other similar event, subject to the prior
preferences and other rights of any Senior Stock, but before any distribution
or payment shall be made to the holders of Junior Stock, the holders of the
Series B Preferred Stock shall be entitled to be paid an amount per share
equal to the Liquidation Price in cash or property at its fair market value
(as determined by the Board of Directors in good faith), or both. The holders
of Series B Preferred Stock shall be entitled to no further participation in
any remaining assets of this corporation after receiving the Liquidation
Price per share. If such payment shall have been made in full to the holders
of Series B Preferred Stock, and if payment shall have been made in full to
the holders of any Senior Stock and Parity Stock of all amounts to which such
holders shall be entitled, the remaining assets and funds of this corporation
shall be distributed among the holders of Junior Stock, according to their
respective shares. If, upon distribution of this corporation's assets in
liquidation, dissolution, winding up or other similar event, the assets of
this corporation to be distributed
15
<PAGE>
among the holders of Series B Preferred Stock and to all holders of any other
Parity Stock shall be insufficient to permit payment in full to such holders
of the preferential amounts to which they are entitled, then the entire
assets of this corporation remaining after the distributions to holders of
any Senior Stock of the full amounts to which they may be entitled shall be
distributed among the holders of Series B Preferred Stock and of any Parity
Stock ratably in proportion to the full amounts to which they would otherwise
be respectively entitled. Neither the consolidation or merger of this
corporation with or into any other corporation or corporations nor the sale
or lease of all or substantially all the assets of this corporation shall
itself be deemed to be a liquidation, dissolution or winding up of this
corporation within the meaning of any of the provisions of this paragraph 6.
7. VOTING RIGHTS. The holders of Series B Preferred Stock shall have no
right to vote for any purpose, except as specifically required by the General
Corporation Law of the State of Delaware and except as described below:
16
<PAGE>
(a) If at any time the amount of any dividends which have accrued
(whether or not declared), and which have not been paid or declared and a sum
sufficient for the payment thereof set apart, is at least equal to the amount
of six quarterly dividends (whether or not consecutive) the holders of Series
B Preferred Stock voting separately as a class shall be entitled to and may
elect two directors. Upon election, such directors shall become additional
directors of this corporation and the authorized number of directors of this
corporation shall thereupon be automatically increased by such number of
directors. In the event such holders, voting as a class, elect two directors,
the remaining directors shall be elected by the holders of the other shares
of capital stock of this corporation then entitled to vote for the election
of directors without right in the holders of Series B Preferred Stock to
participate in the election of such remaining directors. Such special voting
rights of the holders of Series B Preferred Stock shall continue only until
all quarterly dividends accrued as of the most recent quarterly period,
whether or not declared, have been paid or declared and a sum sufficient for
the payment thereof set apart, at which time the terms of said directors
theretofore elected by the
17
<PAGE>
holders of Series B Preferred Stock shall expire and the number of directors
constituting the entire Board of Directors shall thereupon return to the
number of authorized directors otherwise in effect (subject always to the
same provisions for the vesting of such special voting rights in the case of
any such future dividend default or defaults). The fact that dividends have
been paid and set apart as required by the preceding sentence shall be
evidenced by a certificate executed by the President and chief financial
officer of this corporation and delivered to the Board of Directors. The
directors to be elected (or if such directors have been previously elected and
any vacancy shall exist, such vacancy to be filled) by the holders of Series
B Preferred Stock (voting as a class) shall be elected (or filled) at (i)
annual meetings of the shareholders of this corporation, or (ii) a special
meeting of the holders of Series B Preferred Stock for the purpose of
electing such directors (or filling any such vacancy), to be called by the
Secretary of this corporation upon the written request of the holders of
record of 10% or more of the number of shares of Series B Preferred Stock
then outstanding; provided, however, that if the Secretary of this
corporation shall fail to call any such meeting
18
<PAGE>
within 10 days after any such request, such meeting may be called by any
holder of Series B Preferred Stock designated for that purpose by the holders
of record of 10% or more of the number of shares of Series B Preferred Stock
then outstanding. Notwithstanding the foregoing, the Secretary shall not be
required, and the holders of Series B Preferred Stock shall not be entitled,
to call such meeting in the case of any such request received by this
corporation less than 45 days before the date fixed for any annual meeting of
shareholders, and if in such case such special meeting is not called, the
holders of Series B Preferred Stock shall be entitled to vote (voting as a
class) at such annual meeting to elect such directors (or fill any such
vacancy). Except as hereinbefore provided, the directors elected by the
holders of Series B Preferred Stock shall serve until the next annual meeting
of the shareholders and until their successors shall have been elected and
qualified.
(b) Except as set forth in subparagraph (c) of this paragraph
7, the Certificate of Incorporation of this corporation shall not be changed
so as to alter in an adverse manner the powers, preferences or special rights
of the Series B Preferred Stock without the consent, either in writing or by
vote at a meeting called
19
<PAGE>
for that purpose, of the holders of at least a majority of the number of
shares at the time outstanding of the Series B Preferred Stock. In giving
such consent, the holders of the Series B Preferred Stock shall vote as a
single class.
(c) Without the consent of the holders of at least 66-2/3% of
the number of shares of the Series B Preferred Stock at the time outstanding
either in writing or by vote at a meeting called for that purpose at which
the holders of the Series B Preferred Stock shall vote as a class, neither by
modification to the Certificate of Incorporation of this corporation nor by
action of the Board of Directors shall:
(i) a series of any class of Senior Stock be established
or enlarged; or
(ii) any additional class of Senior Stock be authorized
or the authorized number of shares of any class of Senior Stock be
increased.
20
<PAGE>
8. EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by
law, the shares of Series B Preferred Stock shall not have any preferences or
relative, participating, optional or other special rights, other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) and in the Certificate of Incorporation of this
corporation, as amended. The shares of Series B Preferred Stock shall have no
preemptive or subscription rights.
9. HEADINGS OF SUBDIVISIONS. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
10. SEVERABILITY OF PROVISIONS. If any right, preference or limitation
of the Series B Preferred Stock set forth in this resolution (as such
resolution may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule of law or public policy,
all other rights, preferences and limitations set forth in this resolution
(as so amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall, nevertheless, remain in
full force and effect, and no
21
<PAGE>
right, preference or limitation herein set forth shall be deemed dependent
upon any other such right, preference or limitation unless so expressed
herein.
11. STATUS OF REACQUIRED SHARES. Shares of Series B Preferred Stock
which have been issued and converted or reacquired in any manner shall (upon
compliance with any applicable provisions of the laws of the State of
Delaware) have the status of authorized and unissued shares of preferred
stock issuable in series undesignated as to series and may be redesignated
and reissued.
22
<PAGE>
EXHIBIT B
-------------------------------------------------------------------------------
ZENITH NATIONAL INSURANCE CORP.
and
[Trustee to be Selected], as Trustee
-------------------------
INDENTURE
Dated as of , 1990
-------------------------
$143,775,000
Subordinated Debentures
due , 2000
-------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
------- ---------
<S> <C>
Section 310(a)(1)....................................... 8.10
(a)(2)....................................... 8.10
(a)(3)....................................... N.A.
(a)(4)....................................... N.A.
(b).......................................... 8.08;
8.10;
12.02
(c).......................................... N.A.
Section 311(a).......................................... 8.11
(b).......................................... 8.11
(c).......................................... N.A.
Section 312(a).......................................... 2.05
(b).......................................... 12.03
(c).......................................... 12.03
Section 313(a).......................................... 8.06
(b)(1)....................................... N.A.
(b)(2)....................................... 8.06
(c).......................................... 8.06;
12.02
(d).......................................... 8.06
Section 314(a).......................................... 5.09;
12.02
(b).......................................... N.A.
(c)(1)....................................... 12.04
(c)(2)....................................... 12.04
(c)(3)....................................... N.A.
(d).......................................... N.A.
(e).......................................... 12.05
(f).......................................... N.A.
Section 315(a).......................................... 8.01(b)
(b).......................................... 8.05;
12.02
(c).......................................... 8.01(a)
(d).......................................... 8.01(c)
(e).......................................... 7.11
Section 316(a)(last sentence)........................... 2.09
(a)(1)(A).................................... 7.05
(a)(1)(B).................................... 7.04
(a)(2)....................................... N.A.
(b).......................................... 7.07
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
TIA Indenture
Section Section
------- ---------
<S> <C>
Section 317(a)(1)....................................... 7.08
(a)(2)....................................... 7.09
(b).......................................... 2.04
Section 318(a).......................................... 12.01
</TABLE>
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
HEADING PAGE
------- ----
<S> <C>
ARTICLE ONE
Definition And Incorporation By Reference
Section 1.01 Definitions.............................................. 1
Section 1.02 Incorporation by Reference of Trust Indenture Act........ 7
Section 1.03 Rules of Construction.................................... 8
ARTICLE TWO
The Securities
Section 2.01 Form and Dating.......................................... 9
Section 2.02 Execution and Authentication; Denominations.............. 9
Section 2.03 Registrar and Paying Agent............................... 10
Section 2.04 Paying Agent to Hold Money in Trust...................... 11
Section 2.05 Securityholder Lists..................................... 11
Section 2.06 Transfer and Exchange.................................... 11
Section 2.07 Replacement Securities................................... 12
Section 2.08 Outstanding Securities................................... 12
Section 2.09 Treasury Securities...................................... 13
Section 2.10 Temporary Securities..................................... 13
Section 2.11 Cancellation............................................. 13
Section 2.12 Defaulted Interest....................................... 13
ARTICLE THREE
Redemption
Section 3.01 Notices to Trustee....................................... 14
Section 3.02 Selection of Securities to be Redeemed................... 14
Section 3.03 Notice of Redemption..................................... 15
Section 3.04 Effect of Notice of Redemption........................... 16
Section 3.05 Deposit of Redemption Price.............................. 16
Section 3.06 Securities Redeemed in Part.............................. 16
Section 3.07 Accelerated Redemption Provision......................... 16
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
HEADING PAGE
------- ----
<S> <C>
ARTICLE FOUR
Subordination
Section 4.01 Securities Subordinated to Senior Indebtedness........... 18
Section 4.02 No Payment on Securities in Certain Circumstances........ 19
Section 4.03 Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or
Reorganization of Company.............................. 20
Section 4.04 Securityholders to be Subrogated to Rights of Holders
of Senior Indebtedness................................. 22
Section 4.05 Obligations of the Company Unconditional................. 22
Section 4.06 Trustee and Paying Agent Entitled to Assume Payments
Not Prohibited in Absence of Notice.................... 23
Section 4.07 Application by Trustee of Monies Deposited With It....... 23
Section 4.08 Subordination Rights not Impaired by Acts or Omissions
of Company or Holders of Senior Indebtedness........... 24
Section 4.09 Securityholders Authorize Trustee to Effectuate
Subordination of Securities............................ 24
Section 4.10 Right of Trustee and Paying Agent to Hold Senior
Indebtedness........................................... 25
Section 4.11 Article Four Not to Prevent Events of Default............ 25
Section 4.12 No Fiduciary Duty Created to Holders of
Senior Indebtedness.................................... 25
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
HEADING PAGE
------- ----
<S> <C>
ARTICLE FIVE
Covenants
Section 5.01 Payment of Securities.................................... 26
Section 5.02 Maintenance of Office or Agency.......................... 26
Section 5.03 Limitation on Dividends and Other Distributions.......... 27
Section 5.04 Corporate Existence...................................... 28
Section 5.05 Payment of Taxes and Other Claims........................ 29
Section 5.06 Notice of Defaults....................................... 29
Section 5.07 Maintenance of Properties................................ 30
Section 5.08 Liquidation.............................................. 30
Section 5.09 Compliance Certificate................................... 31
Section 5.10 SEC Reports.............................................. 32
Section 5.11 Waiver of Stay, Extension or Usury Laws.................. 32
ARTICLE SIX
Successor Corporation
Section 6.01 When Company May Merge, Etc.............................. 33
Section 6.02 Successor Corporation Substituted........................ 34
ARTICLE SEVEN
Default and Remedies
Section 7.01 Events of Default........................................ 34
Section 7.02 Acceleration............................................. 37
Section 7.03 Other Remedies........................................... 38
Section 7.04 Waiver of Past Defaults.................................. 38
Section 7.05 Control by Majority...................................... 38
Section 7.06 Limitation on Suits...................................... 39
Section 7.07 Rights of Holders to Receive Payment..................... 39
Section 7.08 Collection Suit by Trustee............................... 40
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
HEADING PAGE
------- ----
<S> <C>
Section 7.09 Trustee May File Proofs of Claim......................... 40
Section 7.10 Priorities............................................... 41
Section 7.11 Undertaking for Costs.................................... 41
ARTICLE EIGHT
Trustee
Section 8.01 Duties of Trustee........................................ 42
Section 8.02 Rights of Trustee........................................ 43
Section 8.03 Individual Rights of Trustee............................. 44
Section 8.04 Trustee's Disclaimer..................................... 44
Section 8.05 Notice of Defaults....................................... 44
Section 8.06 Reports by Trustee to Holders............................ 45
Section 8.07 Compensation and Indemnity............................... 45
Section 8.08 Replacement of Trustee................................... 46
Section 8.09 Successor Trustee by Merger, Etc......................... 47
Section 8.10 Eligibility; Disqualification............................ 47
Section 8.11 Preferential Collection of Claims Against Company........ 48
ARTICLE NINE
Satisfaction and Discharge of Indenture
Section 9.01 Satisfaction, Discharge of the Indenture and
Defeasance of the Securities........................... 48
Section 9.02 Termination of Company's Obligations Upon Cancellation
of the Securities...................................... 50
Section 9.03 Survival of Certain Obligations.......................... 51
Section 9.04 Acknowledgement of Discharge by Trustee.................. 52
Section 9.05 Application of Trust Money............................... 52
Section 9.06 Repayment to the Company................................. 52
Section 9.07 Reinstatement............................................ 53
</TABLE>
vi
<PAGE>
<TABLE>
<CAPTION>
HEADING PAGE
------- ----
<S> <C>
ARTICLE TEN
Amendments, Supplements and Waivers
Section 10.01 Without Consent of Holders............................... 53
Section 10.02 With Consent of Holders.................................. 54
Section 10.03 Compliance with Trust Indenture Act...................... 55
Section 10.04 Revocation and Effect of Consents........................ 55
Section 10.05 Notation on Exchange of Securities....................... 56
Section 10.06 Trustee to Sign Amendments, Etc.......................... 56
ARTICLE ELEVEN
Meetings of Securityholders
Section 11.01 Purposes for which Meetings May Be Called................ 57
Section 11.02 Manner of Calling Meetings............................... 57
Section 11.03 Call of Meetings By Company or Holders................... 58
Section 11.04 Who May Attend and Vote at Meetings...................... 59
Section 11.05 Regulations May be Made by Trustee; Conduct of the
Meeting; Voting Rights; Adjournment.................... 59
Section 11.06 Voting at the Meeting and Record to be Kept.............. 60
Section 11.07 Exercise of Rights of Trustee or Securityholders
May Not be Hindered or Delayed by Call of Meeting...... 61
</TABLE>
vii
<PAGE>
<TABLE>
<CAPTION>
HEADING PAGE
------- ----
<S> <C>
ARTICLE TWELVE
Miscellaneous
Section 12.01 Trust Indenture Act Controls............................. 61
Section 12.02 Notices.................................................. 61
Section 12.03 Communications by Holders with Other Holders............. 61
Section 12.04 Certificate and Opinion as to Conditions Precedent....... 62
Section 12.05 Statements Required in Certificate or Opinion............ 63
Section 12.06 Rules by Trustee, Paying Agent, Registrar................ 63
Section 12.07 Legal Holidays........................................... 64
Section 12.08 Governing Law............................................ 64
Section 12.09 No Adverse Interpretation of Other Agreements............ 64
Section 12.10 No Recourse Against Others............................... 64
Section 12.11 Successors............................................... 64
Section 12.12 Duplicate Originals...................................... 65
Section 12.13 Separability............................................. 65
Signatures............................................................... 65
Exhibit A -- Form of Debenture........................................... A-1
</TABLE>
--------------
Note: This Table of Contents shall not, for any purpose, be
deemed to be a part of the Indenture.
viii
<PAGE>
INDENTURE dated as of , 1990, between ZENITH
NATIONAL INSURANCE CORP., a Delaware corporation (the "Company"), and [
], a [ ], 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
Subordinated Debentures due September __, 2000 (the "Securities"):
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Affiliate" of any specified person means any other person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bankruptcy Law" shall have the meaning provided in SECTION 7.01.
"Board of Directors" means the Board of Directors of the Company or
any authorized committee of the Board of Directors.
"Board Resolution" means a resolution of the Board of Directors,
certified by the Secretary or an Assistant Secretary of the Company.
"Business Day" means a day that is not a Legal Holiday.
<PAGE>
"Capitalized Lease Obligation" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes, in accordance with generally accepted accounting
principles and the amount of such Indebtedness shall be the capitalized
amount of such obligations determined in accordance with such generally
accepted accounting principles.
"Capital Stock" means any and all shares, interests, participations
or other equivalents (however designated) of corporate stock.
"Common Stock" means the common stock, par value $1.00 per share,
of the Company, as presently designated, or shares of any class or classes of
Capital Stock resulting from any reclassification or reclassifications of
such common stock.
"Common Stockholders" means holders of Common Stock.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to the Indenture and thereafter means the
successor.
"Consolidated Net Income," for any period, means the aggregate of
the Net Income of the Company and its Subsidiaries for such period, on a
consolidated basis, determined in accordance with generally accepted
accounting principles consistently applied; provided, however, that (i) the
Net Income of any person which is not a Subsidiary in which the Company or
any Subsidiary has an interest shall be included only to the extent of the
amount of cash dividends or cash distributions paid to the Company or a
Subsidiary, (ii) the Net Income of any person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition shall be excluded, (iii) the Net Income of any
Subsidiary which is subject to restrictions, direct or indirect, on the
payment of dividends or the making of distributions to the Company shall be
excluded to the extent of such restrictions and (iv) all gains (but not
losses) of the Company or a Subsidiary realized (a) upon the sale or other
disposition (including, without limitation, sale and leaseback transactions)
of property or assets (other than securities which are not Capital Stock of
the Company or any Subsidiary) which
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are not sold or otherwise disposed of in the ordinary course of business or
(b) upon the sale or other disposition of any Capital Stock of the Company or
any Subsidiary shall be excluded.
"Custodian" shall have the meaning provided in SECTION 7.01.
"Default" means any event which is, or after notice or passage of
time would be, an Event of Default.
"Disqualified Stock" means any Capital Stock which, by its terms,
is required to be redeemed, in whole or in part, by the Company or any of its
Subsidiaries prior to the maturity date of the Securities.
"Event of Default" shall have the meaning provided in SECTION 7.01.
"Exchange Date" means September 1, 1990.
"Holder" or "Securityholder" means the person, in whose name a
Security is registered on the Registrar's books.
"Indebtedness" of any person means (i) any liability of such
person, contingent or otherwise, (a) for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such person or only to
a portion thereof), (b) evidenced by a note, debenture or similar instrument
or letter of credit (including a purchase money obligation) given in
connection with the acquisition of any property or assets (other than
inventory or similar property acquired in the ordinary course of business),
including securities, or (c) for the payment of money relating to a
Capitalized Lease Obligation; (ii) any liability of others described in the
preceding clause (i) which the person has guaranteed or which is otherwise
its legal liability; and (iii) any amendment, renewal, extension or refunding
of any liability of the types referred to in clauses (i) and (ii) above.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Intangible Assets" of any person means the amount (to the extent
reflected in determining the
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consolidated equity of the common stockholders of such person and-its
subsidiaries) of (i) all write-ups (other than write-ups resulting from
foreign currency translations and write-ups of assets of a going concern
business made within twelve months after the acquisition of such business)
subsequent to June 30, 1990 in the book value of any asset owned by such
person or a consolidated subsidiary of such person, (ii) all investments in
unconsolidated subsidiaries and in persons which are not subsidiaries, and
(iii) all unamortized debt discount and expense, unamortized deferred
charges, goodwill, organization or developmental expenses and other
intangible items, including trademarks, patents, service marks, trade names,
copyrights, licenses and other similar agreements, all of the foregoing as
determined in accordance with generally accepted accounting principles.
"Interest Payment Date" means the stated maturity of an installment
of interest on the Securities.
"Legal Holiday" shall have the meaning provided in SECTION 12.07.
"Lien" means any mortgage, lien, pledge, charge, or other security
interest or encumbrance of any kind.
"Net Income" of any person for any period means the net income
(loss) of such person for such period, determined in accordance with generally
accepted accounting principles consistently applied.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Chief Financial Officer, the Treasurer, the Secretary or the
Controller of the Company.
"Officers' Certificate" means a certificate signed by two Officers
or by an Officer and an Assistant Treasurer or Assistant Secretary of the
Company. See SECTIONS 12.04 AND 12.05.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee. See SECTIONS 12.04 and 12.05.
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"Paying Agent" shall have the meaning provided in SECTION 2.03,
except that for the purposes of ARTICLES THREE and NINE the Paying Agent
shall not be the Company or a Subsidiary of the Company.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or other agency or political subdivision thereof.
"Preferred Shares" means all outstanding shares of the Company's
Series A Cumulative Convertible Preferred Stock, par value $1.00 per share.
"principal" of a debt security (including the Securities) means the
principal of such debt security plus, when appropriate, the premium, if any,
on such debt security.
"redemption date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"redemption price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this
Indenture as set forth in the form of Security annexed hereto as Exhibit A.
"Registrar" shall have the meaning provided in SECTION 2.03.
"Representative" means the indenture trustee or other trustee,
agent or representative for any Senior Indebtedness.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means the principal of interest on and other
amounts due on or in connection with (a) any Indebtedness of the Company
(other than the Securities), whether outstanding on the date of this
Indenture or hereafter created, incurred, assumed or guaranteed in any manner
by the Company or in effect guaranteed by the Company through an agreement to
purchase or otherwise; and (b) deferrals, renewals, extensions or refundings
of, or amendments, modifications or supplements to, Indebtedness of the kind
described in the
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preceding CLAUSE (a), unless, in the case of any particular Indebtedness,
deferral, renewal, extension, refunding, amendment, modification or
supplement, the instrument creating or evidencing the same or the assumption
or guarantee thereof expressly provides that such Indebtedness, deferral,
renewal, extension, refunding, amendment, modification or supplement shall
not be senior in right of payment of principal of and interest on the
Securities. Notwithstanding anything to the contrary in the foregoing,
Senior Indebtedness shall not include (a) Indebtedness of or amounts owned by
the Company (except to banks and other financing institutions) for goods or
materials purchased in the ordinary course of business or for services or (b)
Indebtedness of the Company to a Subsidiary for money borrowed or advanced
from such Subsidiary.
"Series A Preferred" means the Company's Series A Cumulative
Convertible Preferred Stock, par value $1.00 per share.
"Series B Preferred" means the Company's series of preferred stock
which shall have the rights and preferences substantially as set forth in the
form of resolution of the Board of Directors annexed as Exhibit A to the
resolution of the Board of Directors which sets forth the rights and
preferences of the Series A Preferred.
"Subsidiary" means (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 the Company, by the Company and
a Subsidiary of the Company or by a Subsidiary of the Company or (ii) any
other person (other than a corporation) in which the Company, a Subsidiary of
the Company or the Company and a Subsidiary of the Company, directly or
indirectly, at the date of determination thereof, has at least a majority
ownership interest.
"Tangible Net Worth" means the consolidated equity of the Common
Stockholders of the Company and its consolidated Subsidiaries less their
consolidated Intangible Assets, all determined as of such date on a
consolidated basis in accordance with generally accepted accounting
principles.
"Ten Year Treasury Rate" means, with respect to any date, the
arithmetic average (rounded to the nearest
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basis point) of the weekly average per annum yield to maturity values,
adjusted to constant maturities of ten years, for the three calendar weeks
ending on the last Friday that is more than six (6) business days prior to
such date (the "Rate Determination Period") as read from the yield curves of
the most actively traded marketable United States Treasury fixed interest
rate securities (x) constructed daily by the United States Treasury Department
(i) as published by the Federal Reserve Board in its Statistical Release H.15
(519), "Selected Interest Rates," which weekly average yield to maturity
values presently are set forth in such securities -- Treasury Constant
Maturities -- ten years" or (ii) if said Statistical Release H.15 (519) is
not then published or such information is not set forth therein, as published
by the Federal Reserve Board in any release comparable to its Statistical
Release H.15 (519), or (iii) if the Federal Reserve Board shall not be
publishing a comparable release, as published in any official publication or
release of any other United States Government department or agency, or (y) if
the United States Treasury Department shall not then be constructing such
yield curves, as constructed by the Federal Reserve Board or any other United
States Government department or agency and published as set forth in (x)
above. However, if the Ten Year Treasury Rate cannot be determined as
provided above, then such Ten Year Treasury Rate shall mean the arithmetic
average (rounded to the nearest basis point) of the per annum yields to
maturity for each Business Day during the Rate Determination Period of all of
the issues of actively traded marketable United States Treasury fixed
interest rate securities with a maturity not less than 117 months nor more
than 123 months from such Business Day (excluding all such securities which
can be surrendered at the option of the holder at face value in payment of
any Federal estate tax, which provide tax benefits to the holder or which
were issued at substantial discount) (1) as published in THE WALL STREET
JOURNAL or (2) if THE WALL STREET JOURNAL shall cease such publication, based
on average asked prices (or yields) as quoted by each of the three United
States government securities dealers of recognized national standing
selected by the Company.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of this Indenture.
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"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 the successor.
"Trust Officer" means the Chairman of the Board, the President or
any other officer or assistant officer of the Trustee assigned by the Trustee
to administer its corporate trust matters.
"U.S. Government Obligations" shall have the meaning provided in
SECTION 9.01.
SECTION 1.02 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of such TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"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.
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SECTION 1.03. RULES OF CONSTRUCTION
Unless the context otherwise requires:
(1) a term has the meaning assigned to it.
(2) an accounting term not otherwise defined
has the meaning assigned to it in accordance with
generally accepted accounting principles in effect on
the date hereof, and any other reference in this Indenture
to "generally accepted accounting principles" refers to
generally accepted accounting principles on the date hereof.
(3) words in the singular include the plural, and
words in the plural include the singular.
(4) provisions apply to successive events and
transactions.
(5) "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.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. FORM AND DATING
The Securities and the Trustee's certificate of authentication
relating thereto shall be substantially in the form set forth in EXHIBIT A to
the Indenture, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule or usage. The Company 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.
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The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture. To the
extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby.
SECTION 2.02. EXECUTION AND AUTHENTICATION; DENOMINATIONS
Two Officers shall sign the Securities for the Company by facsimile
signature. The Company's seal shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall
be valid nevertheless.
A Security shall not be valid until 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 in the
aggregate principal amount of up to $143,775,000 upon a written order of the
Company signed by two Officers or by an Officer and an Assistant Treasurer or
Assistant Secretary of the Company. The order shall specify the amount of
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated. The aggregate principal amount of
Securities issued and outstanding at any time may not exceed $143,775,000
except as provided in SECTION 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture
to authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company
or an Affiliate.
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The Securities shall be issuable only in registered form without
coupons and only in denomination of $1,000 and any integral multiple thereof.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the state of New
York where Securities may be presented for registration of transfer or for
exchange ("Registrar"), and an office or agency in the state of New York
where Securities may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange.
The Company may have one or more co-Registrars and one or more additional
paying agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any such Agent. If the Company
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar and Paying
Agent.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
Subject to Section 4.07, each Paying Agent shall hold in trust for
the benefit of Securityholders or the Trustee all money held by the Paying
Agent for the payment of principal of or interest on the Securities (whether
such money has been paid 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. If the
Company or a Subsidiary acts as Paying Agent, it shall on or before each due
date of principal of or interest on the Securities, segregate the money and
hold it as a separate trust fund. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee and account for any
funds disbursed and the Trustee may at any time during the continuance of
any payment default, upon written request to a Paying Agent,
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require such Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed. Upon doing so the Paying Agent shall have no
further liability for the money.
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 Securityholders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee on or before each Interest Payment Date and at such
times as the Trustee may request in writing a list in such form and as of
such date as the Trustee may reasonably require of the names and addresses of
Securityholders.
SECTION 2.06. TRANSFER AND EXCHANGE.
When Securities are presented to the Registrar or a co-Registrar
with a request to register the transfer or to exchange them for an equal
principal amount of Securities of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met. To permit registrations of
transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Securities at the Registrar's request. No service charge shall
be made for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchanges pursuant
to Section 2.10, 3.06 or 10.05).
SECTION 2.07 REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the
Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate
a replacement Security if the Trustee's requirements are met. If required by
the Trustee or the Company, an indemnity bond must be sufficient in the
judgment of both
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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 may charge such
Holder for its expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.08. OUTSTANDING SECURITIES.
Securities outstanding at any time are all Securities that have been
authenticated by the Trustee except for those cancelled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding. A Security does not cease to be outstanding because the Company
or one of its Affiliates holds the Security.
If a Security is replaced pursuant to SECTION 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company or another Subsidiary)
holds on a redemption date or maturity date money sufficient to pay
Securities payable on that date, then on and after that 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 direction, waiver or consent, Securities
owned by the Company or an Affiliate shall be disregarded, except that for
the purposes of determining whether the Trustee shall be protected in relying
on any such direction, waiver or consent, only Securities which the Trustee
knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall
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authenticate temporary Securities. 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 definitive Securities in exchange for temporary 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 transfer, exchange or payment.
The Trustee and no one else shall cancel and destroy all Securities
surrendered for transfer, exchange, payment or cancellation. Subject to
SECTION 2.07, the Company may not issue new Securities to replace Securities
it has paid or delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Securities,
it shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest, to the persons who are Securityholders on
a subsequent special record date, and such term, as used in this SECTION 2.12
with respect to the payment of any defaulted interest, shall mean the
fifteenth day next preceding the date fixed by the Company for the payment of
defaulted interest, whether or not such day is a Business Day. At least 15
days before the subsequent special record date, the Company shall mail to
each Securityholder a notice that states the subsequent special record date,
the payment date and the amount of defaulted interest to be paid.
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ARTICLE THREE
REDEMPTION
SECTION 3.01: NOTICES TO TRUSTEE.
If the Company wants to redeem Securities pursuant to PARAGRAPH 5
of the Securities, it shall notify the Trustee in writing of the redemption
date and the principal amount of Securities to be redeemed.
If the Company is redeeming Securities pursuant to paragraph 6 of
the Securities it shall notify the Trustee of the principal amount of
Securities to be redeemed. If the Company wants to reduce the principal
amount of Securities to be redeemed in accordance with the terms of paragraph
6 of the Securities, it shall notify the Trustee of the amount of the
reduction in accordance with the terms of such paragraph 6. If the Company
wants to credit against any such redemption Securities, it has not previously
delivered to the Trustee for cancellation, it shall deliver the Securities
with the notice.
The Company shall give each notice provided for in this Section at
least 50 days before the redemption date (unless a shorter notice shall be
satisfactory to the Trustee).
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed PRO RATA or by lot or by such
other method as the Trustee shall deem to be fair and appropriate. The
Trustee shall deem to be fair and appropriate. The Trustee shall make the
selection from the Securities outstanding and not previously called for
redemption. Securities in denominations of $1,000 may be redeemed only in
whole. The Trustee may select for redemption portions (equal to $1,000 or any
integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called
for redemption.
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SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption
date, the Company shall mail or cause to be mailed a notice of redemption by
first class mail to each Holder whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the redemption date and the only remaining right of the Holders
is to receive payment of the redemption price upon surrender to the
Trustee of the Securities; and
(6) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof
will be issued.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date and at the
redemption price. Upon surrender to the Paying Agent, such Securities shall
be paid
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at the redemption price, plus accrued and unpaid interest to the redemption
date.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before the redemption date, the Company shall deposit with the
Paying Agent (or if the Company is its own Paying Agent, shall segregate and
hold in trust) money sufficient to pay the redemption price of and accrued
interest on all Securities to be redeemed on that date other than Securities
or portions thereof called for redemption on that date which have been
delivered by the Company to the Trustee for cancellation.
SECTION 3.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal amount to
the unredeemed portion of the Security surrendered.
ARTICLE FOUR
SUBORDINATION
SECTION 4.01. SECURITIES SUBORDINATED TO SENIOR INDEBTEDNESS.
The Company, for itself and its successors, and each Holder, by his
acceptance of Securities, agrees that the payment of the principal of and
interest on the Securities is subordinated, to the extent and in the manner
provided in this ARTICLE FOUR, to the prior payment in full of all Senior
Indebtedness.
This ARTICLE FOUR shall constitute a continuing offer to all persons
who, in reliance upon such provisions, become holders of, or continue to
hold, Senior Indebtedness, and such provisions are made for the benefit of
the holders of Senior Indebtedness, and such holders are made obligees
hereunder and they and/or each of them may enforce such provisions.
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SECTION 4.02. NO PAYMENT ON SECURITIES IN CERTAIN CIRCUMSTANCES.
(a) Upon the maturity of any Senior Indebtedness by lapse of
time, acceleration or otherwise, all principal thereof and interest thereon
and other amounts due in connection therewith shall first be paid in full, or
such payment duly provided for in cash or in a manner satisfactory to the
holders of such Senior Indebtedness, before any payment is made (i) on
account of principal of or interest on the Securities or (ii) to acquire any
of the Securities for cash or property other than Capital Stock (other than
Disqualified Stock) of the Company or (iii) on account of the redemption
provisions for the Securities (except mandatory redemption payments pursuant
to PARAGRAPH 6 of the Securities made in Securities acquired by the Company
before the maturity, by lapse of time, acceleration or otherwise, of such
Senior Indebtedness).
(b) Upon the happening of an event of default (or if an event
of default would result upon any payment with respect to the Securities) with
respect to any Senior Indebtedness, as such event of default is defined
therein or in the instrument under which it is outstanding, permitting the
holders to accelerate the maturity thereof and (if the default is other than
(i) default in payment of the principal of or interest on or other amounts
due in connection with such Senior Indebtedness or (ii) a default for which
notice is required to be sent under the terms of such Senior Indebtedness by
the holders thereof or their Representative) upon written notice thereof
given to the Company and the Trustee by the holders of such Senior
Indebtedness or their Representative, then, unless and until such event of
default shall have been cured or waived or shall have ceased to exist, no
payment shall be made by the Company with respect to the principal of or
interest on the Securities or to acquire any of the Securities or on account
of the redemption provisions for the Securities (except mandatory redemption
payments pursuant to PARAGRAPH 6 of the Securities made in Securities
acquired by the Company before the maturity, by lapse of time, acceleration
or otherwise, of such Senior Indebtedness); PROVIDED, HOWEVER, that if such
default is a default other than a default referred to in CLAUSE (i) of this
SECTION 4.02 (b), nothing contained in this SECTION 4.02 (b) shall prevent
the Company from making payments of interest,
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when due, on the Securities; and PROVIDED FURTHER, that if such default has not
become the subject of pretrial proceedings within 120 days after the occurrence
thereof (in the case of a default specified in CLAUSE (i) of this SECTION
4.02(b)), then the Company shall resume making any and all required payments in
respect of the Securities.
(c) In the event that notwithstanding the provisions of this
SECTION 4.02, the Company shall make any payment to the Trustee on account of
the principal of or interest on the Securities or on account of the redemption
provisions (other than as permitted by SECTION 4.02(b)), after the happening of
an event of default of the type specified in CLAUSE (i) or (ii) of SECTION
4.02(b) above or after receipt by the Company and the Trustee of written notice
as provided in SECTION 4.02(b) above of any other event of default with respect
to any Senior Indebtedness, then, unless and until such event of default shall
have been cured or waived or shall have ceased to exist, such payment (subject
to the provisions of SECTIONS 4.06 and 4.07) shall be held by the Trustee, in
trust for the benefit of, and shall be paid forthwith over and delivered to, the
holders of Senior Indebtedness (pro rata as to each of such holders on the basis
of the respective amounts of Senior Indebtedness held by them) or their
Representative, as their respective interests may appear, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with its terms, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Indebtedness. The Company shall give prompt written notice to the Trustee of
any default under any Senior Indebtedness or under any agreement pursuant to
which Senior Indebtedness may have been issued.
SECTION 4.03. SECURITIES SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR
INDEBTEDNESS ON DISSOLUTION, LIQUIDATION OR REORGANIZATION OF
COMPANY.
Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization of the Company (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit of
creditors or otherwise):
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(a) the holders of all Senior Indebtedness shall first be
entitled to receive payment in full (or to have such payment duly
provided for) of the principal thereof and interest due thereon and
other amounts due in connection therewith before the Holders are
entitled to receive any payment on account of the principal of or
interest on the Securities;
(b) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to which
the Holders or the Trustee on behalf of the Holders would be entitled
except for the provisions of this ARTICLE FOUR, shall be paid by the
liquidating trustee or agent or other person making such payment or
distribution directly to the holders of Senior Indebtedness or their
representative to the extent necessary to make payment in full of all
Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution or provision therefor to the holders
of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, shall be received by
the Trustee or the Holders or any Paying Agent (or, if the Company is
acting as its own Paying Agent, money for any such payment or
distribution shall be segregated or held in trust) on account of
principal of or interest on the Securities before all Senior
Indebtedness is paid in full, or effective provision made for its
payment, such payment or distribution (subject to the provisions of
SECTIONS 4.06 and 4.07) shall be received and held in trust for and
shall be paid over to the holders of the Senior Indebtedness remaining
unpaid or unprovided for or their representative for application to the
payment of such Senior Indebtedness until all such Senior Indebtedness
shall have been paid in full, after giving effect to any concurrent
payment or distribution or provision therefor to the holders of such
Senior Indebtedness.
The Company shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation
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or reorganization of the Company or any assignment for the benefit of the
Company's creditors.
SECTION 4.04. SECURITYHOLDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS OF SENIOR
INDEBTEDNESS.
Subject to the payment in full of all Senior Indebtedness, the
Holders of Securities shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of assets of the Company
applicable to the Senior Indebtedness until all amounts owing on the Securities
shall be paid in full, and for the purpose of such subrogation no such payments
or distributions to the holders of Senior Indebtedness by or on behalf of the
Company or by or on behalf of the Holders by virtue of this ARTICLE 4 which
otherwise would have been made to the Holders shall, as between the Company and
the Holders, be deemed to be payment by the Company to or on account of the
Senior Indebtedness, it being understood that the provisions of this ARTICLE 4
are and are intended solely for the purpose of defining the relative rights of
the Holders, on the one hand, and the holders of Senior Indebtedness, on the
other hand.
SECTION 4.05. OBLIGATIONS OF THE COMPANY UNCONDITIONAL.
Nothing contained in this ARTICLE FOUR or elsewhere in this Indenture
or in any Security 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 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 FOUR 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 distribution of assets of the
Company referred to in this ARTICLE FOUR, the Trustee, subject to the provisions
of SECTIONS 8.01 and 8.02, and the Holders shall be entitled to rely upon any
order or decree made
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by any court of competent jurisdiction in which such dissolution, winding up,
liquidation, reorganization or similar proceedings are pending, or a
certificate of the liquidating trustee or agent or other person making any
distribution to the Trustee or to the Holders, for the purpose of ascertaining
the persons entitled to participate in such distribution, the holders of
Senior Indebtedness and other Indebtedness of the Company, the amount thereof
or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this ARTICLE FOUR.
SECTION 4.06. TRUSTEE AND PAYING AGENT ENTITLED TO ASSUME PAYMENTS NOT
PROHIBITED IN ABSENCE OF NOTICE.
The Trustee and Paying Agent shall not at any time be charged with
knowledge of the existence of any facts which would prohibit the making of any
payment to or by the Trustee or the Paying Agent or the taking of any other
action under this ARTICLE FOUR by the Trustee unless and until the Trustee or
the Paying Agent shall have received written notice thereof from the Company or
from one or more holders of Senior Indebtedness or from any Representative
therefor and, prior to the receipt of any such written notice, the Trustee and
Paying Agent, subject to the provisions of SECTIONS 8.01 and 8.02, shall be
entitled in all respects conclusively to assume that no such facts exist.
SECTION 4.07. APPLICATION BY TRUSTEE OF MONIES DEPOSITED WITH IT.
Money or securities deposited in trust with the Trustee pursuant to
and in accordance with SECTION 9.01 shall be for the sole benefit of
Securityholders and, to the extent allocated for the payment of Securities,
shall not be subject to the subordination provisions of this ARTICLE 4.
Otherwise, any deposit of monies by the Company with the Trustee or any Paying
Agent (whether or not in trust) for the payment of the principal of or interest
on any Securities shall be subject to the provisions of SECTIONS 4.01, 4.02,
4.03 and 4.04 except that, if two Business Days prior to the date on which by
the terms of this Indenture any such monies may become payable for any purpose
(including, without limitation, the
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payment of either the principal of or the interest on any Security), the
Trustee or such paying agent shall not have received with respect to such
monies the notice provided for in SECTION 4.06, then the Trustee or such
Paying Agent shall have full power and authority to receive such monies and
to apply the same to the purpose for which they were received, and shall not
be affected by any notice to the contrary which may be received by it during
or after such two Business Days. This Section shall be construed solely for
the benefit of the Trustee and Paying Agent and nothing herein shall be
construed to relieve any Holders from the duties imposed upon them under
SECTION 4.03(c) with respect to monies received in violation of the
provisions of this ARTICLE FOUR.
SECTION 4.08. Subordination Rights Not Impaired by Acts or Omissions of
Company or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Company with the terms of this
Indenture, regardless of any knowledge thereof which any such holder may have
or be otherwise charged with. The holders of Senior Indebtedness may extend,
renew, modify or amend the terms of the Senior Indebtedness or any security
therefor and release, sell or exchange such security and otherwise deal
freely with the Company, all without affecting the liabilities and
obligations of the parties to the Indenture or the Holders. No provision in
any supplemental indenture which affects the superior position of the holders
of the Senior Indebtedness shall be effective against the holders of the
Senior Indebtedness who have not consented thereto.
SECTION 4.09. SECURITYHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE SUBORDINATION
OF SECURITIES.
Each Holder by his acceptance of Securities authorizes and expressly
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in
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this ARTICLE FOUR and appoints the Trustee his attorney-in-fact for such
purpose, including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency, receivership,
reorganization or similar proceedings or upon an assignment for the benefit of
creditors or any other similar remedy or otherwise) tending towards liquidation
of the business and assets of the Company, the immediate filing of a claim for
the unpaid balance of his Securities in the form required in said proceedings
and causing 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 30 days
before the expiration of the time to file such claim or claims, then the holders
of Senior Indebtedness are hereby authorized to have the right to file and are
hereby authorized to file an appropriate claim for and on behalf of the Holders.
SECTION 4.10. RIGHT OF TRUSTEE AND PAYING AGENT TO HOLD SENIOR INDEBTEDNESS.
The Trustee and the Paying Agent, in their individual capacities,
shall be entitled to all of the rights set forth in this ARTICLE FOUR in
respect of any Senior Indebtedness at any time held by either of them
to the same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall be construed to deprive the Trustee or the
Paying Agent of any of its rights as such holder.
SECTION 4.11. ARTICLE FOUR 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 FOUR shall not be
construed as preventing the occurrence of an Event of Default under SECTION
7.01.
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SECTION 4.12. NO FIDUCIARY DUTY CREATED TO HOLDERS OF SENIOR INDEBTEDNESS.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness by virtue of the provisions of this ARTICLE FOUR.
ARTICLE FIVE
COVENANTS
SECTION 5.01. PAYMENT OF PRINCIPAL OF AND INTEREST ON THE SECURITIES.
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities at the rate of
interest determined pursuant to the formula set forth below. The Securities
shall bear interest until they are paid at a rate per annum equal to the greater
of (i) 325 basis points over the Ten Year Treasury Rate as calculated for
September 1, 1990 or (ii) 132.5% of the Ten Year Treasury Rate as calculated for
September 1, 1990 (the "Interest Rate"). As soon as practicable prior to the
Exchange Date, the Company shall notify the Trustee in writing of the Interest
Rate so calculated and provide such calculation to the Trustee. The Trustee
shall confirm the mathematical accuracy of the Company's calculation of such
rate (and, if it cannot confirm such mathematical accuracy, shall confer with
the Company and, if necessary, correct such calculation). An installment of
principal or interest shall be considered paid on the date due if the Trustee or
Paying Agent holds on that date money designated for and sufficient to pay such
installment; PROVIDED, HOWEVER, that money held by the Trustee for the benefit
of holders of Senior Indebtedness pursuant to the provisions of ARTICLE FOUR
hereof shall not be considered paid within the meaning of this SECTION 5.01.
The Company shall pay interest on overdue principal at the rate borne
by the Securities; it shall pay interest on overdue installments of interest at
the same rate, to the extent lawful.
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SECTION 5.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be surrendered for registration
of transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in SECTION 12.02.
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, 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 will 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 agency of the Trustee in
the Borough of Manhattan, the City of New York, as an agency of the Company in
accordance with SECTION 2.03.
SECTION 5.03. LIMITATION ON DIVIDENDS AND OTHER DISTRIBUTIONS.
The Company shall not declare or pay any dividend on, or make any
distribution to the holders of, any shares of its Capital Stock (except Series A
Preferred and Series B Preferred), other than dividends or distributions payable
in its Capital Stock (other than Disqualified Stock) and neither the Company nor
any subsidiary of the Company will purchase, redeem or otherwise acquire or
retire for value any shares of Capital Stock of the Company if, at the time of
such declaration, payment,
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distribution, purchase, redemption, other acquisition or retirement, a
Default shall have occurred and be continuing, or if, at the time of such
declaration, payment, distribution, purchase, redemption, other acquisition or
retirement, and after giving effect thereto and to any dividends declared or
paid on, or any distributions to the holders of, any shares of Series A
Preferred and Series B Preferred, the aggregate amount expended for all such
purposes (the amount expended for such purposes, if other than cash, to be
determined in good faith by the Board of Directors as evidenced by a Board
Resolution) subsequent to June 30, 1990 shall exceed the sum of (a) 75% of
the aggregate Consolidated Net Income earned subsequent to June 30, 1990 (or,
in case such aggregate shall be a deficit, minus such deficit), and (b) the
aggregate net proceeds, including cash and the fair market value of property
other than cash (as determined in good faith by the Board of Directors as
evidenced by a Board Resolution), received by the Company from the issue or
sale, to any person other than a Subsidiary, subsequent to the date of the
indenture, of Capital Stock of the Company (other than (i) any Disqualified
Stock or (ii) Capital Stock of the Company issued upon conversion of or in
exchange for any securities of the Company), and (c) the aggregate net
proceeds received by the Company from the issue or sale to any person other
than a Subsidiary of the Company, subsequent to the date of the Indenture, of
any debt securities evidencing Indebtedness of the Company or a Subsidiary or
of any Disqualified Stock, if, and at the time that, such debt or
Disqualified Stock, as the case may be, thereafter are converted into or
exchanged for Capital Stock of the Company (other than any Disqualified
Stock), and (d) an amount equal to 10% of the Tangible Net Worth at June 30,
1990.
For purposes of this SECTION 5.03, (i) the net proceeds from the
issuance of debt securities which are subsequently converted into or
exchanged for Capital Stock (other than Disqualified Stock) shall be deemed
to be the net book value of such debt securities at the date of conversion
(plus the additional amount required to be paid upon such conversion or
exchange, if any), and (ii) the net proceeds from the issuance of any debt
securities or Disqualified Stock which are subsequently converted into or
exchanged for Capital Stock (other than Disqualified Preferred) shall be
reduced by the amount of any cash payment on account of fractional shares.
For pur-
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poses of this paragraph, the "net book value" of a security shall be the
amount received by the Company on the issuance of such security, as adjusted
on the books of the Company to the date of conversion or exchange. The
foregoing shall not be interpreted to limit the authority of the Board of
Directors, as set forth above, to determine the value of other securities of
the Company or other property received as net proceeds; PROVIDED, HOWEVER,
that the value of the other property shall not exceed the net book value of
such property.
The provisions of this SECTION 5.03 shall not prevent (a) the
payment of any dividend within sixty days after the date of declaration
thereof, if at said date of declaration such payment complied with the
provisions of this SECTION 5.03; or (b) the retirement of any shares of the
Company's Capital Stock in exchange for, or out of the proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of,
other shares of its Capital Stock (other than any Disqualified Stock), and
neither such retirement nor the proceeds of any such sale or exchange shall
be included in any computation made under this SECTION 5.03.
SECTION 5.04. MAINTENANCE OF NET WORTH.
The Company will not permit its Tangible Net Worth at the end of
each of any two consecutive fiscal quarters to be less than sixty percent
(60%) of the Company's Tangible Net Worth as of June 30, 1990 (the "Minimum
Net Worth"). If the Company's Tangible Net Worth at the end of each of any
two consecutive fiscal quarters (the last day of the first of such fiscal
quarters being referred to herein as the "Deficiency Date") is less than the
Minimum Net Worth, the Company shall redeem, on the last day of the second
fiscal quarter next following such Deficiency Date (the "Advanced Payment
Date"), ten percent (10%) of the aggregate principal amount of the Securities
(or, if such amount shall not be outstanding on such Advanced Payment Date,
then all Securities then outstanding) at a redemption price equal to 100% of
the principal amount of such Securities, plus accrued interest to the
Advanced Payment Date. In accordance with Paragraph 6 of the Securities, the
Company may credit against its obligation to redeem Securities hereunder the
principal amount of Securities acquired by the Company through purchase,
redemption or exchange (other-
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wise than by redemption through operation of the sinking fund pursuant to
Paragraph 6 of the Securities) subsequent to the Deficiency Date and surrendered
for cancellation. In no event shall the failure to meet the Minimum Net Worth
stated above at the end of the fiscal quarter be counted toward more than one
advanced redemption of the Securities. Selection of Securities for redemption
pursuant to this Section of 5.04 will be made by the Trustee in accordance with
Section 3.02 hereof. Notice of redemption shall comply with Section 3.03 hereof
and shall be mailed not less than 30 days nor more than 60 days prior to the
Advanced Payment Date to the Holders of the Securities to be redeemed, at their
last registered address.
SECTION 5.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company will not, and will not permit any Subsidiary to, create
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary to (i) pay dividends
or make any other distributions on its Capital Stock or pay any Indebtedness
owed to the Company or any Subsidiary, (ii) make loans or advances to the
Company or any Subsidiary or (iii) transfer any of its property or assets to the
Company or any Subsidiary, except any such restrictions existing under the
Securities or existing under the California Insurance Code and any rules and
regulations thereunder.
SECTION 5.06. CORPORATE EXISTENCE.
Subject to ARTICLE SIX, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each Subsidiary
in accordance with the respective organizational documents of each Subsidiary
and the rights (charter and statutory), licenses and franchises of the Company
and its Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required
to preserve any such right, license or franchise, or the corporate existence of
any Subsidiary, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Sub-
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subsidiaries taken as a whole and that the loss thereof is not, and will not
be, adverse in any material respect to the Holders.
SECTION 5.07. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a Lien upon the property of the Company or any Subsidiary; PROVIDED,
HOWEVER, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and provided further that the Company shall not be required to cause
to be paid or discharged any such tax, assessment, charge or claim if the Board
of Directors, or the board of directors or managing partners of the Subsidiary
concerned, shall determine that such payment is not advantageous to the conduct
of the business of the Company or any Subsidiary and that the failure to pay or
discharge is not disadvantageous in any material respect to the Holder.
SECTION 5.08. NOTICE OF DEFAULTS.
In the events that any Indebtedness of the Company or any of its
Subsidiaries is declared due and payable before its maturity because of the
occurrence of any default (or any event which, with notice or the lapse of
time, or both, shall constitute such default) under such Indebtedness, the
Company will promptly give written notice to the Trustee of such declaration.
SECTION 5.09. MAINTENANCE OF PROPERTIES.
The Company will cause cause all properties owned by or leased to it
or any Subsidiary and used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in normal condition,
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repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as in the judgment of the Company may be
necessary, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
nothing in this SECTION 5.09 shall prevent the Company or any Subsidiary from
discontinuing the use, operation or maintenance of any of such properties, or
disposing of any of them, if such discontinuance or disposal is, in the
judgment of the Board of Directors or of the board of directors, board of
trustees or managing partners of the Subsidiary concerned, or of an officer
(or other agent employed by the Company or of any of its Subsidiaries)
desirable in the conduct of the business of the Company or such Subsidiary
having managerial responsibility for any such property, desirable in the
conduct of the business of the Company or any Subsidiary, and if such
discontinuance or disposal is not disadvantageous in any material respect to
the Holders.
SECTION 5.10. LIQUIDATION.
The Board of Directors or the stockholders of the Company may not
adopt a plan of liquidation which provides for, contemplates or the
effectuation of which is preceded by (i) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company
otherwise than substantially as an entirety (ARTICLE SIX of this Indenture
being the Article which governs any such sale, lease, conveyance or other
disposition substantially as an entirety) and (ii) the distribution of all or
substantially all of the proceeds of such sale, lease, conveyance or other
disposition and of the remaining assets of the Company to the holders of
Capital Stock of the Company, unless the Company, prior to making any
liquidating distribution pursuant to such plan, makes provision for the
satisfaction of the Company's obligations hereunder and under the Securities
as to the paye payment of principal and interest. The Company shall be deemed
to make provision for such payments only if (a) the Company delivers in trust
to the Trustee or Paying Agent (other than the Company) money or U.S.
Government Obligations maturing as to principal and interest in such amounts
and at such times as are suffi
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cient without consideration of any reinvestment of such interest to pay, when
due, the principal of and interest on the Securities or (b) there is an
express assumption of the due and punctual payment of the Company's
obligations hereunder and under the Securities and the performance and
observance of all convenants and conditions to be performed by the Company
hereunder, by the execution and delivery of supplemental indenture in form
satisfactory to the Trustee by a person which acquires or will acquire
(otherwise than pursuant to a lease) a portion of the assets of the Company,
and which person will have assets (immediately after the acquisition) and
aggregate earnings (for such person's four full fiscal quarters immediately
preceding the acquisition) equal to not less than the assets of the Company
(immediately preceding the acquisition), and the aggregate earnings of the
Company (for its four full fiscal quarters immediately preceding such
acquisition), respectively, and which is organized and existing under the
laws of the United States, any State thereof or the District of Columbia;
provided, however, that the Company shall not make any liquidating
distribution until after the Company shall have certified to the Trustee with
an Officers' Certificate at least five days prior to the making of any
liquidating distribution that it has complied with the provisions of this
SECTION 5.10.
SECTION 5.11 COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee within 90 days after the
end of each fiscal year of the Company an Officers' Certificate stating
whether or not the signers know of any default or Event of Default by the
Company that occurred during such fiscal year. If they do know of such a
default or Event of Default, the certificate shall describe the default and
its status. The first certificate to be delivered by the Company pursuant to
this SECTION 5.11 shall be for the fiscal year ending December 31, 1990.
SECTION 5.12 SEC REPORTS.
(a) The Company shall file with the Trustee within 15 days after it
files them with the SEC copies of the annual reports and of the information,
documents, and other reports (or copies of such portions of any of the
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foregoing as the SEC may by rules and regulations prescribe) which the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"), as amended. The
Company also shall comply with the other provisions of TIA Section 314(a).
(b) So long as the Securities remain outstanding, the Company
shall cause its annual and quarterly reports to stockholders and any
quarterly or other financial reports furnished by it to stockholders,
containing such financial statements and other information concerning the
business and affairs of the Company as would be required to be included in
annual and quarterly reports required to be filed with the SEC by an issuer
of a security registered with the SEC pursuant to Section 12 of the Exchange
Act, to be mailed to the Holders at their addresses appearing in the register
of Securities maintained by the Registrar and will cause to be disclosed in a
statement accompanying such annual report as of the date of the most recent
financial statements in each such report the amount available for payments
pursuant to SECTION 5.03 hereof.
SECTION 5.13 WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants 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 which would prohibit
or forgive the Company from paying all or any portion of the principal of
and/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.
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ARTICLE SIX
SUCCESSOR CORPORATION
SECTION 6.01 WHEN COMPANY MAY MERGE, ETC.
The Company shall not consolidate with or merge with or into any
other corporation or transfer all or substantially all of its properties and
assets as an entirety to any person, unless:
(1) either the Company shall be the continuing person, or the
person (if other than the Company) formed by such consolidation or into
which the Company is merged or to which the properties and assets of the
Company as an entirety are transferred shall be a corporation organized
and existing under the laws of the United States or any State thereof or
the District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under
the Securities and this Indenture;
(2) the person formed by such consolidation or surviving such
merger or to which the properties and assets of the Company as an
entirety are transferred shall have a Tangible Net Worth (immediately
after such transaction), at least equal to that of the Company
(immediately preceding such transaction);
(3) immediately before and immediately after giving effect to such
transaction, no Event of Default and no Default shall have occurred and
be continuing; and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture comply
with this ARTICLE SIX and that all conditions precedent herein provided
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relating to such transaction have been complied with.
Notwithstanding the foregoing, any Subsidiary may consolidate with,
merge into or transfer all or part of its properties and assets to the
Company or any other Subsidiary or Subsidiaries.
SECTION 6.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company in accordance with SECTION
6.01, the successor corporation formed by such consolidation or into 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 successor corporation
had been named as the Company herein.
ARTICLE SEVEN
DEFAULT AND REMEDIES
SECTION 7.01 EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any
Securities when the same becomes due and payable and the default
continues for a period of 30 days;
(2) the Company defaults in the payment of the principal of any
Securities when the same becomes due and payable at maturity, upon
redemption or otherwise;
(3) the Company fails to comply with its agreement contained in
Section 5.04 hereof and fails to make the required payment on the
Advanced Payment Date as provided in such Section 5.04.
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(4) the Company fails to comply with any of its other agreements
contained in the Securities or this Indenture and the default continues
for the period and after the notice specified below;
(5) there shall be a default under any bond, debenture, note or
other evidence of Indebtedness or under any mortgage, indenture or other
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness of the Company or any Subsidiary
or under any guarantee of payment by the Company or any Subsidiary of
Indebtedness, whether such Indebtedness or guarantee now exists or shall
hereafter be created, and which default relates to (i) the obligation to
pay the principal of or interest on any such Indebtedness or guarantee
or (ii) an obligation other than the obligation to pay the principal of
or interest on any such Indebtedness and the effect of such default is
to cause, or to permit the holder or holders or such Indebtedness to
cause, with the giving of notice if required, such Indebtedness to
become due prior to its stated maturity; provided, however, that no
default under this CLAUSE (5) shall exist if all such defaults do not
relate to such Indebtedness or such guarantees with an aggregate
principal amount of at least $500,000;
(6) the Company or any Subsidiary pursuant to or within the
meaning of any Bankruptcy Law (A) becomes insolvent, (B) fails generally
to pay its debts as they become due, (C) admits in writing its inability
to pay its debts generally as they become due, (D) commences a voluntary
case or proceeding, (E) consents to the entry of a judgment, decree or
order for relief against it in an involuntary case or proceeding, (F)
consents to the appointment of a Custodian of it or for all or
substantially all of its property, (G) consents to the institution of
bankruptcy or insolvency against it, (H) applies for, consents to or
acquiesces in the appointment of or taking possession by a Custodian of
the Company or any Subsidiary or for any substantial part of its
property,
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(I) makes a general assignment for the benefit of its creditors, or (J)
takes any corporate action in furtherance of any of the foregoing;
(7) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any Subsidiary in an
involuntary case or proceeding under any Bankruptcy Law which shall (A)
approve as properly filed a petition seeking reorganization,
arrangement, adjustment or composition in respect of the Company or any
Subsidiary, (B) appoint a Custodian of the Company or any Subsidiary or
for any substantial part of its property or (C) order the winding-up or
liquidation of its affairs; and such judgment, decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
any bankruptcy or insolvency petition or application is filed, or any
bankruptcy or insolvency proceeding is commenced, against the Company or
any Subsidiary and such petition, application or proceeding is not
dismissed within 60 days; or any warrant of attachment is issued against
any substantial portion of the property of the Company or any Subsidiary
which is not released within 60 days of service; or
(8) final judgments for the payment of money which in the
aggregate exceed $500,000 shall be rendered against the Company or any
Subsidiary by a court of competent jurisdiction and shall remain
undischarged for a period (during which execution shall not be
effectively stayed) of 60 days after such judgment becomes final and
nonappealable.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means
any receiver, trustee, assignee, liquidator, sequestrator or similar official
under any Bankruptcy Law.
A Default under clause (4) (other than Defaults under SECTION 5.03
or SECTION 5.10, which Defaults shall be Events of Default without the notice
or passage of time specified in this paragraph) is not an Event of Default
until the Trustee notifies the Company, or the
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Holders of at least 25% in principal amount of the outstanding Securities
notify the Company and the Trustee, of the Default and the Company does not
cure the Default within 30 days after receipt of the notice. The notice must
specify the Default, demand that it be remedied and state that the notice is
a "Notice of Default." When a Default is cured, it ceases.
Subject to the provisions of SECTION 8.01 and 8.02, the Trustee
shall not be charged with knowledge of any Event of Default unless written
notice thereof shall have been given to a Trust Officer at the corporate
trust office of the Trustee by the Company, the Paying Agent, any Holder or
an agent of any Holder. Such notice shall be given by the Trustee if so
requested by the Holders of at least 25% in principal amount of the
Securities then outstanding.
SECTION 7.02 ACCELERATION.
If an Event of Default (other than an Event of Default specified in
SECTION 7.01(6) or (7)) occurs and is continuing, the Trustee may, by notice
to the Company, or the Holders of at least 25% in principal amount of the
Securities then outstanding may, by notice to the Company and the Trustee,
and the Trustee shall, upon the request of such Holders, declare all unpaid
principal and accrued interest to the date of acceleration on the Securities
then outstanding (if not then due and payable) to be due and payable and,
upon any such declaration, the same shall become and be immediately due and
payable. If an Event of Default specified in SECTION 7.01(6) or (7) occurs,
all unpaid principal and accrued interest on the Securities then outstanding
shall IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Securityholder.
Upon payment of such principal amount and interest all of the Company's
obligations under the Securities and this Indenture, other than obligations
under SECTION 8.07, shall terminate. The Holders of a majority in principal
amount of the Securities then outstanding by notice to the Trustee may
rescind an acceleration and its consequences if (i) all existing Events of
Default, other than the non-payment of the principal of the Securities which
has become due solely by such declaration of acceleration, have been cured or
waived, (ii) to the extent the payment of such interest is lawful, interest
on over-
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due installments of interest and overdue principal, which has become due
otherwise than by such declaration of acceleration, has been paid, (iii) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction and (iv) all payments due to the Trustee and any
predecessor Trustee under SECTION 8.07 have been made.
SECTION 7.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any 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 7.04 WAIVER OF PAST DEFAULTS.
Subject to SECTIONS 7.07 and 10.02, the Holders of a majority in
principal amount of the outstanding Securities 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 or interest on any Security as specified
in CLAUSES (1) and (2) of SECTION 7.01. When a Default or Event of Default is
waived, it is cured and ceases.
SECTION 7.05 CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the outstanding
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it. However, subject to Section 8.01, the
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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; provided that the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction.
SECTION 7.06. LIMITATION ON SUITS.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in
principal amount of the outstanding Securities 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 7.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal and interest on the Security, on
or after the respective due dates expressed in the Security, or to
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bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of
the Holder.
SECTION 7.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of interest or principal
specified in SECTION 7.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against
the Company 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 7.09. 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,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Securities), its creditors or its property and
shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on 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 pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agent and counsel, and any other amounts due the Trustee under SECTION
7.07. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting
the
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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 7.10. PRIORITIES.
Subject to the provisions of ARTICLE FOUR, if the Trustee collects
any money pursuant to this ARTICLE SEVEN, it shall pay out the money in the
following order:
First: to the Trustee for amounts due under SECTION 8.07;
Second: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to
this SECTION 7.10.
SECTION 7.11. 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 7.11 does not apply to a suit by the Trustee, a
suit by a Holder pursuant to SECTION 7.07, or a suit by Holders of more than
10% in principal amount of the outstanding Securities.
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ARTICLE EIGHT
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 8.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be
implied in this Indenture which are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and
opinions, which by any provision of this Indenture are specifically
required to be furnished to the Trustee, to determine whether or not
they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of PARAGRAPH (b) of
this SECTION 8.01.
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(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to SECTION 7.05.
(d) 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.
(e) Every provision of this Indenture that in any way relates to
the Trustee is subject to PARAGRAPHS (a), (b), (c) and (d) of this
SECTION 8.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Company. Money
held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 8.02. RIGHTS OF TRUSTEE.
Subject to SECTION 8.01:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, which shall conform to
SECTION 12.05. 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.
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(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within
is rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion
of such counsel as to matters of law shall be full and complete
authorization and protection in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice
or opinion of such counsel.
SECTION 8.03. 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 or its
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 8.10 and 8.11.
SECTION 8.04 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Securities, it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities other than its certificate of
authentication.
SECTION 8.05. NOTICE OF DEFAULTS.
If a Default or an Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to each Securityholder
notice of the Default or Event of Default within 90 days after it occurs.
Except in the case of a Default or an Event of Default in payment of
principal or interest on any Security, the Trustee may withhold the notice if
and so long
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as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interest of the Securityholders.
SECTION 8.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall mail to each Securityholder a
brief report dated as of such May 15 that complies with TIA Section 313(a).
The Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock
exchange, if any, on which the Securities are listed.
The Company shall notify the Trustee if the Securities become listed
on any stock exchange.
SECTION 8.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
disbursements, out-of-pocket expenses and advances incurred or made by it.
Such expenses shall include the reasonable compensation, disbursements and
out-of-pocket expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability incurred by it without negligence or bad faith
on its part, arising out of or in connection with the administration of this
trust and its duties hereunder. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The
Company need not pay for any settlement made without its written consent.
The Company need not reimburse any expense or indemnify
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against any loss or liability incurred by the Trustee through negligence or
bad faith.
To secure the Company's payment obligations in this SECTION 8.07,
the Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an Event
of Default specified in SECTION 7.01(6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 8.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in writing. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the removed Trustee in writing and may
appoint a successor Trustee with the Company's consent. The Company may
remove the Trustee if:
(1) the Trustee fails to comply with SECTION 8.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the Securities 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
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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 8.07, 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 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with SECTION 8.10, any Securityholder
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
8.08, the Company's obligations under SECTION 8.07 shall continue for the
benefit of the retiring Trustee.
SECTION 8.09. 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 be the successor Trustee.
SECTION 8.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA
Section 310(b), including the optional provision permitted by the second
sentence of TIA Section 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities, or certificates of interest
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or participation in other securities, of the Company are outstanding, if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 8.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
ARTICLE NINE
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 9.01. SATISFACTION, DISCHARGE OF THE INDENTURE AND DEFEASANCE OF THE
SECURITIES.
The Company shall be deemed to have paid and discharged the
entire indebtedness on the Securities and the provisions of this Indenture
(subject to Section 9.03), if:
(1) The Company irrevocably deposits in trust with the Trustee,
pursuant to an irrevocable trust agreement in form and substance
reasonably satisfactory to the Trustee, money or direct noncallable
obligations of 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. Government Obligations") maturing as to
principal and interest in such amounts and at such times as are
sufficient, without consideration of the reinvestment of such interest
and after payment of all Federal, state and local taxes or other charges
or assessments in respect thereof payable by the Trustee, in the opinion
of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered in form and
substance reasonably satisfactory to the Trustee, to (i) pay principal
of (and premium, if any) and interest on the outstanding Securities and
(ii) make the mandatory sinking fund payments required by PARAGRAPH 6(a)
of the Securi-
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ties on the day on which any such payments are due and payable in
accordance with the terms of the Indenture and of the Securities;
(2) Such deposits shall not cause the Trustee to have a
conflicting interest as defined in and for purposes of the TIA;
(3) No Default or Event of Default shall have occurred or be
continuing on the date of such deposit or shall occur on or before the
91st day after the date of such deposit;
(4) Such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other instrument to
which the Company is a party or by which it or its property is bound;
(5) The Company has delivered to the Trustee an opinion of counsel
satisfactory to the Trustee to the effect that Holders of the Securities
will not recognize income, gain or loss for Federal income tax purposes
as a result of such deposit and the defeasance contemplated by this
SECTION 9.01 and will be subject to Federal income tax in the same
amounts and in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred;
(6) The Holders shall have a perfected security interest under
applicable state law in the money or U.S. Government Obligations
deposited pursuant to SECTION 9.01(1) above; and
(7) The Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the defeasance contemplated by
this SECTION 9.01 have been complied with.
In the event all or any portion of the Securities are to be
redeemed, whether pursuant to mandatory sinking fund or optional redemption
provisions, through such irrevocable trust, the Company must make
arrangements satisfactory to the Trustee, at the time of such deposit, for
the giving of the notice of such redemption
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or redemptions by the Trustee in the name and at the expense of the Company.
SECTION 9.02 TERMINATION OF THE COMPANY'S OBLIGATIONS UPON CANCELLATION OF
THE SECURITIES.
In addition to its rights under SECTION 9.01, the Company may
terminate all of its obligations under this Indenture when:
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in SECTION
2.07 and (ii) Securities for whose payment 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; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their stated maturity
within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds
in trust for that purpose an amount of money sufficient to pay and
discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for
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principal (and premium, if any) and interest to the date of such
deposit (in the case of Securities which have become due and
payable) or to the stated maturity or redemption date, as the case
may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the satisfaction and discharge of
this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under SECTION 8.07 and, if
money shall have been deposited with the Trustee pursuant to SUBCLAUSE (B) of
CLAUSE (1) of this Section, the obligations of the Trustee under SECTION 9.04
shall survive.
SECTION 9.03 SURVIVAL OF CERTAIN OBLIGATIONS.
Notwithstanding the satisfaction and discharge of this Indenture
and of the Securities referred to in SECTION 9.01, the respective obligations
of the Company and the Trustee under SECTIONS 2.03, 2.04, 2.05, 2.06, 2.07,
5.01, 5.02, 8.07, 8.08, 9.05, 9.06 and 9.07 shall survive until the Securities
are no longer outstanding. Thereafter the obligations of the Company and the
Trustee under SECTIONS 8.07, 9.05, 9.06 and 9.07 shall survive.
SECTION 9.04 ACKNOWLEDGEMENT OF DISCHARGE BY TRUSTEE.
After (i) the conditions of either SECTION 9.01 or 9.02, and, if
applicable SECTION 9.03, 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 Officer's 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 request shall acknowledge in
writing the discharge of the
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Company's obligations under this Indenture except for those surviving
obligations specified in SECTION 9.03.
SECTION 9.05. APPLICATION OF TRUST MONEY.
The Trustee shall hold any money or U.S. Government Obligations
deposited with it in the irrevocable trust established pursuant to SECTION
9.01. It shall apply the cash flow from the deposited money or U.S.
Government Obligations through the Paying Agent (other than the Company) in
accordance with this Indenture and the terms of the irrevocable trust
agreement, to the payment of principal of (and premium, if any) and interest
on the Securities. The money or U.S. Government Obligations so held in trust
shall not be part of the trust estate under this Indenture, but shall
constitute a separate trust fund for the benefit of all Holders entitled
thereto.
SECTION 9.06. REPAYMENT TO THE COMPANY.
Upon termination of the trust established pursuant to SECTION 9.01,
the Trustee and the Paying Agent shall promptly pay to the Company upon
request any excess money or U.S. Government Obligations held by them.
The Trustee and the Paying Agent shall pay to the Company upon
request, and, if applicable, in accordance with the irrevocable trust
established pursuant to SECTION 9.01, any money or U.S. Government
Obligations held by them for the payment of principal (or premium, if any) or
interest on the Securities that remains unclaimed for two years. After
payment to the Company, Holders entitled to such payment of principal or
interest must look to the Company for such payment as general creditors unless
an applicable abandoned property law designates another person.
SECTION 9.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with SECTION 9.01 or 9.02 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, the Company's obligations under this Indenture and the
Securities shall
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be revived and reinstated as though no deposit had occurred pursuant to
SECTION 9.01 or 9.02 until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Governmental Obligations in
accordance with SECTION 9.01 or 9.02; provided, however, that if the Company
has made any payment of interest on or principal 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
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. WITHOUT CONSENT OF HOLDERS.
The Company, when authorized by a resolution of its Board of
Directors, and the Trustee may amend or supplement this Indenture or the
Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with ARTICLE SIX;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(4) to make any change that does not adversely affect the rights of
any Securityholders; or
(5) to make any changes necessary to comply with any amendment to
the provisions of the TIA.
SECTION 10.02. WITH CONSENT OF HOLDERS.
Subject to SECTION 7.07, the Company, when authorized by a
resolution of its Board of Directors, and the Trustee may amend or supplement
this Indenture or the Securities without notice to any Securityholder but with
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the written consent of the Holders of at least a majority in principal amount
of the outstanding Securities. Subject to SECTION 7.07, the Holders of a
majority in principal amount of the outstanding Securities may waive
compliance by the Company with any provision of this Indenture or the
Securities without notice to any Securityholder. However, without the consent
of each Securityholder affected, an amendment, supplement or waiver,
including a waiver pursuant to SECTION 7.04, may not:
(1) reduce the amount of Securities whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the rate or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the fixed maturity of any
Security or alter the redemption provisions with respect thereto;
(4) waive a default in the payment of the principal of, interest
on, or redemption payment with respect to, any Security;
(5) modify the provisions of ARTICLE FOUR in a manner adverse to
the Holders or in a manner which will cause any Security to be senior to
any other Security in right of payment;
(6) make any changes in SECTION 7.04, 7.07 or the THIRD SENTENCE of
this SECTION 10.02; or
(7) make any Security payable in money other than that stated in
the Security.
An amendment under this SECTION 10.02 may not make any change that
adversely affects the rights under ARTICLE FOUR of any holder of an issue of
Senior Indebtedness unless the holders of the issue pursuant to its terms
consent to such change.
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
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it shall be sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders 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 supplemental indenture.
SECTION 10.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 10.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or waiver 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, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of a Security. Such revocation shall be
effective only if the Trustee receives the notice of revocation before the
date on which the Trustee receives an Officers' Certificate certifying that
the holders of the requisite principal amount of Securities have consented to
the amendment, supplement or waiver.
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 two sentences of the immediately preceding paragraph,
those persons who were Holders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent to such
amendment, supplement or waiver or 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 90 days after such
record date.
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After an amendment, supplement or waiver becomes effective, it
shall bind every such Securityholder, unless it makes a change described in
any of CLAUSES (1) through (7) of SECTION 10.02. In that case, the amendment,
supplement or waiver shall bind 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.
SECTION 10.05 NOTATION ON 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 it to
the Trustee. The Trustee may place an appropriate notation on the Security
about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determine, the Company in exchange for the security
shall issue and the Trustee shall authenticate a new Security that reflects
the changed terms.
SECTION 10.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution
of any amendment, supplement or waiver authorized pursuant to this ARTICLE
TEN is authorized or permitted by this Indenture. 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
or otherwise.
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ARTICLE ELEVEN
MEETINGS OF SECURITYHOLDERS
SECTION 11.01 PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Securityholders may be called at any time and from time
to time pursuant to the provisions of this ARTICLE ELEVEN for any of the
following purposes:
(a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to waive or to consent to the waiving of
any Default hereunder and its consequences, or to take any other action
authorized to be taken by Securityholders pursuant to any of the provisions
of ARTICLE SEVEN;
(b) to remove the Trustee or appoint a successor Trustee pursuant to
the provisions of ARTICLE EIGHT;
(c) to consent to an amendment, supplement or waiver pursuant to the
provisions of SECTION 10.02; or
(d) to take any other action (i) authorized to be taken by or on
behalf of the Holders of any specified aggregate principal amount of the
Securities under any other provision of this Indenture, or authorized or
permitted by law or (ii) which the Trustee deems necessary or appropriate
in connection with the administration of this Indenture.
SECTION 11.02. MANNER OF CALLING MEETINGS.
The Trustee may at any time call a meeting of Securityholders to take
any action specified in SECTION 11.01, to be held at such time and at such place
in the City of New York, State of New York, or as the Trustee shall determine.
Notice of every meeting of Securityholders, setting forth the time and place of
such meeting and in general terms the action proposed to be taken at such
meeting, shall be mailed by the Trustee, first-class postage prepaid, to the
Company, and to the Holders of
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the Securities at their last addresses as they shall appear on the registration
books of the Registrar, not less than ten nor more than 60 days prior to the
date fixed for the meeting.
Any meeting of Securityholders shall be valid without notice if the
Holders of all Securities then outstanding are present in person or by proxy,
or if notice is waived before or after the meeting by the Holders of all
Securities outstanding, and if the Company and the Trustee are either present
by duly authorized representatives or have, before or after the meeting,
waived notice.
SECTION 11.03. CALL OF MEETINGS BY COMPANY OR HOLDERS.
In case at any time the Company, pursuant to resolution of its
Board of Directors, or the Holders of not less than 25% in aggregate
principal amount of the Securities then outstanding shall have requested the
Trustee to call a meeting of Securityholders to take any action specified in
SECTION 11.01., by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within 20 days after receipt of such
request, then the Company or the Holders of Securities in the amount above
specified may determine the time and place in the City of New York, State of
New York, or in the City of Los Angeles, State of California, for such
meeting and may call such meeting for the purpose of taking such action, by
mailing or causing to be mailed notice thereof as provided in SECTION 11.02,
or by causing notice thereof to be published at least once in each of two
successive calendar weeks (on any day of the week) in a newspaper or
newspapers printed in the English language, customarily published at least
five days a week of a general circulation in the City of New York, State of
New York, and in the City of Los Angeles, State of California, the first such
publication to be not less then ten nor more than 60 days prior to the date
fixed for the meeting.
SECTION 11.04. WHO MAY ATTEND AND VOTE AT MEETINGS.
To be entitled to vote at any meeting of Securityholders, a person
shall (a) be a registered Holder of
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one or more Securities, or (b) be a person appointed by an instrument in
writing as proxy for the registered Holder or Holders of Securities. The only
persons who shall be entitled to be present or to speak at any meeting of
Securityholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
SECTION 11.05. REGULATIONS MAY BE MADE BY TRUSTEE; CONDUCT OF THE MEETING;
VOTING RIGHTS; ADJOURNMENT.
Notwithstanding any other provision of this Indenture, the Trustee
may take such reasonable regulations as it may deem advisable for any meeting
of Securityholders, in regard to proof of the holding of Securities and of
the appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, and submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning
the conduct of the meeting as it shall think appropriate. Such regulations
may fix a record date and time for determining the Holders of record of
Securities entitled to vote at such meeting, in which case those and only
those persons who are Holders of Securities at the record date and time so
fixed, or their proxies, shall be entitled to vote at such meeting whether or
not they shall be such Holders at the time of the meeting.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in SECTION 11.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the Holders of
a majority in principal amount of the Securities represented at the meeting
and entitled to vote.
At any meeting such Securityholder or proxy shall be entitled to one
vote for each $1,000 principal amount of Securities held or represented by him;
PROVIDED, HOWEVER, that no vote shall be cast or counted at any meeting in
respect of any Securities challenged as not
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outstanding and ruled by the chairman of the meeting to be not outstanding.
The chairman of the meeting shall have no right to vote other than by virtue
of Securities held by him or instruments in writing as aforesaid duly
designating him as the person to vote on behalf of other Securityholders. At
any meeting of Securityholders, the presence of persons holding or
representing any number of Securities shall be sufficient for a quorum. Any
meeting of Securityholders duly called pursuant to the provisions of SECTION
11.02 or SECTION 11.03 may be adjourned from time to time by vote of the
Holders of a majority in aggregate principal amount of the Securities
represented at the meeting and entitled to vote, and the meeting may be held
as so adjourned without further notice.
SECTION 11.06. VOTING AT THE MEETING AND RECORD TO BE KEPT.
The vote upon any resolution submitted to any meeting of
Securityholders shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities or of their representatives by proxy
and the principal amount of the Securities voted by the ballot. The
permanent chairman of the meeting shall appoint two inspectors of votes, who
shall count all votes cast at the meeting for or against any resolution and
who shall make and file with the secretary of the meeting their verified
written reports in duplicate of all votes cast at the meeting. A record in
duplicate of the proceedings of each meeting of Securityholders shall be
prepared by the secretary of the meeting and there shall be attached to such
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
facts, setting forth a copy of the notice of the meeting and showing that
such notice was mailed as provided in SECTION 11.02 or published as provided
in SECTION 11.03. The record shall be signed and verified by the affidavits
of the permanent chairman and the secretary of the meeting and one of the
duplicates shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
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SECTION 11.07. EXERCISE OF RIGHTS OF TRUSTEE OR SECURITYHOLDERS MAY NOT BE
HINDERED OR DELAYED BY CALL OF MEETING.
Nothing in this ARTICLE ELEVEN contained shall be deemed or
construed to authorize or permit, by reason of any call of a meeting of
Securityholders or any rights expressly or impliedly conferred hereunder to
make such call, any hindrance or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Securityholders under any
of the provisions of this Indenture or of the Securities.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by
the TIA, the provision required by the TIA shall control.
SECTION 12.02. NOTICES.
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first-class mail postage prepaid, addressed
as follows:
if to the Company:
Zenith National Insurance Corp.
15760 Ventura Boulevard
Encino, California 91436
if to the Trustee:
Attention:
------------------------------
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The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed
to him 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. Except for a notice to the Trustee, which is deemed given only
when received, if a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 12.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 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 Section 312(c).
SECTION 12.04. 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:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
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SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion has
read such covenant or condition;
(2) A brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 12.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar each may make reasonable rules
for its functions.
SECTION 12.07. LEGAL HOLIDAYS
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in New York, New York are not required to be open. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a
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Legal Holiday, and no interest shall accrue for the intervening period.
SECTION 12.08. GOVERNING LAW.
The laws of the State of New York shall govern this Indenture and the
Securities without regard to principles of conflicts of law.
SECTION 12.09. NO ADVERSE INTREPRETATION 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. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 12.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Securityholder by accepting a
Security waives and releases all such liability.
SECTION 12.11. SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture
shall bind its successor.
SECTION 12.12. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
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SECTION 12.13. SEPARABILITY.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the date first writen above.
Dated: ZENITH NATIONAL INSURANCE CORP.
By:
--------------------------------
[SEAL]
Attest:
--------------------------------
Dated: [ ]
as Trustee
By:
--------------------------------
[SEAL]
Attest:
--------------------------------
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State of California
ss:
County of Los Angeles
On this ____ day of [ ], 1990, before me personally came
___________________, to me known, who, being by me duly sworn, did depose and
say that he resides at ____________________, California, that he is
__________ of Zenith National Insurance Corp., one of the corporations
described in and which executed the above instrument; that he knows the
corporate seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
Notary Public
[Notary Seal]
State of [ ]
ss:
County of [ ]
On this ____ day of [ ], 1990, before me personally came
___________________, to me known, who, being by me duly sworn, did depose and
say that he resides at ____________________, California, that he is
__________ of [ ], one of the corporations described in and
which executed the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
Notary Public
[Notary Seal]
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EXHIBIT A
[FORM OF DEBENTURE]
ZENITH NATIONAL INSURANCE CORP..
[Designation of Securities]
No. $___________
Zenith National Insurance Corp., a Delaware corporation (the
"Company"), which term includes any successor corporation, for value received
promises to pay to_________________________________or registerd assigns, the
principal sum of _______________________________Dollars, on [ , 2000].
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
Reference is made to the further provisions of this Debenture on the
reverse side, which will for all purposes have the same effect as if set forth
at this place.
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporte seal to be affixed to, or imprinted on this Debenture.
Dated:
Zenith National Insurance Corp.
By_____________________________
President and Chief
Executive Officer
Attest:
Secretary
A-1
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Zenith National Insurance Corp.
__% Subordinated Debentures due September__, 2000
1. INTEREST.
Zenith National Insurance Corp., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above, as calculated pursuant to Section 5.01 of the
Indenture ( the "Interest Rate"). The Company will pay interest semiannually on
March 1 and September 1 of each year. Interest on the Securities will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the Exchange Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT.
The Company will pay interest on the Securities (except defaulted
interest) to the persons who are registered Holders of Securities at the close
of business on the last day of the month next preceding the Interest Payment
Date. Holders must surrender Securities to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company may pay principal and interest by its check
payable in such money. It may mail an interest check to a Holder's registered
address.
3. PAYING AGENT AND REGISTRAR.
Initially [ ] (the "Trustee") will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-registrar without notice. The Company or any of its Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. INDENTURE.
The Company issued the Securities under an Indenture, dated as of
_________________ ___, 1990 (the "Indenture"), between the Company and the
Trustee. Capitalized terms herein are used as defined in the Indenture unless
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otherwise defined herein. 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 Sections 77aaa-77bbbb) as in effect on
the date of the Indenture. The Securities are subject to all such terms, and
Holders of Securities are referred to the Indenture and said Act for a
statement of them.
5. OPTIONAL REDEMPTION.
The Securities may be redeemed at the option of the Company, as a
whole or from time to time in part, at any time on or after September 1, 1993 at
a redemption price equal to the following redemption prices (expressed as
percentages of the principal amount) if redeemed during the twelve-month period
beginning September 1 of the year indicated.
Year Percentage
---- ----------
1993..................... *
1994..................... **
1995 and thereafter...... 100%
; in each case together with accrued interest to the Redemption Date.
6. MANDATORY REDEMPTION (SINKING FUND).
The Company will redeem, as a mandatory Sinking Fund payment, a
principal amount of Securities, equal to fifteen percent (15%) of the principal
amount of Securities issued on the Exchange Date under the Indenture, on
September 1, 1996 and on each September 1 thereafter at a redemption price
equal to the principal amount thereof,
---------------------------
* The percentage shall be the sum of (i) 100 plus (ii) 40% of the product of
the Interest Rate (expressed as a percentage) multiplied by 100.
** The percentage shall be the sum of (i) 100 plus (ii) 20% of the product of
the Interest Rate (expressed as a percentage) multiplied by 100.
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together with accrued interest to the redemption date. The Company's
obligation to make Sinking Fund payments pursuant hereto shall not be
affected by any payments made by the Company pursuant to Section 5.04 of the
Indenture, except as provided in the next succeeding paragraph. Section 5.04
provides that subject to certain qualifications, if the Company fails to
maintain a Minimum Net Worth (as defined in the Indenture) for two
consecutive fiscal quarters, the schedule of Sinking Fund payments will be
advanced.
The Company may reduce the principal amount of Securities to be
redeemed for any mandatory Sinking Fund payment pursuant to this PARAGRAPH 6 by
crediting 100% of the principal amount of any Securities that the Company has
delivered to the Trustee for cancellation, other than pursuant to this
PARAGRAPH 6. Notwithstanding the foregoing, Securities redeemed pursuant to
Section 5.04 of the Indenture (or credited against the Company's obligation to
redeem Securities pursuant to Section 5.04) shall be credited against, and
reduce the Company's obligation to make, Sinking Fund payments pursuant to this
paragraph 6 in this inverse order of their maturity. The Company may so credit
the same Security only once.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Securities to be redeemed
at his registered address. Securities in denominations larger than $1,000 may be
redeemed in part. On and after the redemption date, interest ceases to accrue on
Securities or portions of them called for redemption.
8. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form without coupons in denominations
of $1,000 and multiples of $1,000. A Holder may 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 any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption. Also, it need not register the transfer
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of or exchange any Securities for a period of 15 days before a selection of
Securities to be redeemed.
9. PERSONS DEEMED OWNERS.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
10. UNCLAIMED MONEY.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agents will pay the money back to the
Company at its request. After that, all liability of the Trustee and such Paying
Agents with respect to such money shall cease.
11. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
If the Company at any time deposits with the Trustee U.S. Government
Obligations sufficient to pay the principal of and interest on the Securities to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Securities. The Company at any time may terminate its
obligation to pay an installment of principal or interest if it deposits with
the Trustee U.S. Government Obligations sufficient to pay the installment when
due and complies with the other provisions of the Indenture relating thereto.
In such case, Holders of Securities must look to the deposited U.S. Government
Obligations for payment.
12. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Securities then outstanding, and any existing default
or compliance with any provision may be waived with the consent of the Holders
of a majority in principal amount of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Securities to, among other things, cure any ambiguity,
defect or inconsistency, provide or uncertificated Securities in addition to or
in place of certificated Securi-
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ties or make any change that does not materially adversely affect the rights of
any Holder of a Security.
13. RESTRICTIVE COVENANTS.
The Securities are general obligations of the Company limited to
$143,775,000 principal amount. The Indenture imposes certain limitations on the
ability of the Company to, among other things, make payments in respect of its
Capital Stock, merge or consolidate with any other person and sell, lease,
transfer or otherwise dispose of its properties or assets. The Company must
annually report to the Trustee on compliance with such limitations.
14. SUBORDINATION.
The Securities will be subordinated in right of payment to the prior
payment in full of all Senior Indebtedness (as defined in the Indenture).
15. SUCCESSORS.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
16. DEFAULTS AND REMEDIES.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
Securities may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Securities. Subject to certain limitations,
Holders of a majority in principal amount of the Securities then outstanding may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Securities notice of any continuing default (except a
default in payment of principal or interest) if it determines that withholding
notice is in their interests.
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17. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its affiliates, and may otherwise deal with the Company or its
affiliates as if it were not Trustee.
18. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer or incorporator, as such, present or
future, of the Company or any successor corporation shall 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. 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
issue of the Securities.
19. AUTHENTICATION.
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
20. ABBREVIATIONS.
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.)
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:
Zenith National Insurance Corp., 15760 Ventura Boulevard, Encino, California
91436.
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21. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities 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.
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[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Subordinated Debentures due September__, 2000
described in the within-mentioned Indenture.
[ ]
as Trustee
By
----------------------------
Authorized Signature
----------------------------
I or we assign and transfer this Security to
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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(Print or type name, address and zip code of assignee)
Please insert social security or other
identifying number of assignee
---------------------------------------
and irrevocably appoint_______________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date: Signed:
------------------------- -------------------------------------------
--------------------------------------------------------------------------------
(Sign exactly as name appears on the other side of this Security)
