File No. 33-59279
As filed with the Securities and Exchange Commission on May __, 1997
Securities and Exchange Commission
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DynCorp
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
4581
(Primary Standard Industrial Classification Code Number)
36-2408747
(I.R.S. Employer Identification Number)
2000 Edmund Halley Drive, Reston, Virginia 20191-3436
(703) 264-0330
(Address, including zip code and telephone number,
including area code, of registrant's principal executive offices)
David L. Reichardt
Senior Vice President & General Counsel
DynCorp
2000 Edmund Halley Drive
Reston, Virginia 2
200191-3436
(703) 264-9106
(Name, address, including zip code and telephone
number,
including area code, of agent for service)
1
Copies to:
Robert B. Ott
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004-1202
(202) 942-5008
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15
15
SUBJECT TO COMPLETION, DATED MAY , 1997
Information contained herein is subject to completion or amendment. A
post-effective amendment to a registration statement relating to these
securities has been filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior to the time
the amendment to the registration statement becomes effective. This prospectus
shall not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
PROSPECTUS
DynCorp
11,969,313 Shares of DynCorp Common Stock
(Par Value $0.10 per Share)
Of the 11,969,313 shares of DynCorp (the "Company") common stock, par
value $0.10 per share (the "Common Stock"), originally offered hereby (the
"Offering"), 20,781 shares have been offered and sold by the Company, 78,798
shares have been offered and sold by officers, directors and affiliates of the
Company, and 252,285 shares have been offered and sold by other current and
former employees and other stockholders of the Company through the Internal
Market described below. This Prospectus, as amended, relates to the offer and
sale by the Company; officers, directors and affiliates of the Company; and
other current and former employees and other stockholders of the Company of
4,256,947 shares, 2,744,808 shares and 1,667,050 shares, respectively. See
"Securities Offered by this Prospectus." The Company will not receive any
portion of the net proceeds from the sale of shares by officers, directors,
affiliates or other individual employees or stockholders.
The 4,256,947 shares of Common Stock offered by the Company (of which
approximately 1,500,000 are currently treasury shares that were acquired by the
Company pursuant to the Stockholders Agreement (as defined hereinafter) and
through the Employee Stock Ownership Plan ("ESOP") between 1989 and 1995, and
the remainder of such shares are heretofore unissued shares) are expected to be
offered as follows: (i) up to 850,000 shares may be issued and delivered by the
Company to a trustee for the benefit of employees under the DynCorp Savings and
Retirement Plan; (ii) up to 100,000 shares may be issued and delivered by the
Company to employees under the DynCorp Employee Stock Purchase Plan; (iii) up to
1,193,800 shares may be issued upon the exercise of options granted and
available to be granted to employees under the DynCorp 1995 Non-Qualified Stock
Option Plan; (iv) up to 288,364 shares may be issued and delivered to employees
under the DynCorp Executive Incentive Plan; and (v) up to 1,824,783 shares may
be offered and sold by the Company to present and future employees and directors
through one or more of the employee benefit plans listed above. The actual
number of shares offered and sold by the Company under each category may be less
than the indicated number, but will not exceed the maximum for such category.
See "Securities Offered by this Prospectus" and "Employee Benefit Plans."
All of the shares offered hereby may be offered and sold on a limited
trading market (the "Internal Market") established by the Company's wholly owned
subsidiary, DynEx, Inc. The Internal Market was established and is managed by
DynEx, Inc., in order to provide employees, directors and other stockholders of
the Company the opportunity to buy and sell shares of Common Stock. The Internal
Market generally permits eligible stockholders to buy and sell shares of Common
Stock on four predetermined days each year (each a "Trade Date"). All offers and
sales on the Internal Market by officers, directors, employees, affiliates and
other stockholders of the Company may, for purposes of the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
be attributed to the Company. The Company may also sell (through one or more of
its employee benefit plans) or buy shares of Common Stock on the Internal Market
for its own account, but will do so only to address imbalances between the
number of shares offered for sale and bid for purchase by stockholders on any
particular Trade Date. The Company will not be both a buyer and a seller on the
Internal Market on the same Trade Date. The purchases and sales of shares on the
Internal Market are carried out by Buck Investment Services, Inc. ("Buck"), a
registered broker-dealer, upon instructions from the respective buyers and
sellers. All stockholders (other than the Company and its retirement plans) will
pay a commission to Buck equal to 2% of the proceeds from the sale of any shares
of Common Stock sold by them on the Internal Market, half of which will be paid
to DynEx, Inc. to defray the costs of maintaining the Internal Market. See
"Market Information -- The Internal Market."
See "Risk Factors" on pages 5
through 9 for information concerning
certain factors that should be considered
by prospective investors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION; NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May ___, 1997.
<PAGE>
There is no public market for the Common Stock, and it is not currently
anticipated that such a market will develop. To the extent that the Internal
Market does not provide sufficient liquidity for a stockholder, and the
stockholder is otherwise unable to locate a buyer for his or her shares of
Common Stock, the stockholder could effectively be subject to a total loss of
investment. See "Market Information -- The Internal Market."
All of the shares of Common Stock offered hereby will be subject to
certain restrictions (including restrictions on their transferability) set forth
in the Company's By-Laws (the "By-Laws") and may be subject to other
contingencies. Shares purchased on the Internal Market will be subject to
contractual transfer restrictions having the same effect as those contained in
the By-Laws. See "Description of Capital Stock -- Restrictions on Common Stock."
The purchase price of the shares of Common Stock offered hereby will be
determined pursuant to the formula and valuation process described below (the
"Formula Price"). The Formula Price per share of Common Stock is the product of
seven times the operating cash flow ("CF") where operating cash flow is
represented by earnings before interest, taxes, depreciation and amortization
("EBITDA") of the Company for the four fiscal quarters immediately preceding the
date on which a price revision is to occur and the market factor (the "Market
Factor" or "MF"), plus the non-operating assets at disposition value (net of
disposition costs) ("NOA"), minus the sum of interest-bearing debt adjusted to
market and other outstanding securities senior to Common Stock ("IBD") divided
by the number of shares of Common Stock outstanding at the date on which a price
revision is made, on a fully diluted basis assuming exercise of all outstanding
options and warrants ("ESO"). The Market Factor is a numerical factor which
reflects existing securities market conditions relevant to the valuation of such
stock. The Formula Price of the Common Stock, expressed as an equation (the
"Formula"), is as follows:
Formula Price = [(CF x 7)MF + NOA - IBD]
ESO
The Formula Price including the Market Factor is reviewed four times
each year, generally in conjunction with Board of Directors meetings, which are
generally scheduled for February, May, August and November. The Market Factor is
reviewed by the Board in conjunction with an appraisal that is prepared by an
independent appraisal firm for the committee administering the ESOP. The Board
of Directors believes that the valuation process results in a stock price that
reasonably reflects the value of the Company on a per share basis. See "Market
Information -- Determination of Offering Price."
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a post-effective amendment on Form S-2 to its Registration
Statement on Form S-1 under the Securities Act with respect to the Common Stock
offered hereby. As permitted by the rules and regulations of the Commission,
this Prospectus omits certain information, exhibits and undertakings contained
in the Registration Statement. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules incorporated by reference thereto.
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
Such reports and other information filed by the Company may be examined without
charge at, or copies obtained upon payment of prescribed fees from, the Public
Reference Section of the Commission at Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and are also available for inspection and
copying at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, New York 10048, and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Electronic filings filed
through the Commission's Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR") are publicly available through the Commission's home page on
the Internet at htpp://www.sec.gov.
CERTAIN INFORMATION INCORPORATED BY REFERENCE
The following documents filed with the Commission by the Company
pursuant to the Exchange Act are incorporated by reference into this Prospectus:
1. Annual Report of the Company on Form 10-K for the year ended
December 31, 1996.
This Prospectus is accompanied by a copy of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, without exhibits
("Annual Report"). The Company undertakes to provide, without charge, to any
person, including a beneficial owner, to whom a copy of this Prospectus is
delivered, upon the written or oral request of such person, a copy of any
document incorporated by reference into this Prospectus, without exhibits
(unless such exhibits are incorporated by reference into such documents).
Requests for such copies should be directed to: H. Montgomery Hougen, Vice
President and Secretary, DynCorp, 2000 Edmund Halley Drive, Reston, Virginia
20191, (703) 264-9108.
This Prospectus includes or incorporates by reference "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Such statements are identified by the use of
forward-looking words or phrases including, but not limited to, "intended,"
"will be positioned," "expects," "expected," "anticipates," and "anticipated."
These forward-looking statements are based on the Company's current
expectations. All statements other than statements of historical facts included
in this Prospectus or incorporated by reference therein, including those
regarding the Company's financial position, business strategy, projected costs
and plans and objectives of management for future operations, are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to have been correct. Because
forward-looking statements involve risks and uncertainties, the Company's actual
results could differ materially. Important factors that could cause actual
results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed under "Risk Factors," and elsewhere in this
Prospectus or incorporated by reference therein including, without limitation,
in conjunction with the forward-looking statements included in this Prospectus.
These forward-looking statements represent the Company's judgment as of the date
of this Prospectus. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on behalf of the Company are
expressly qualified in their entirety by the Cautionary Statements. The Company
disclaims, however, any intent or obligation to update its forward-looking
statements.
THE COMPANY
DynCorp is a leading provider of diversified management, technical and
professional services to a wide range of government customers. The Company's
principal markets are information management services, software development and
system integration and analysis; facilities management; and aviation maintenance
and specialized support services. With current customers including the
Department of Defense, the Department of Energy, the National Aeronautics and
Space Administration, the Department of State, the Department of Justice and
various other U.S. Government agencies, the Company is one of the foremost
providers of services to the U.S. Government. The Company has over 250 contracts
that employ approximately 14,250 employees throughout the United States and in
numerous other countries.
The Company was incorporated in Delaware in 1946. The address of the
Company's principal executive offices is 2000 Edmund Halley Drive, Reston,
Virginia 20191-3436, telephone (703) 264-0330.
RISK FACTORS
Prior to purchasing the Common Stock offered hereby, purchasers should
carefully consider all of the information contained in and incorporated by
reference to this Prospectus and in particular should carefully consider the
following factors.
Substantial Leverage and Ability to Service and Refinance Debt
The Company is highly leveraged. As of March 27, 1997, after giving pro
forma effect to the replacement of the accounts receivable securitization
facility ("New Securitization Facility") and the reduction of the revolving
credit facility (the "Revolving Credit Facility"), the Company's indebtedness
would have been approximately $157.9 million, net of discount of $0.5 million,
(including issued but undrawn letters of credit of $4.8 million and excluding
unused commitments available for borrowing of $70.2 million) and its
Stockholders' Equity was negative $8.3 million. Earnings for the years ended
December 31, 1995, 1994, 1993, 1992 and 1991 were insufficient to cover fixed
charges by approximately $4.5 million, $3.1 million, $3.7 million, $13.9 million
and $11.8 million, respectively. Subject to the restrictions in its existing
financing agreements, the Company may incur additional indebtedness from time to
time to finance acquisitions, working capital, or capital expenditures or for
other purposes.
The level of the Company's indebtedness could have important
consequences, including: (i) a substantial portion of the Company's cash flow
from operations must be dedicated to debt service and will not be available for
other purposes; (ii) the Company's ability to obtain additional debt financing
in the future for working capital, capital expenditures or acquisitions may be
limited and, if additional borrowings can be made, they may not be on terms
favorable to the Company; and (iii) the Company's level of indebtedness could
limit its flexibility in reacting to changes in the industry and economic
conditions generally.
The Company's ability to satisfy its other debt obligations will depend
upon its future operating performance, which will be affected by prevailing
economic conditions and financial, business and other factors, certain of which
are beyond its control. If the Company is unable to service its indebtedness, it
will be forced to adopt an alternative strategy that may include actions such as
reducing or delaying capital expenditures, selling assets, restructuring or
refinancing its indebtedness, or seeking additional equity capital. There can be
no assurance that any of these strategies could be effected on satisfactory
terms, if at all. If the Company is unable to repay its debt as it becomes due,
the stockholders could lose some or all of their investment.
Restrictions Imposed by Terms of the Company's Indebtedness
The terms of the Company's indebtedness restrict, among other things,
the Company's ability to incur additional indebtedness, incur liens, pay
dividends or make certain other restricted payments, consummate certain asset
sales, enter into certain transactions with affiliates, impose restrictions on
the ability of a subsidiary to pay dividends or make certain payments to the
Company, merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the assets of
the Company.
In addition, the agreements relating to the Company's senior
subordinated notes (the "Senior Subordinated Notes"), the New Securitization
Facility and the Revolving Credit Facility contain other restrictive covenants.
A breach of any of these covenants could result in a default under the Senior
Subordinated Notes, the New Securitization Facility and the Revolving Credit
Facility. Upon the occurrence of an event of default under the Senior
Subordinated Notes, the New Securitization Facility or the Revolving Credit
Facility, the lenders could elect to declare all amounts outstanding, together
with accrued interest, to be immediately due and payable. If the Company were
unable to repay those amounts, such lenders could proceed against the collateral
granted to them to secure that indebtedness, which indebtedness currently is
secured by substantially all of the assets of the Company. If the lenders under
the Senior Subordinated Notes, the New Securitization Facility or the Revolving
Credit Facility accelerate the payment of such indebtedness, there can be no
assurance that the assets of the Company would be sufficient to repay in full
such indebtedness and other indebtedness of the Company.
Under the terms of the New Securitization Facility, if the interest
coverage ratio (as defined) falls below certain prescribed levels or if
scheduled principal payments on the Company's other indebtedness exceed
prescribed levels during periods preceding the scheduled maturity of the
facilities, the Company's ability to obtain funding through the facilities will
be suspended. Further, if the collateral value of the receivables and cash held
by Dyn Funding Corporation ("DFC") falls below the amount of outstanding
borrowings under the facilities, and the Company fails to provide sufficient
receivables or cash to increase the collateral value to such amount, the
Company's ability to obtain funding through the facilities will be suspended or
terminated and collections on receivables will be used to repay all or part of
the amounts outstanding under the facilities. The suspension or termination of
the Company's ability to obtain funding through the facilities and the use of
collections to repay borrowings under the facilities would result in additional
demands on the Company's cash resources.
Past Net Losses
The Company reported net earnings of $14.6 million and $2.4 million for
the years ended December 31, 1996 and 1995, respectively, and net losses for the
years ended December 31, 1994, 1993 and 1992, of $12.8 million, $13.4 million
and $23.3 million, respectively. For the three months ended March 27, 1997 and
March 28, 1996, the Company reporting net earnings of $2.3 and $2.2,
respectively. In the future, there can be no assurance that profitable
operations will be sustained.
Dependence on and Risks Inherent in U.S. Government Contracts
The Company derived 97.1% and 94.6% of its revenues for the years ended
December 31, 1996 and 1995, respectively, and 96.0% and 96.7% of its revenues
for the three months ended March 27, 1997 and March 28, 1996, respectively, from
contracts and subcontracts with the U.S. Government ("Government Contracts").
Contracts with the DoD represented 52.0% and 53.3% of the Company's revenues for
the years ended December 31, 1996 and 1995, respectively, and 46.9% and 54.0% of
the Company's revenues for the three months ended March 27, 1997 and March 28,
1996, respectively. Continuation and renewal of the Company's existing
Government Contracts and the acquisition by the Company of additional Government
Contracts is contingent upon, among other things, the availability of adequate
funding for various U.S. Government agencies. A further significant decline in
U.S. military expenditures, particularly in the operations and maintenance
portion of the defense budget, or a reapportioning of such expenditures reducing
operations and maintenance segment, might materially and adversely affect the
Company's revenues and earnings. The loss or significant curtailment of the
Company's material U.S. military contracts would materially and adversely affect
the Company's future revenues and earnings.
Typically, a Government Contract has an initial term of one year combined with
two, three or four one-year renewal periods, exercisable at the discretion of
the Government. The Government is not obligated to exercise its option to renew
a Government Contract. At the time of completion of a Government Contract, the
contract in its entirety is "recompeted" against all eligible third-party
providers. Contracts between the Company and the U.S. Government or its prime
contractors usually contain standard provisions for termination at the
convenience of the Government or such prime contractors. There can be no
assurance that terminations will not occur, and such terminations could
adversely affect the Company's business and prospects.
The Company's Government Contract services are provided through three
types of contracts--fixed-price, time-and-materials and cost-reimbursement. The
Company assumes financial risk on fixed-price contracts and time-and-materials
contracts, because the Company assumes the risk of performing those contracts at
the stipulated prices or negotiated hourly rates. The failure to accurately
estimate ultimate costs or to control costs during performance of the work could
result in losses or smaller than anticipated profits. With regard to
cost-reimbursement contracts, to the extent that the actual costs incurred are
within the contract ceiling and allowable under the terms of the contract and
applicable regulations, the Company is entitled to reimbursement of its costs
plus a stipulated profit.
Government Contract payments received by the Company for allowable
direct and indirect costs are subject to adjustment and repayment after audit by
Government auditors if the payments exceed allowable costs as defined in such
Government Contracts. Audits have been completed on the Company's incurred
contract costs through 1986 and are continuing for subsequent periods. The
Company has included an allowance for excess billings and contract losses in its
financial statements that it believes is adequate based on its interpretation of
contracting regulations and past experience. There can be no assurance, however,
that this allowance will be adequate.
As a U.S. Government contractor, the Company is subject to federal
regulations under which its right to receive future awards of new Government
Contracts, or extensions of existing Government Contracts, may be unilaterally
suspended or barred should the Company be convicted of a crime or be indicted
based on allegations of a violation of certain specific federal statutes or
other activities. The initiation of suspension or debarment hearings against the
Company or any of its affiliated entities could have a material adverse impact
upon the Company's business and prospects.
Potential for Adverse Judgments in Legal Proceedings
The Company and its subsidiaries are involved in various claims and
lawsuits, including contract disputes and claims based on allegations of
negligence and other tortious conduct. The Company and its subsidiaries are also
potentially liable for certain environmental, personal injury, tax and other
issues related to prior operations of divested businesses. In addition, an
inactive subsidiary of the Company that was acquired in 1974 was, as of April
25, 1997, named as one of many defendants in 8,433 civil lawsuits which have
been filed and remain open in certain state courts (primarily Texas). The claims
arise out of the subsidiary's installation and distribution of industrial
insulation products that allegedly contained asbestos.
Competition
The markets which the Company services are highly competitive. In each
of its businesses, the Company's competition is quite fragmented, with no single
competitor holding a significant market position. The Company experiences
vigorous competition from industrial firms, university laboratories, nonprofit
institutions and U.S. Government agencies. Some of the Company's competitors are
large, diversified firms with substantially greater financial resources and
larger technical staffs than the Company has available to it. Government
agencies also compete with and are potential competitors of the Company because
they can utilize their internal resources to perform certain types of services
that might otherwise be performed by the Company. A majority of the Company's
revenues are derived from contracts with the U.S. Government and its prime
contractors, and such contracts are awarded on the basis of negotiations or
competitive bids where price is a significant factor.
Company May Be Obligated to Repurchase Shares of Certain ESOP Participants
In the event that an employee participating in the ESOP is terminated,
retires, dies or becomes disabled while employed by the Company, the ESOP, or
the Company under certain circumstances, is obligated to repurchase shares of
common stock distributed to such former employee under the ESOP, until such time
as the common stock becomes readily tradable stock. In addition, after ten years
of participation in the ESOP, a participant who is 55 years of age may receive a
distribution of up to 25% of shares in the aggregate from his or her account,
increasing to 50% after age 60, for diversification purposes. These shares are
also subject to the repurchase obligation. To the extent that the Company
repurchases shares as described above, its availability of cash will be
adversely affected. DynCorp has the right under both the ESOP and applicable law
to defer indefinitely the repurchase of any shares if payment to the
stockholders would impair the capital of the Company.
No Payment of Cash Dividends
The Company has not paid a cash dividend since 1986. The Company does
not have a policy for the payment of regular dividends. The payment of dividends
in the future will be subject to the discretion of the Board of Directors of the
Company. Any proposed dividend payments may be subject to restrictions imposed
by financing arrangements and by legal and regulatory restrictions.
Absence of a Public Market
There is no present public market for the Common Stock, and it is not
currently anticipated that such a market will develop in the future. There can
be no assurance that the purchasers of Common Stock in this Offering will be
able to resell their shares through the Internal Market should they decide to do
so. To the extent that the Internal Market does not provide sufficient liquidity
for a stockholder, and the stockholder is otherwise unable to locate a buyer for
his or her shares, the stockholder could effectively be subject to a total loss
of investment. Accordingly, the purchase of Common Stock is suitable only for
persons who have no need for liquidity in this investment and who can afford a
total loss of investment. See "Market Information -- The Internal Market."
Right of First Refusal
All shares of Common Stock offered hereby will be subject to the
Company's right of first refusal to purchase such shares before they may be
offered to third parties (other than on the Internal Market). Shares of Common
Stock purchased on the Internal Market will be subject to contractual transfer
restrictions having the same effect as those contained in the By-Laws. See
"Description of Capital Stock -- Restrictions on Common Stock."
Offering Price Determined by Formula Not Market Forces
The offering price is, and subsequent offering prices will be,
determined by means of the Formula set forth on the cover page of this
Prospectus. The Formula takes into consideration the Company's financial
performance, the market valuation of comparable companies and the limited
liquidity of the Common Stock, as determined by the Board of Directors based on
an independent appraisal. The Formula is subject to change by the Board of
Directors in its sole discretion. See "Market Information -- Determination of
Offering Price."
Parties to Stockholders Agreement Effectively Control Appointments to the Board
of Directors
Certain individuals in the management group of the Company, Capricorn
Investors, L.P. ("Capricorn") and other outside investors who hold shares of
Common Stock are parties to a Stockholders Agreement originally dated March 11,
1988 and restated March 11, 1994 (the "Stockholders Agreement"). Under the terms
of the Stockholders Agreement, stockholders who own approximately 34% of the
fully diluted outstanding shares of Common Stock have agreed, among other
things, to vote for the election of a Board of Directors consisting of four
management group nominees, four Capricorn nominees and a joint nominee who would
be elected if needed to break a tie vote. Effective January 23, 1997, Capricorn
waived its prior right to nominate members to the Board of Directors, but not
its obligations to vote in accordance with the Stockholders Agreement. Because
the management group stockholders, directly and through ESOP holdings, and
Capricorn represent approximately 34% of the shares of Common Stock necessary to
elect the Company's Board of Directors on a fully diluted basis, it is unlikely
that other stockholders acting in concert or otherwise will be able to change
the composition of the Board of Directors. Unless extended, the Stockholder's
Agreement expires on March 10, 1999. See "Description of Capital Stock --
Stockholders Agreement."
Anti-Takeover Effects
The combined effects of management's and Capricorn's collective
ownership of a substantial portion of the outstanding shares of Common Stock,
the voting provisions of the Stockholders Agreement and the Company's right of
first refusal may discourage, delay or prevent attempts to acquire control of
the Company that are not negotiated with the Company's Board of Directors. These
may, individually or collectively, have the effect of discouraging takeover
attempts that some stockholders might deem to be in their best interests,
including tender offers in which stockholders might receive a premium for their
shares over the Formula Price available on the Internal Market, as well as
making it more difficult for individual stockholders or a group of stockholders
to elect directors. See "Description of Capital Stock."
Dilution
Because the net tangible book value of the Company on March 27, 1997
was a negative $120,938,000 or ($18.69) per share, which is substantially less
than the offering price of $20.00, purchasers of Common Stock in the Offering
will realize immediate and substantial dilution of $38.69 per share, or $34.54
per share assuming conversion of all outstanding warrants and options, and the
issuance of all restricted stock shares. The amount of dilution may vary
depending on the Formula Price.
<PAGE>
SECURITIES OFFERED BY
THIS PROSPECTUS
Common Stock Offered by the Company
The shares of Common Stock offered by the Company may be offered
through the Internal Market or directly or contingently to present and future
employees and directors of the Company and to trustees or agents for the benefit
of employees under the Company's employee benefit plans described below.
Direct and Contingent Sales to Employees and Directors
The Company believes that its success is dependent upon the abilities
of its employees and directors. Since 1988, the Company, therefore, has pursued
a policy of offering such persons an opportunity to make an equity investment in
the Company as an inducement to such persons to become or remain employed by or
affiliated with the Company. At the discretion of the Board of Directors or the
Compensation Committee of the Board of Directors (the "Compensation Committee"),
employees and directors may be offered an opportunity to purchase a specified
number of shares of Common Stock offered hereby. All such direct and contingent
sales to employees and directors will be effected through the Internal Market or
the employee benefit plans described below, and may be attributable to the
Company. Pursuant to the By-Laws, all shares of Common Stock offered by the
Company after May 11, 1995, directly or contingently, to its employees or
directors and all shares of Common Stock purchased on the Internal Market are
subject to a right of first refusal. See "Description of Capital Stock --
Restrictions on Common Stock."
Equity Target Ownership Policy
The Company has adopted an Equity Target Ownership Policy (the "ETOP")
under which certain highly paid employees of the Company are encouraged over a
period of seven years to invest up to specified multiples of their annual
salaries in shares of the Common Stock. Under the ETOP, corporate officers,
presidents and vice presidents of strategic business units and other
participants in the Executive Incentive Plan with salaries greater than $99,999
but less than $200,000 are encouraged to invest at least 1.5 times their salary
in shares of Common Stock; those with salaries greater than $199,999 but less
than $300,000 are encouraged to invest at least two times their salary in shares
of Common Stock; and those with salaries greater than $299,999 are encouraged to
invest at least three times their salary in shares of Common Stock. Investments
under any of the employee benefit plans described below, as well as any other
holdings, including securities held prior to adoption of the ETOP, will qualify
for purposes of the ETOP. As an additional incentive to compliance with the
ETOP, individuals who directly purchase 1,000 shares of Common Stock or more on
the Internal Market on a single Trade Date are paid a special bonus by the
Company equal to 7 1/2% of the purchase price.
Savings and Retirement Plan
The Company maintains a Savings and Retirement Plan (the "SARP"), which
is intended to be qualified under Sections 401(a) and (k) of the Internal
Revenue Code of 1986, as amended (the "Code"). Generally, all employees are
eligible to participate, except for employees of divisions or other units
designated as ineligible. The SARP permits a participant to elect to defer, for
federal income tax purposes, a portion of his or her annual compensation and to
have such amount contributed directly by the Company to the deferred fund of the
SARP for his or her benefit. The Company may, but is not obligated to, make a
matching contribution to the SARP's deferred fund for the benefit of those
participants who have elected to defer a portion of their compensation for
investment in shares of Common Stock. The amount of the matching contribution
will be determined periodically by the Company's Board of Directors based on the
aggregate amounts deferred by participants. The SARP currently provides for a
Company matching contribution, in cash or Common Stock, of 100% of the first one
percent of compensation invested in a Company Common Stock fund by a participant
and 25% of the next four percent of compensation so invested. The Company may
also make additional contributions to the SARP deferred fund in order to comply
with Section 401(k) of the Code. Each participant will be vested at all times in
100% of his or her contributions to the deferred fund accounts. Company
contributions will vest 50% after two years of service and 100% after three
years of service. Benefits are payable to a participant within certain specified
time periods following such participant's retirement, permanent disability,
death or other termination of employment. Pursuant to the By-Laws, shares of
Common Stock distributed to a participant under the SARP will be subject to the
Company's right of first refusal. See "Employee Benefit Plans -- Savings and
Retirement Plan" and "Description of Capital Stock -- Restrictions on Common
Stock."
Employee Stock Purchase Plan
The Company has established the Employee Stock Purchase Plan (the
"ESPP") for the benefit of substantially all its employees. The ESPP provides
for the purchase of Common Stock through payroll deductions by participating
employees. The ESPP is intended to qualify under Section 423(b) of the Code.
Participants contribute 95% of the purchase price of the Common Stock, and the
Company contributes the balance in the form of cash or shares of Common Stock.
Such purchases will be made through the Internal Market. All shares purchased
pursuant to the ESPP will be credited to the participant's account promptly
following the Internal Market trade day on which they were purchased and,
pursuant to the By-Laws, will be subject to the Company's right of first
refusal. See "Employee Benefit Plans -- Employee Stock Purchase Plan" and
"Description of Capital Stock -- Restrictions on Common Stock."
1995 Stock Option Plan
Pursuant to the Company's 1995 Non-Qualified Stock Option Plan (the
"1995 Option Plan"), the Company may grant stock options to certain of its
employees and directors. Stock options under the 1995 Option Plan may be granted
contingent, for example, upon an employee obtaining a certain level of contract
awards for the Company within a specified period, upon the satisfaction of other
performance criteria or a requirement that such individual also purchase a
specified number of shares of Common Stock on the Internal Market at the Formula
Price. As of April 25, 1997, 6,200 stock options have been exercised and 842,000
are outstanding. Pursuant to the By-Laws, all shares of Common Stock issued upon
the exercise of such stock options will be subject to the Company's right of
first refusal. See "Employee Benefit Plans -- 1995 Stock Option Plan" and
"Description of Capital Stock -- Restrictions on Common Stock."
Executive Incentive Plan
The Company maintains an Executive Incentive Plan (the "EIP"), which
provides for the payment of annual bonuses to certain officers and
management/executive employees and provides for payment of up to 20% of the
bonuses in the form of shares of Common Stock, valued at the then current
Formula Price. Awards of shares of Common Stock will be distributed during each
fiscal year. Pursuant to the By-Laws, all shares of Common Stock awarded
pursuant to the EIP will be subject to the Company's right of first refusal. See
"Employee Benefit Plans -- Executive Incentive Plan" and "Description of Capital
Stock -- Restrictions on Common Stock."
Employee Stock Ownership Plan
The Company maintains an ESOP, which is a stock bonus plan intended to
be qualified under Section 401(a) of the Code. Generally, all employees
participate in the ESOP, except employees of groups or units designated as
ineligible. Interests of participants in the ESOP vest in accordance with the
vesting schedule and other vesting rules set forth in the ESOP plan document.
Benefits are allocated to a participant in shares of Common Stock and are
distributable within certain specified time periods following such participant's
retirement, permanent disability, death or other termination of employment. Upon
distribution, the participant is entitled to a statutory "put" right at two
separate times, whereby the ESOP or the Company is obligated to purchase the
shares at the fair market value of the Common Stock, as determined by the ESOP's
appraisers (the "ESOP Share Price"). In the event the participant declines to
exercise the put right, such shares of Common Stock may be sold by the
participant on the Internal Market subject to the restrictions and limitations
of the Internal Market. The ESOP Share Price is not determined by the Formula,
and amounts paid to participants at the time of distribution may be different
from amounts paid to sellers on the Internal Market. See "Market Information --
The Internal Market." The amount of the Company's annual contribution to the
ESOP is determined by, and within the discretion of, the Board of Directors and
may be in the form of cash, Common Stock or other qualifying securities.
Pursuant to the ESOP plan document, any shares of Common Stock distributed out
of the ESOP will be subject to a right of first refusal on behalf of the
Company. See "Employee Benefit Plans -- Employee Stock Ownership Plan --
Distributions and Withdrawals."
Common Stock Offered by Officers, Directors and Affiliates
This Prospectus originally related to the offer and sale of up to
5,810,308 shares by certain officers, directors and affiliates of the Company.
As of April 25, 1997, such persons may, from time to time, sell up to an
aggregate of 2,744,808 shares of the Common Stock being offered hereby on the
Internal Market or otherwise. 2,744,808 shares is the total aggregate holdings
of all officers, directors and affiliates remaining available for offer and sale
hereunder. While the Company originally registered all shares owned by its
officers, directors and affiliates on a fully diluted basis, including unvested
options, the Company does not know whether some, none, or all of such shares
will be so offered or sold. However, the Company believes that the ETOP will act
as a disincentive to the officers to sell their Common Stock during 1997 and
possibly in later years as well. The officers, directors, and affiliates will
not be treated more favorably than other stockholders participating on the
Internal Market and, like all other stockholders selling shares on the Internal
Market (other than the Company and its retirement plans), will pay Buck, the
Company's designated broker-dealer, a commission equal to two percent of the
proceeds from their sales. See "Market Information -- The Internal Market."
The following table sets forth information as of April 25, 1997 with
respect to the number of shares of Common Stock owned directly or indirectly by
each of the officers, directors and affiliates (including shares issuable upon
the exercise of outstanding options and warrants, shares issuable as a result of
expiration of deferrals or otherwise under the former Restricted Stock Plan and
shares allocated to such person's accounts under the Company's employee benefit
plans), and their respective percentages of ownership of equity on a fully
diluted basis, the number of shares registered on behalf of each such person,
and the number of shares remaining for offer and sale as of April 25, 1997. Each
of the persons (other than Capricorn, which is an affiliate by reason of its
ownership of more than 10% of the Company's equity) is a director and/or officer
of the Company. Except as indicated below, all the shares are owned of record or
beneficially. The table also reflects the relative ownership of such persons in
the event of their individual sales of all the registered shares owned by them
in this Offering.
<TABLE>
<CAPTION>
Percent Percent
Ownership of Number of Ownership
Number of Fully Diluted Shares After Sale
Shares Equity(1) Originally Number of of All
Beneficially Before Offering Covered Shares Covered
Name and Title of Beneficial Owner Owned (1) Hereby Remaining(2) Shares
- -------------------------------------------------------- -------------- ----------------- ------------- --------------- ------------
- ------------------------------------------------------ --------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
D. R. Bannister, Chairman of the Board 549,198 4.74% 544,493 544,493 *
& Director
T. E. Blanchard, Director 259,242 2.24% 297,864 259,242 *
R. E. Dougherty, Director 5,000 * 4,000 4,000 *
P. V. Lombardi, 155,355 1.34% 150,697 150,697 *
Executive Vice President & President, Chief Executive
Officer
D. C. Mecum II, Director 5,000 * 4,000 4,000 *
D. L. Reichardt, Senior Vice President & Director 161,780 1.40% 199,754 161,780 *
Capricorn/H. S. Winokur, Jr., Director 1,231,952 10.66% 4,117,127 1,231,952 *
R. B. Alleger, Jr., Vice President 31,157 * 8,000 8,000
G. A. Dunn, Vice President & Controller 64,028 * 112,560 64,028 *
M. C. Filteau, Vice President 74,297 * 52,858 52,858 *
H. M. Hougen, Vice President & Secretary 33,806 * 32,684 32,684 *
M. J. Hyman, Vice President 32,696 * 32,092 31,692 *
J. A. Mackin, Vice President 5,934 * 7,243 3,183 *
M. S. Mandell, Vice President 49,616 * 47,670 47,670 *
C. H. McNair, Jr., Vice President 58,680 * 56,918 56,918 *
R. Morrel, Vice President 23,571 * 25,606 22,450 *
H. H. Philcox, Vice President 44,055 * 35,113 35,113 *
R. E. Stephenson, Vice President 7,248 * 7,535 5,485 *
R. G. Wilson, Vice President & General Auditor 29,005 * 36,036 28,563 *
------ --- -- ------ ------ ---- -
Total 2,821,620 24.4 5,810,308 2,744,808 *
- -----------------------
<FN>
* Indicates less than one percent
(1) Includes shares issuable upon the exercise of outstanding warrants, shares
issuable as a result of expiration of deferrals or otherwise under the former
Restricted Stock Plan, exercise of all outstanding options whether or not
vested, and shares allocated to such person's accounts under the Company's
employee benefit plans.
(2) Reflects number of shares remaining available for offer and sale as of April
25, 1997. Certain shares originally offered hereby have been sold through the
Internal Market or otherwise.
</FN>
</TABLE>
<PAGE>
MARKET INFORMATION
The Internal Market
In 1988, following a decision by the Company's Board of Directors to
consider offers for the purchase of the Company, the Company became privately
owned through a leveraged buy-out (the "LBO") involving its management group.
Public trading of the Company's common stock ceased, and the new management
installed the ESOP as the Company's principal retirement benefit. Approximately
30,000 former and present employees are now beneficial owners of the Common
Stock through the ESOP, representing approximately 61.9% of the shares of Common
Stock outstanding on the date of this Prospectus and approximately 80.0% of the
Company's Common Stock on a fully diluted basis.
Since the LBO, the management stockholders, Capricorn and certain other
investors have relied on the Stockholders Agreement as a means of restricting
the distribution of the Company's shares of capital stock. The Stockholders
Agreement contains various provisions for the annual offering of shares of
Common Stock owned by retiring and terminated management stockholders, first to
other management stockholders, Capricorn and certain other investors and then to
the Company as purchaser of last resort.
On May 10, 1995, the Board of Directors approved the establishment of the
Internal Market as a replacement for the resale procedures set forth in the
Stockholders Agreement.
The Internal Market generally permits all stockholders to sell shares
of Common Stock on four Trade Dates, subject to purchase demand. All Warrants to
be sold must first be converted into shares of Common Stock which can then be
sold on the Internal Market, subject to purchase demand.
All sales of Common Stock on the Internal Market will be made to
employees and directors of the Company who have been approved by the
Compensation Committee as being entitled to purchase Common Stock and to the
trustees of the SARP and the ESOP and the administrator of the ESPP who may
purchase shares of Common Stock for their respective trusts and plan
(collectively "Authorized Buyers"). The Compensation Committee will normally
permit direct purchases in the Internal Market only by employees who are
purchasing such stock to meet the requirements of the ETOP. Other employees will
be encouraged to participate through the various employee benefit plans.
Limitations on the number of shares that an individual can purchase directly may
be imposed where there are more buy orders than sell orders on a particular
Trade Date.
The Internal Market was established and is managed by the Company's
wholly owned subsidiary, DynEx, Inc. The purchase and sale of shares on the
Internal Market are carried out by Buck, a registered broker-dealer, upon
instructions from the respective buyers and sellers, and individual stock
ownership account records are maintained by Buck's affiliate, Buck Consultants,
Inc. Subsequent to determination of the applicable Formula Price for use on the
next Trade Date, and at least fifteen days prior to such trade date, Buck will
advise the stockholders of record by mail as to the amount of the Formula Price
and the Trade Date, inquiring whether such stockholders wish to sell shares on
the Internal Market and advising them, if they do so, how to deliver written
sell orders and stock certificates (which must be received by Buck at least two
days prior to such Trade Date) to facilitate such sale.
The Company may, but is not obligated to, purchase shares of Common
Stock on the Internal Market on any Trade Date, but only if and to the extent
that the number of shares offered for sale by stockholders exceeds the number of
shares sought to be purchased by Authorized Buyers, and the Company, in its
discretion, determines to make such purchases.
Except as provided below, in the event that the aggregate number of
shares offered for sale on the Internal Market is greater than the aggregate
number of shares sought to be purchased by Authorized Buyers and the Company,
offers to sell 500 shares or less of Common Stock or up to the first 500 shares
if more than 500 shares of Common Stock are offered by any seller will be
accepted first, and offers to sell shares in excess of 500 shares of Common
Stock will then be accepted on a pro-rata basis determined by dividing the total
number of shares remaining under purchase orders by the total number of shares
remaining under sell orders. If, however, there are insufficient purchase orders
to support the primary allocation of 500 shares of Common Stock, then the
purchase orders will be allocated equally among all of the proposed sellers up
to the first 500 shares offered for sale by each seller. To the extent that the
aggregate number of shares sought to be purchased exceeds the aggregate number
of shares offered for sale, the Company may, but is not obligated to, sell
authorized but unissued shares of Common Stock on the Internal Market. All
sellers on the Internal Market (other than the Company and its retirement plans)
will pay Buck a commission equal to two percent of the proceeds from such sales.
No commission is paid by purchasers on the Internal Market. All offers and sales
of Common Stock made on the Internal Market may be attributed to the Company.
If the aggregate purchase orders exceed the number of shares available
for sale, the following prospective purchasers will have priority, in the order
listed:
1. the administrator of the Employee Stock Purchase Plan
2. the trustees of the Savings and Retirement Plan
3. individuals approved for purchases by the Compensation Committee
of the Board of Directors, on a pro rata basis
4. the trustees of the Employee Stock Ownership Plan
There is no public market for the Common Stock. While the Company
established the Internal Market in an effort to provide liquidity to
stockholders, there can be no assurance that there will be sufficient liquidity
to permit stockholders to resell their shares on the Internal Market or that a
regular trading market will develop or be sustained in the future. The Internal
Market will be dependent on the presence of sufficient buyers to support sell
orders that will be placed through the Internal Market. Depending on the
Company's performance, potential buyers (which would include employees and
trustees under the Company's benefit plans) may elect not to buy on the Internal
Market. Moreover, although the Company may enter the Internal Market as a buyer
of Common Stock under certain circumstances, including an excess of sell orders
over buy orders, the Company has no obligation to engage in Internal Market
transactions. Consequently, there is a risk that sell orders could be prorated
as a result of insufficient buyer demand or that the Internal Market may not be
permitted to open because of the lack of buyers. To the extent that the Internal
Market does not provide sufficient liquidity for a stockholder and the
stockholder is otherwise unable to locate a buyer for his or her shares, the
stockholder could effectively be subject to a total loss of investment.
Accordingly, the purchase of Common Stock is suitable only for persons who have
no need for liquidity in this investment and who can afford a total loss of
investment. See "Risk Factors -- Absence of a Public Market."
Determination of Offering Price
The purchase price of the shares of Common Stock offered hereby will be
determined pursuant to the Formula Price. The Formula Price per share of Common
Stock is the product of seven times the operating cash flow ("CF") where
operating cash flow is represented by earnings before interest, taxes,
depreciation and amortization ("EBITDA") of the Company for the four fiscal
quarters immediately preceding the date on which a price revision is made and
the market factor (the "Market Factor" denoted MF), plus the non-operating
assets at disposition value (net of disposition costs) ("NOA"), minus the sum of
interest bearing debt adjusted to market and other outstanding securities senior
to Common Stock ("IBD") divided by the number of shares of Common Stock
outstanding at the date on which a price revision is made, on a fully diluted
basis assuming conversion of all outstanding options and warrants ("ESO"). The
Market Factor is a numerical factor which reflects existing securities market
conditions relevant to the valuation of such stock. The Formula Price of the
Common Stock, expressed as an equation (the "Formula"), is as follows:
Formula Price = [(CF x 7)MF + NOA - IBD]
ESO
"CF" is the earnings basis which is considered to be representative of
the future performance of the Company. The abbreviation stands for operating
cash flow, and the basic measurement used by the Company for operating cash flow
is Earnings Before Interest, Depreciation and Taxes ("EBITDA."). Each element of
EBITDA is measured according to generally accepted accounting principles
("GAAP"), but, before using those objective numbers in the formula, the Board of
Directors examines the details used in those earnings to see if any adjustments
are needed in order for the earnings number to be representative of the future
performance of the Company. Following are examples of situations where the Board
of Directors may feel it appropriate to make adjustments so that the earnings
used in the Formula would be representative of expected future performance: (a)
the earnings from an acquisition made late in the year may be pro-formed for a
full year, (b) the earnings from a discontinued activity may be pro-formed out
even though the discontinued activity may not qualify as a discontinued business
under GAAP; or (c) a truly unusual expenditure or windfall profit may be
pro-formed out even though it is clearly part of GAAP earnings for the current
year.
"MF" is the market factor. In the end, it is totally subjective.
Annually, the Board of Directors looks at the public market pricing for other
government service contractors which in its opinion are most comparable to the
Company. Six to eight other companies are generally considered, but there is no
set number of comparables. The pricing multiples of Net Income and of Cash Flow
for these companies are looked at on a last twelve-month basis, on a fiscal-year
basis, and, where available from analysts' reports, on a projected basis. Since
the Formula capitalizes the Company's CF at seven times, these comparables give
the Board of Directors a sense whether the public market is currently at a
higher, lower or roughly the same level as that fixed multiple. The Board of
Directors also looks at the Company's earnings trends in setting the MF, because
the stock market generally rewards an upward trend and punishes a downward
trend. On a quarterly basis, the Board of Directors will look at the Price
Earnings Multiples of its annual comparable companies to see if there are any
significant changes which might influence the Board's determination of the MF to
be used in the formula.
"NOA" are non-operating assets at disposition value (net of disposition
costs). The Company's principal non-operating asset since 1992 has been
"Restricted Cash". This is cash in its wholly owned subsidiary, DFC, which must
remain in specified short-term marketable investments (e.g., U.S. Treasury
bills) on a temporary basis, because the Company and its other subsidiaries do
not have enough eligible accounts receivable to sell to DFC at any particular
point in time to utilize the minium $50 million of capital of DFC. If the
Company discontinues a business, and the net assets of that business were
recorded as Assets Held For Sale, those assets would also be included in NOA at
management's estimate of their disposition value, net of disposition costs. (The
earnings from those assets would also be excluded from "CF" in the Formula.) If
the Company had a passive investment outside its normal operations, the earnings
from that investment would be excluded from "CF", and the lower of cost or
estimated market value would be included in "NOA". Other similar situations
could give rise to inclusion in "NOA", but an asset must be clearly
non-operating to be included.
"IBD" is interest-bearing debt and other securities senior to common
stock. Under GAAP, interest-bearing debt is to be reported net of any
unamortized discount at issuance, but in the Formula such issuance discounts are
ignored, and it is expected that the debt will be recorded at its face value. On
the other hand, if it is the intent of management in the near term to call any
portion of its long term debt, the amount used for that portion of IBD would be
at its call price. Similarly, if the debt were publicly traded at a discount,
and it was management's intent in the near term to retire debt through open
market discounted purchases, the market price would be used for that portion of
the debt in the Formula. In applying the Formula, the Board of Directors would
also look at any convertible securities and subjectively decide whether it is
likely that such securities would be converted. If, in the opinion of the Board,
they will be converted, such securities will be included in the fully diluted
common shares and not IBD. Preferred stock, or any similar security, senior to
the common stock in liquidation, would be considered as IBD.
"ESO" is the equivalent shares outstanding of common stock at the time
of the valuation. It assumes the exercise of all outstanding options (if no
greater than the current Formula Price), warrants and the conversion of any
convertible securities of which there are none at the present time.
The Formula Price, including the Market Factor, will be reviewed four
times each year, generally in conjunction with Board of Directors meetings,
which are generally scheduled for February, May, August and November. The Market
Factor is reviewed by the Board in conjunction with an appraisal which is
prepared by an independent appraisal firm for the committee administering the
ESOP. The Board of Directors believes that the valuation process results in a
stock price which reasonably reflects the value of the Company on a per share
basis. See "Risk Factors -- Offering Price Determined by Formula Not Market
Forces."
The Formula was adopted in its present form by the Board of Directors
on August 15, 1995. The Formula is subject to change by the Board of Directors.
Availability of Information
The Company intends to disseminate the current Formula Price on at
least a quarterly basis to all employees through internal communications,
including bulletins and electronic mail messages and to other stockholders by
mailed reports, including mailed notices of upcoming Trade Dates. Participants
in any of the employee benefit plans may obtain the current Formula Price by
calling the Company's Powerline system toll-free number (1-800-956-4015), which
operates 24 hours a day, seven days a week.
The Company also intends to distribute copies of its audited annual
financial statements to all stockholders, as well as other employees, and to
potential participants in the Internal Market through employee benefit plans,
either through U.S. Mail or inter-company mail. Such information is normally
distributed at the time of distribution of employee annual reports, which is
made at approximately the same time that proxy information is distributed and
solicitations are made for voting instructions from participants in the ESOP and
SARP, in May or June of each year. The Company files unaudited quarterly
financial information with the Commission, and copies of such information are
available from the Commission. See "Available Information."
USE OF PROCEEDS
The shares of Common Stock which may be offered by the Company are
principally being offered to permit the acquisition of shares by the Company's
employee benefit plans as described herein and to permit the Company to offer
shares of Common Stock to present and future employees and directors. The
Company does not intend or expect this Offering to raise significant capital.
Any net proceeds received by the Company from the sale of the Common Stock
offered (after giving effect to the payment of expenses of the Offering) will be
added to the general funds of the Company for working capital and general
corporate purposes. Currently, the Company has no specific plans for the use of
such proceeds. It is anticipated that the majority of the sales of Common Stock
on the Internal Market will be made by stockholders rather than by the Company,
and the Company will not receive any portion of the net proceeds from the sale
of such shares (other than the 1% received by DynEx, Inc. to defray the costs of
establishing and maintaining the Internal Market).
EMPLOYEE BENEFIT PLANS
The Company maintains several employee benefit plans pursuant to which certain
of the shares of Common Stock being offered hereby may be offered or sold. The
primary purpose of these plans is to motivate the Company's employees and
directors to contribute to the growth and development of the Company by
encouraging them to achieve and surpass annual goals of the Company and of the
operations for which they are responsible. The following is a summary
description of each of these plans. All capitalized terms, unless otherwise
defined, have the meanings ascribed to them in the employee benefit plan to
which they relate.
Savings and Retirement Plan
Recent amendments to the SARP (originally adopted in 1983) added a Company match
for certain investments in Common Stock were adopted on March 28, 1995 and
became effective on July 1, 1995.
Trustee
Merrill Lynch Trust Company, 265 Stevenson Avenue, Somerset, NJ 08873, serves as
trustee of the SARP, except that the Company serves as trustee of the Company
Stock Fund.
Administration
The Company administers the SARP through an Administrative Committee consisting
of H. M. Hougen and J. A. Mackin officers of the Company, whose address is 2000
Edmund Halley Drive, Reston, VA 20191.
Eligibility and Participation
Generally, all employees (as defined in the SARP) are eligible to participate in
the SARP upon commencing employment, except for employees in groups or units
designated as ineligible. As of December 31, 1996, there were approximately
6,640 participants in the SARP.
Contributions and Allocations
The SARP permits a participant to elect to defer a portion of his or her
compensation for the Plan Year and to have such deferred amount contributed
directly by the Company to the participant's SARP account. Amounts deferred by
participants, including rollovers from qualified plans, totaled approximately
$13.5 million for the Plan Year ended December 31, 1996. Under the terms of the
SARP, deferred amounts are treated as contributions made by the Company. The
maximum amount of compensation that a participant may elect to defer is
determined by the SARP Administrative Committee, but in no event may the
deferral exceed $9,500 per year during 1997 (adjusted for cost-of-living under
rules prescribed by the Secretary of the Treasury). In addition to amounts
deferred by participants, the Company may, but is not obligated to, make a
matching contribution to the SARP accounts of those participants who have
elected to defer a portion of their compensation equal to a percentage or
percentages of the amounts which such participants have elected to defer. This
Company matching contribution is determined periodically by the Board of
Directors and is allocated to the SARP accounts of those participants who have
elected to defer a portion of their compensation. The Company intends to
contribute 100% of the first 1% of a participant's compensation deferred under
the SARP for investment in Common Stock (the "Company Stock Fund") and 25% of
the next 4% of such deferred compensation (the "Stock Match"). The Company's
Stock Match contribution to the SARP will be made in shares of Common Stock
unless the Board of Directors determines to make the contribution in cash, which
would then be used to purchase Company Stock on the Internal Market. 850,000
shares of Common Stock have been reserved for possible issuance in satisfaction
of the Company's Stock Match obligations through 2001.
Certain acquired subsidiaries of the Company previously made matching cash
contributions to separately maintained 401(k) qualified deferred savings plans
without regard to the nature of the investment of the employee's contribution.
Effective January 1, 1995, these plans were merged into the SARP, and matching
contributions are now limited to the Stock Match.
Company contributions to the SARP are made by the due date (including
extensions) for the Company's federal income tax return for the applicable year
except contributions resulting from amounts deferred by participants, which must
be made within 14 days of the first day of the calendar month following the
month in which the deferral occured. The Company's practice has been to make
matching contributions quarterly based on current participant bi-weekly
deferrals, and the Company plans to make a Stock Match in conjunction with each
applicable Trade Date. Any additional Company contribution, if required, will be
made after the end of the Plan Year.
An Eligible Employee may transfer to the trust fund maintained for the SARP a
rollover contribution from another qualified retirement plan pursuant to
applicable regulations and SARP Administrative Committee procedures. A
participant in the SARP who has made a deferral election may terminate or alter
the rate of his or her deferrals at any time under the terms of the SARP.
Investment of Funds
The SARP Administrative Committee is authorized to establish a choice of
investment alternatives including securities of the Company, in which
contributions to the SARP (including that portion of compensation which
participants elect to defer) may be invested. The investment alternatives
currently available to participants in the SARP include a Company Stock Fund,
six Merrill Lynch & Company mutual funds and three other mutual funds. Under the
terms of the SARP, a participant's entire interest in his or her SARP account
may be invested in a mixture of Company Stock Fund and/or any of the other
mutual funds, provided that, in order to obtain the Stock Match, the matched
portion of a participant's compensation deferred under the SARP must be invested
in the Company Stock Fund that is not exchangeable for other investment
alternatives until after a period of 18 months. The Company's Stock Match will
also be invested in the Company's Stock Fund, which contribution will not be
allowed to be exchanged for another investment alternative. Participants may
elect at such time, in such manner and subject to such restrictions as the SARP
Administrative Committee may specify, to have contributions allocated or
apportioned among the different investment alternatives. Separate SARP accounts
are established for each investment alternative selected by a participant, and
each such account is valued separately. Except for restrictions on investments
in the Company Stock Fund, participants may transfer amounts from one investment
alternative to one or more other investment alternatives on a daily basis.
Investments in the Company Stock Fund (other than the non-exchangeable Company
contribution described in the preceding paragraph) may be exchanged into other
investment choices (subject to the 18-month limitation mentioned above) only on
a Trade Date. It is the current policy of the SARP Administrative Committee to
keep all amounts related to the Company's Stock Fund invested in Common Stock,
except for estimated cash-equivalent reserves which are primarily used to
provide future benefit distributions, future investment exchanges and other cash
needs as determined by the SARP Administrative Committee. Residual cash
remaining after accounting for estimated cash reserves generally will be used to
purchase Common Stock. If cash reserves in the Company Stock Fund are
insufficient at any given time to provide benefit distributions and/or
investment exchanges, shares held by the Company Stock Fund may be offered for
sale on the Internal Market. Exchanges out of the Company Stock Fund may be
deferred until such time, if ever, that sufficient cash is available to make
required benefit distributions and provide for investment exchanges.
Accordingly, investment exchanges of participants' investments held in the
Company Stock Fund may be restricted. See "Risk Factors -- Absence of a Public
Market" and "Market Information -- The Internal Market." The following tables
summarize as of the dates indicated, the investment performance of each of the
nationally traded mutual funds in which SARP funds can be invested, since
December 31, 1993. The summary is based on an initial investment of $100.00 on
each investment alternative.
Merrill Lynch Corporate Bond Fund - High Income Portfolio
% Increase
Unit Value From Prior Year
12/31/93 $100.00 --
12/31/94 $97.32 (2.68%)
12/31/95 $115.21 18.38%
12/31/96 $129.55 12.45%
Merrill Lynch Capital Fund
Unit Value % Increase
12/31/93 $100.00 --
12/31/94 $100.91 0.91%
12/31/95 $134.08 32.87%
12/31/96 $151.07 12.67%
Merrill Lynch Basic Value Fund
Unit Value % Increase
12/31/93 $100.00 --
12/31/94 $101.97 1.97%
12/31/95 $135.52 32.90%
12/31/96 $159.66 17.81%
Merrill Lynch Retirement Preservation Trust
Unit Value % Increase
12/31/93 $100.00 --
12/31/94 $106.19 6.19%
12/31/95 $113.08 6.49%
12/31/96 $120.32 6.40%
Merrill Lynch Equity Index Trust
Unit Value % Increase
12/31/93 $100.00 --
12/31/94 $101.02 1.02%
12/31/95 $138.62 37.22%
12/31/96 $169.98 22.62%
Merrill Lynch Global Allocation Fund
Unit Value % Increase
12/31/93 $100.00 --
12/31/94 $98.00 (2.00%)
12/31/95 $121.24 23.71%
12/31/96 $140.87 16.19%
Fidelity Advisor Equity Growth Fund
Unit Value % Increase
12/31/93 $100.00 --
12/31/94 $97.31 (2.69%)
12/31/95 $115.20 18.38%
12/31/96 $129.54 12.45%
AIM Constellation Fund
Unit Value % Increase
12/31/93 $100.00 --
12/31/94 $101.30 1.3%
12/31/95 $137.22 35.46%
12/31/96 $159.55 16.27%
Templeton Foreign Fund
Unit Value % Increase
12/31/93 $100.00 --
12/31/94 $100.30 0.3%
12/31/95 $111.48 11.15%
12/31/96 $131.55 18.00%
Company Stock Fund
Because the Company's Common Stock has not been publicly traded since 1988,
there has not been any historical market-determined price
The average price per share figures shown below for December 31, 1993
through December 31, 1994, reflect market values established by the Board of
Directors for purposes of sales under the former Management Employees Stock
Purchase Plan and for transactions under the Stockholders Agreement. The Board's
determination was based on its review of valuations of the Common Stock made
annually by an independent appraiser for the ESOP Trust. The price per share for
December 31, 1995 and later dates is based upon the Formula Price.
From and after May 10, 1995, the Board of Directors has determined that
the price per share will equal the Formula Price described herein. There can be
no assurance that the Common Stock will in the future provide returns comparable
to historical returns, or that the Formula Price will provide returns similar to
those for past transactions that were based on prices other than the Formula
Price. Because the prices listed in the table below were developed under
differing valuation methods for differing purposes, they are not fully
comparable with the Formula Price.
% Increase
Average price (Decrease)
Date per share Unit Value(1) From Prior Period
12/31/93 $9.35 $100.00 --
12/31/94 $11.86 $126.85 26.85%
12/31/95 $14.90 $159.36 26.12%
12/31/96 $19.00 $203.21 27.64%
2/16/97 $20.00 $213.90 5.26%
(1) Based upon an initial investment
of $100.00 in DynCorp Common Stock.
Vesting
Under the SARP as currently in effect, each participant is 100% vested in
those portions of his or her SARP account which are attributable to the
participant's salary deferrals and earnings thereon. Entitlement to the Stock
Match will vest at the rate of 50% after two years of service and 100% after
three years of service, provided the underlying matched investment in the
Company Stock Fund is held the requisite 18-month period.
Loans
Loans are available from the SARP account to all participants. Loans have a
maximum limit of $50,000 reduced by the participant's highest aggregate
outstanding loan balance during the preceding 12-month period. Loans are further
limited to 50% of a participant's vested interest in his or her eligible
accounts (these loans from SARP may not exceed the vested value in the SARP less
vested amounts invested in the Company Stock Fund). Loans must (i) bear a
reasonable rate of interest, (ii) be adequately secured, (iii) state the date
upon which the loans must be repaid, which in any event may not exceed five
years from the date on which the loan is made, unless the proceeds are used for
the purchase of a principal residence, in which case repayment may not exceed 30
years, and (iv) be amortized with level payments, made not less frequently than
quarterly, over the term of the loan. The Company currently requires that loans
be repaid through payroll deductions. The loan documents provide that 50% of the
participant's vested account balances are security for the loan, and the SARP,
therefore, has a lien against such balances. A loan will result in a withdrawal
of the borrowed amounts from the participant's interest in the Funds against
which the loan is made and, to the extent that cash assets in accounts other
than the Company Stock Fund are required, a portion of the investment in the
Company Stock Fund may need to be transferred. Principal and interest payments
on the loan are allocated to the account(s) of the borrowing participant in
accordance with the current investment choices of the participant.
Distributions and Withdrawals
If a participant's employment with the Company terminates, the participant
is entitled to receive a single distribution of his or her entire interest in
his or her SARP account as soon as practicable following the date of such
termination. In the event a participant dies while employed by the Company, the
SARP Administrative Committee will direct the Trustee to make a single
distribution of the participant's entire interest in his or her SARP account to
the participant's spouse, or, if such spouse has given proper consent or if the
participant has no spouse, to the Beneficiary designated by the participant. In
the event the Company determines that the participant has suffered a permanent
disability while employed by the Company, the Company will direct the Trustee to
make a single distribution of the participant's entire interest in his or her
SARP account to the disabled participant.
Except in the case of qualifying hardship, no withdrawals may be made from
the salary deferral portion of a participant's SARP account prior to his or her
termination of employment unless and until he or she attains the age of 59 1/2.
Any withdrawals made thereafter may be made only once in each Plan Year. In the
absence of a qualified court order to the contrary, a participant's interest in
the SARP may not be voluntarily or involuntarily assigned or hypothecated. The
Company has established procedures for hardship withdrawals including (i)
definition of qualifying hardships, (ii) requirements for having first withdrawn
all voluntary after-tax contributions from any other Company retirement plans
and having received the maximum loans available under such plans, and (iii)
requirement for a 12-month suspension from making elective deferrals into SARP
following the hardship withdrawal.
All distributions, including withdrawals, from the SARP are paid in cash,
except that the portion of SARP balances represented by Common Stock shall be
distributed in kind, which shares of Common Stock will be subject to the
Company's right of first refusal in the event that the participant desires to
sell such shares other than on the Internal Market. See "Description of Capital
Stock -- Restrictions on Common Stock."
Employee Stock Ownership Plan
The ESOP was established effective January 1, 1988, as the Company's
principal retirement plan. It succeeded the DynCorp defined benefit qualified
Pension Plan which was terminated in November, 1988, following the LBO.
Following termination of the Pension Plan, approximately $10 million of excess
Pension Plan assets were rolled over into the ESOP for the benefit of ESOP
participants who were also Pension Plan participants.
Trustees and Administration
The ESOP is administered by the ESOP Committee, consisting of T. E.
Blanchard, a former employee of the Company, L. A. Emmerichs and J. C. Zall,
employees of the Company. Their address is 2000 Edmund Halley Drive, Reston, VA
20191. The members of the ESOP Committee also serve as trustees of the ESOP.
Eligibility and Participation
Generally, all employees, except groups or units designated as
ineligible, participate in the ESOP. As of December 31, 1996, there were
approximately 30,000 participants in the ESOP, including terminated, vested
participants.
Contributions, Allocations, and Forfeitures
For the Plan Year ended December 31, 1996 the Company contributed
approximately $13.7 million to the ESOP. The amount of the Company's annual
contribution to the ESOP is determined by, and within the discretion of, the
Board of Directors, subject to certain limitations. See "General Provisions of
the ESOP and SARP." The Company's annual contribution to the ESOP may be in the
form of cash, Common Stock or other qualifying securities. Participants may not
make voluntary contributions to the ESOP. The Company's current practice has
been to make pro-rata contributions quarterly.
Company contributions to the ESOP for each Plan Year are generally
allocated to the accounts of participants in the ratio which each such
participant's eligible compensation bears to the total eligible compensation of
all such participants. Forfeitures, if any, of the non-vested portion of
terminated participants' accounts are allocated to the accounts of remaining
participants who are entitled to receive an allocation of the Company
contribution. Forfeitures are allocated in the ratio which each such remaining
participant's allocation bears to the total allocation of all such remaining
participants.
Investment of Funds
Although it is generally intended that the assets
of the ESOP will be invested in Company stock, the ESOP may hold cash and
liquid investments pending purchase of Company stock and current cash needs. The
exact number of shares of Common Stock, if any, which may be purchased by the
Trustee of the ESOP in the future will depend on various factors, including any
modifications to the ESOP adopted either in response to changes or modifications
in the laws and regulations governing the ESOP or at the discretion of the
Company's management. Participants who have attained the age of 55 and have ten
or more years of participation are entitled, pursuant to the terms of the ESOP
and ESOP Committee procedures, to receive distributions of a percentage of their
balances in the ESOP. It is the current policy of the ESOP Committee to keep all
amounts invested in Common Stock, except for estimated cash reserves which are
primarily used to provide future benefit distributions, future investment
exchanges and other cash needs as determined by the ESOP Committee. If residual
cash reserves in the ESOP are insufficient to provide cash benefit distributions
and/or investment exchanges and the "put option" described below is not
applicable, the ESOP Committee may offer shares of Common Stock for sale on the
Internal Market. Exchanges out of Company stock may be deferred until such time,
if ever, that sufficient cash is available to make required benefit
distributions and provide for investment exchanges. Accordingly, investment
exchanges of participant's investments held in the ESOP may be restricted. See
"Risk Factors -- Absence of a Public Market" and "Market Information -- The
Internal Market."
Vesting
The ESOP vesting schedule currently provides that a participant's interest
vests 50% after two years of service, 75% after 3 years of service, and 100%
after 4 years of service, so that each participant's interest becomes fully
vested after the participant is credited with four years of service. A
participant's interest also becomes fully vested, notwithstanding the fact that
the participant has not yet been credited with four years of service, at the
time of such participant's attainment of the age of 65, permanent disability, or
death while employed by the Company.
Distributions and Withdrawals
In the event that an employee participating in the ESOP is terminated,
retires, dies or becomes disabled while employed by the Company, the Company is
obligated to repurchase shares of Common Stock distributed to such former
employee under the ESOP until such time as the Common Stock becomes "Readily
Tradable Stock," as defined in the ESOP plan documents. This "put option" gives
the holder of such shares the right to require the ESOP (or, if the ESOP is
unable to honor the put, the Company) to purchase all or a portion of such
shares at the ESOP Share Price during two limited time periods. The first of
these periods is the 60-day period following the date on which the shares are
distributed out of the ESOP, and the second is the 60-day period following
notification by the ESOP of the valuation of the Common Stock as soon as
practicable after the beginning of the Plan Year commencing after such
distribution. Such shares will also be subject to a right of first refusal by
the Company in the event that the participant desires to sell such shares other
than on the Internal Market. See "Description of Capital Stock -- Restrictions
on Common Stock."
The ESOP Share Price is actually two different prices. One price is
applicable to shares first acquired by the ESOP in 1988, incidental to the
leveraged buy-out, which constituted a controlling portion of the outstanding
Common Stock of the Company; these shares bear an "enterprise value" which, as
of December 31, 1996, was determined by the independent appraisal firm for the
committee administering the Company's qualified retirement plans to be $23.70
per share. The other price is applicable to shares acquired by the ESOP
subsequent to 1988, which carried no such controlling factor; these shares bear
a "minority value" which, as of December 31, 1996, was determined by such
appraisal firm to be $20.00 per share. Each participant's accounts tracks the
number of enterprise value shares and minority value shares allocated to such
account and distributable at any given time and distributions are made pro rata
from the two types of shares. If a share is put to the ESOP (or the Company)
pursuant to the put option, the applicable ESOP Share Price (depending upon
whether such shares bears an enterprise value or a minority value) is payable
therefor. The Company estimates an aggregate annual commitment to repurchase
shares from the ESOP participants as follows $4.8 million in 1997, $7.3 million
in 1998, $6.8 million in 1999, $7.8 million in 2000, $10.8 million in 2001 and
$98.9 million thereafter. To the extent that the Company repurchases shares as
described above, its ability to purchase shares on the Internal Market will be
adversely affected. See "Risk Factors -- The Company May be Obligated to
Repurchase Shares of Certain ESOP Participants."
Participants are not permitted to make withdrawals under the ESOP prior to
termination of employment. In the absence of a qualified domestic relations
order to the contrary, a participant's interest in the ESOP may not be
voluntarily or involuntarily assigned or hypothecated. Any permitted designee
will be subject to the same rules and limitations applicable to the participant.
General Provisions of the ESOP and SARP
The ESOP and SARP (collectively, the "Plans") each contain the following
provisions:
Contribution Limitations
The maximum contribution for any Plan Year which the Company may make to
all Plans for the benefit of a participant (including contributions to the SARP
as a result of salary deferral elections by participants), plus forfeitures, may
not exceed the lesser of (i) $30,000 or (ii) 25% of the participant's
compensation.
Administration
The Plans are administered, respectively, by the SARP Administrative
Committee and the ESOP Committee, whose members are appointed by and serve at
the discretion of the Company's Board of Directors. The members of the
Committees who are employees of the Company receive no compensation from the
Plans for services rendered in connection therewith.
The Committees have the power to supervise administration and control of
each Plan's operations including the power and authority to (i) allocate
fiduciary responsibilities, other than trustee responsibilities, among the Named
Fiduciaries, (ii) designate agents to carry out responsibilities relating to the
Plan, other than fiduciary responsibilities, (iii) employ legal, actuarial,
medical, accounting, programming and other assistance as the Committee may deem
appropriate in carrying out the Plan, (iv) establish rules and regulations for
the conduct of the Committee's business and the administration of the Plan, (v)
administer, interpret, construe and apply the Plan and determine questions
relating to the eligibility, the amount of any participant's service and the
amount of benefits to which any participant or beneficiary is entitled, (vi)
determine the manner in which Plan assets are disbursed and (vii) direct the
Trustee regarding investment of Plan assets, subject to the directions of
participants when provided for in the Plans.
Pass Through Voting and Tendering of Common Stock
Each participant in the Plans has the right to instruct the Trustee on a
confidential basis as to how to vote his or her proportionate interest in all
shares of Common Stock held in the various Plans. The Trustee will vote all
allocated shares held in the Plans as to which no voting instructions are
received, together with all unallocated shares held in the ESOP, in the same
proportion as the allocated shares in each Plan for which voting instructions
have been received are voted. The Committees are required to notify participants
of their pass through voting rights prior to each meeting of stockholders.
In the event of a tender or exchange offer for the Company's securities,
each participant in the Plans has the right, under current Plan procedures, to
instruct the Trustee on a confidential basis whether or not to tender or
exchange his or her proportionate interest in all shares of Common Stock held in
the various Plans. The Trustee will not tender or exchange any allocated shares
with respect to which no instructions are received from participants. Shares
held in the Plans which have not yet been allocated to the accounts of
participants will be tendered or exchanged by the Trustee, on a Plan-by-Plan
basis, in the same proportion as the allocated shares held in each Plan are
tendered or exchanged.
The Trustee's duties with respect to voting and tendering of Common Stock
are governed by the fiduciary provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). These fiduciary provisions of ERISA
may require, in certain limited circumstances, that the Trustee override the
votes, or decisions whether or not to tender, of participants with respect to
Common Stock and to determine, in the Trustee's best judgment, how to vote the
shares or whether or not to tender the shares.
Trustee
Generally, the Trustee has all the rights afforded a trustee under
applicable law, although the Trustee generally may exercise those rights at the
direction of the Committee. Subject to this limitation and those set forth in
the Plans and master trust agreement, the Trustee's rights include, but are not
limited to, the right to (i) invest and reinvest the funds held in the Plans'
trust in any investment of any kind, including qualifying employer securities
and qualifying employer real property as such investments are defined in Section
407(d) of ERISA, and contracts issued by insurance companies, including
contracts under which the insurance company holds Plan assets in a separate
account or commingles separate accounts managed by the insurance company, (ii)
retain or sell the securities and other property held in the Plans' trust, (iii)
consent or participate in any reorganization or merger in regard to any
corporation whose securities are held in the Plans' trust (subject, in the case
of the Company's securities, to the participants' pass-through voting rights and
right to instruct the Trustee in the event of a tender or exchange offer) and to
pay calls or assessments imposed on the holder thereof and to consent to any
contract, lease, mortgage or purchase or sale of any property between such
corporation and any other parties, (iv) exercise all the rights of the holder of
any security held in the Plans' trust, including the right to vote such
securities (subject, in the case of the Company's securities, to the
participants' pass-through voting rights), convert such securities into other
securities, acquire additional securities and exchange such securities (subject,
in the case of the Company's securities, to the participants' right to instruct
the Trustee in the event of a tender or exchange offer), (v) vote proxies and
exercise any other similar rights of ownership, subject to the Committee's right
to instruct the Trustee as to how (or the method of determining how) the proxies
should be voted or such rights should be exercised and (vi) lend to participants
in the Plans such amounts as the Committee directs.
The Trustee's compensation and all other expenses incurred in the
establishment, administration and operation of the Plans are borne by the
respective Plans unless the Company elects to pay such expenses.
Administrative and Custodial Services
The Company has entered into an administrative services agreement with
Buck, pursuant to which Buck performs specified administrative services for the
SARP, principally related to accounting and recordkeeping. Buck's fees for these
administrative services are borne by the SARP.
Account Statements
Each participant is furnished with a statement of his or her accounts in
the respective Plans, no less than annually.
Amendment and Termination
The Company has reserved the right to amend each of the Plans at any time
and for any reason, except that no such amendment may have the effect of (i)
generally causing any assets of the Plan trusts to be used for or diverted to
any purposes other than providing benefits to participants and their
beneficiaries and defraying expenses of the Plans, except as permitted by
applicable law, (ii) depriving any participant or beneficiary, on a retroactive
basis, of any benefit to which they would otherwise be entitled had the
participant's employment with the Company terminated immediately prior to the
amendment or (iii) increasing the liabilities or responsibilities of a Trustee
or an investment manager without its written consent.
The Company has also retained the right to terminate any of the Plans at
any time and for any reason. In addition, the Company may discontinue
contributions to the Plans; provided, however, that any such discontinuation of
contributions shall not automatically terminate the Plans as to funds and assets
then held by the Trustee.
ERISA
Each of the Plans is subject to ERISA, including reporting and disclosure
obligations, fiduciary standards and the prohibited transaction rules of Title I
thereof. Since each of the Plans is an individual account plan under ERISA,
neither of the Plans is subject to the jurisdiction of the Pension Benefit
Guaranty Corporation ("PBGC") under Title IV of ERISA, and the Plans' benefits
are not guaranteed by the PBGC.
Federal Income Tax Consequences
In the Company's view, the following discussion includes a description of
all material federal income tax considerations relating to the Plans. The
Company has not received an opinion of counsel with respect to this discussion.
Each of the Plans is qualified under Section 401(a) of the Code. Qualification
of the Plans under Section 401(a) of the Code has the following federal income
tax consequences:
(a) A participant will not be subject to federal income tax on Company
contributions to the Plans at the time such contributions are made.
(b) A participant will not be subject to federal income tax on any
income or appreciation with respect to such participant's accounts under
the Plans until distributions are made (or deemed to be made) to such
participant.
(c) A participant and the Company will not be subject to federal employment
taxes on Company contributions to the Plans, except as set forth below with
respect to certain Company contributions to the SARP.
(d) The Plans will not be subject to federal income tax on the
contributions to them by the Company and will not be subject to federal
income tax on any of their income or realized gains, assuming that the
Plans do not realize any unrelated business taxable income.
(e) Eligibility for participation in the Plans
will preclude or restrict an employee from making deductible contributions
to an Individual Retirement Account ("IRA"), depending on the employee's marital
status and adjusted gross income ("AGI") for the year. If an employee or his or
her spouse is covered by an employer-maintained retirement plan (such as any of
the Plans), an IRA deduction is available only if the participant's AGI does not
exceed a certain phase-out level. To the extent that the IRA deduction is
limited under these provisions, a non-deductible IRA contribution is permitted
(in an amount equivalent to the reduction in the deductible IRA amount).
(f) Subject to the contribution limitations contained in the Plans, the
Company will be able to deduct the amounts that it contributes under the Plans,
with the amount of such deduction generally equaling the amount of the
contributions.
(g) Distributions from the Plans will be subject to federal income tax
under special, complex rules that apply generally to distributions from
tax-qualified retirement plans. In general, a single distribution from any of
the Plans will be taxable in the year of receipt at regular ordinary income
rates (on the full amount of the distribution, exclusive of the amount of the
participant's voluntary, non-deductible contributions made to those Plans which
previously permitted such contributions) unless the distributee is eligible for
and elects (i) to make a qualifying "rollover" of the amount distributed to an
IRA or another qualified plan or (ii) to utilize 10-year averaging, 5-year
averaging or partial capital gains taxation of the distribution. However, the
tax on any portion of the qualifying lump sum distribution represented by "net
unrealized appreciation" in Common Stock distributed shall be deferred until a
subsequent sale or taxable disposition of the shares, unless the distributee
elects not to have this deferral apply.
A "lump sum distribution," for purposes of eligibility for deferral of tax
on net unrealized appreciation, is defined as a distribution of the employee's
entire vested interest under the Plan within one taxable year (i) on account of
the participant's death or other separation from service or (ii) after the
participant has attained age 59 1/2. For a lump sum distribution to be eligible
for 5-year averaging, the participant also must have been a participant in the
Plan from which the distribution is made for at least five years prior to the
year of distribution and must have attained age 59 1/2 when the distribution is
received. Under a special transition rule, an individual who had attained age 50
on January 1, 1986, and who would otherwise be entitled to elect 5-year
averaging (without regard to the age 59 1/2 requirement) may instead make a
one-time election of 10-year averaging (at 1986 rates) and may elect to have the
pre-1974 portion of the distribution taxed at 1986 capital gains rates. The
special 5-year or 10-year averaging treatment, as well as partial capital gains
treatment, of lump sum distributions is applicable to a lump sum distribution
from a Plan only if all other lump sum distributions (whether or not from the
same Plan or plans of a similar type) received during the same taxable year by
the participant are treated in the same manner. Hence, for example, if a
participant receives a lump sum distribution from the SARP and ESOP in the same
taxable year, he or she could not elect to use 5-year or 10-year averaging on
the SARP distributions while electing a rollover to an IRA of the distribution
from the ESOP. "Early" distributions from the Plans will result in an additional
10% tax on the taxable portion of the distribution, except to the extent the
distribution (i) is rolled over into an IRA or other qualified plan or (ii) is
used for deductible medical expenses. "Early" distributions are in-service
distributions (i.e., prior to termination of employment) prior to the date the
participant attains age 59 1/2 unless due to the permanent disability of the
participant, and distributions made following termination of service unless due
to the death of the participant or made to a participant who terminated
employment during or after the calendar year the participant attained the age of
55. (h) A participant (or his or her spouse in the event of the participant's
death) who (i) receives a distribution from the Plans (other than certain
mandatory distributions after age 70 1/2) and (ii) wishes to defer immediate tax
upon receipt of such distributions, may transfer (i.e., "rollover") all or a
portion thereof, exclusive of the amount of the participant's voluntary
nondeductible contributions (made to those Plans which previously permitted the
participant to make voluntary nondeductible contributions) received in the
distribution, to either an IRA or, in the case of a participant, another
qualified retirement plan. To be effective, the "rollover" must be completed
within 60 days of receipt of the distribution. Alternatively, the participant or
spouse may request a direct rollover from the Plans to an IRA or, in the case of
a participant, to another qualified retirement plan. A participant (or his or
her spouse) who does not arrange a direct rollover to an IRA or another
qualified plan will be subject to mandatory federal income tax withholding at a
rate of 20% of the taxable distribution, even if the participant or spouse later
makes a rollover within the 60-day period. However, in no event may the amount
withheld exceed the amount of a participant's distribution, excluding any Common
Stock received by the participant in the distribution. A participant (or his or
her spouse) who makes a valid "rollover" to an IRA will defer payment of federal
income tax until such time as such participant (or his or her spouse) actually
begins to receive distributions from the IRA. IRA earnings accumulate on a
tax-deferred basis until actually distributed; however, IRA funds generally may
not be withdrawn without penalty until a participant (or his or her spouse) (i)
attains the age of 59 1/2, (ii) becomes disabled or (iii) dies. The Code
requires that distributions from an IRA or a qualified retirement plan begin no
later than April 1 of the taxable year following the year in which an individual
attains the age of 70 1/2, at which time periodic distributions may continue for
the participant's lifetime or for a lifetime of the participant and the
participant's spouse. (i) The Code imposes a 15% excise tax on "excess
distributions" to an individual from all qualified retirement plans and IRAs
(whether or not plans of the same employer). In general, an "excess
distribution" is a distribution or distributions in excess of $112,500 in any
calendar year (adjusted for cost-of-living increases). This limit is increased
to $562,500 (also adjusted for cost-of-living) in the case of a lump sum
distribution as to which a qualified recipient elects 5-year or 10-year
averaging treatment. Also, an individual was entitled to elect on his or her
1988 federal income tax return to exclude benefits accrued as of August 1, 1986,
but these benefits are considered in determining whether additional accrued
benefits are subject to the tax. For those individuals who did not elect this
special rule, the $112,500/$562,500 limit is increased to $160,000/$800,000. The
excess distribution excise tax has been suspended with respect to distributions
received during the period from January 1, 1997 to December 31, 1999. In
addition to the federal income tax consequences applicable to all of the Plans,
the Deferred Fund of the SARP is intended to be a qualified "cash or deferred
arrangement" under Section 401(k) of the Code. A participant in the SARP who
elects to defer a portion of his or her compensation and have the Company
contribute it to the SARP will not be subject to federal income tax on the
amounts contributed at the time the contributions are made. However, these
contributions will be subject to social security taxes and certain federal
unemployment taxes. Elective deferrals by a participant to his or her SARP
account is limited to $7,000 annually (adjusted for cost-of-living). This annual
limit applies on an employee-by-employee basis to all 401(k) plans (including
plans of other employers) in which the employee participates. For calendar year
1997, the adjusted limit is $9,500.
Generally, the Company will be able to deduct the amounts that it
contributes to the SARP pursuant to employee elections to defer a portion of
their compensation, as well as any matching or additional Company contributions
it makes to the Deferred Fund. The deduction will be equal to the amount of
contributions made.
With respect to loans from the SARP commencing after December 31, 1986, any
interest paid by the participant will not be deductible, regardless of the
purpose of the loan or use of the loan proceeds. Moreover, interest paid on any
loan from any of the Plans by a "key employee," as defined in Section 416(i) of
the Code, will not be deductible.
Participants should consult their own tax advisors with respect to all
federal, state and local tax effects of participation in the Plans. Moreover,
the Company does not represent that the foregoing tax consequences will apply to
any particular participant's specific circumstances or will continue to apply in
the future and makes no undertaking to maintain the tax-qualified status of the
Plans.
1995 Employee Stock Purchase Plan
General
The 1995 Employee Stock Purchase Plan (the "Stock Purchase Plan" or "ESPP")
was adopted on May 10, 1995, and it became effective July 1, 1995. The Stock
Purchase Plan is intended to qualify under Section 423(b) of the Code. The Stock
Purchase Plan provides for the purchase of Common Stock by participating
employees through voluntary payroll deductions. At each Trade Date, the Stock
Purchase Plan will purchase for the account of each participant that whole
number of shares of Common Stock which may be acquired with the funds available
in the participant's stock purchase account, together with the Company's
contribution described below. The Stock Purchase Plan is not subject to ERISA.
Eligibility
Generally, all of the Company's employees are eligible to participate in
the Stock Purchase Plan. No employee, however, who owns capital stock of the
Company having more than five percent of the voting power or value of such
capital stock will be able to participate. An employee's eligibility to
participate in the Stock Purchase Plan will terminate immediately upon
termination of employment with the Company. Employees may participate in the
Stock Purchase Plan by completing a payroll deduction authorization in
accordance with Company policy. The minimum payroll deduction allowed is $7.00
per week and the maximum allowable deduction is $450 per week. Further, no
employee is entitled to purchase an amount of Common Stock having a value
(measured as of its purchase date) in excess of $25,000 in any calendar year
pursuant to the Stock Purchase Plan and any other employee stock purchase plan
that may be adopted by the Company.
Purchase of Shares/Discount
Shares of Common Stock purchased under the Stock Purchase Plan will be
acquired by the ESPP on the Internal Market. See "Market Information -- The
Internal Market." Contributions by participants under the Stock Purchase Plan
will be used by the ESPP to purchase shares at a discount established from time
to time by the Compensation Committee, but not to exceed 15% of the prevailing
Formula Price. The Company will either pay the discount portion to the ESPP in
cash, or will deliver to the ESPP a sufficient number of shares having a value
equal on the applicable Trade Date to the aggregate amount of the discount. The
Board of Directors has established the discount rate at 5%. A total of 100,000
shares has been reserved for possible issuance under the ESPP in satisfaction of
this contribution obligation.
Distribution and Withdrawals
Shares of Common Stock acquired under the Stock Purchase Plan will be
allocated to each participant's account immediately following each quarterly
Trade Date in which the acquisition occurred.
Pursuant to the By-Laws, all shares of Common Stock purchased pursuant to
the Stock Purchase Plan will be subject to the Company's right of first refusal
in the event that the participant desires to sell such shares other than on the
Internal Market. See "Description of Capital Stock -- Restrictions on Common
Stock."
Participants may withdraw the money held in their stock purchase accounts
at any time prior to the acquisition of shares of Common Stock therewith,
although upon doing so the participant will not be eligible to participate in
the Stock Purchase Plan until 12 months after such withdrawal. No interest will
be paid on the money held in the stock purchase accounts of the participants.
Amendment and Termination
The Board of Directors of the Company may suspend or amend the Stock
Purchase Plan in any respect, except that no amendment may (i) increase the
maximum number of shares authorized to be issued by the Company under the Plan,
(ii) increase the Company's contribution for each share purchased above 15% of
the applicable purchase price for such share, (iii) cause the Stock Purchase
Plan to fail to qualify under Section 423(b) of the Code or (iv) deny to
participating employees the right at any time to withdraw from the Stock
Purchase Plan and thereupon obtain all amounts then due to their credit in their
Stock Purchase Accounts. The Stock Purchase Plan will terminate on December 31,
1999, unless extended by the Board of Directors.
Administration
The Stock Purchase Plan is administered by the Compensation Committee.
Members of the Compensation Committee receive no compensation from the Stock
Purchase Plan for services rendered in connection therewith. The current members
of the Compensation Committee are H. S. Winokur, Jr., R. E. Dougherty, and D. C.
Mecum II. The address of each such person is 2000 Edmund Halley Drive, Reston,
Virginia 20191.
Federal Income Tax Consequences
In the Company's view, the following discussion includes a description of
all material federal income tax considerations relating to the Stock Purchase
Plan. The Company has not received an opinion of counsel with respect to this
discussion. For federal income tax purposes, no taxable income will be
recognized by a participant in the Stock Purchase Plan until the taxable year of
sale or other disposition of the shares of Common Stock acquired under the ESPP.
When the shares are disposed of by a participant more than two years after the
date such shares were purchased for the participant's account by the ESPP, the
participant must recognize ordinary income for the taxable year of disposition
to the extent of the lesser of (i) excess of the fair market value of the shares
on the purchase date over the amount of the purchase price paid by the
participant (the "Discount") or (ii) the amount by which the fair market value
of the shares at disposition or death exceeds the purchase price, with any gain
in excess of such ordinary income amount being treated as a long term capital
gain, assuming that the shares are a capital asset in the hands of the
participant. In the event of a participant's death while owning shares acquired
under the Stock Purchase Plan, ordinary income must be recognized in the year of
death in the amount specified in the foregoing sentence. When the shares are
disposed of prior to the expiration of the two-year holding period (a
"disqualifying disposition"), the participant must recognize ordinary income in
the amount of the Discount, even if the disposition is by gift or is at a loss.
In the case discussed above (other than death), the amount of ordinary
income recognized by a participant is added to the purchase price paid by the
participant and this amount becomes the tax basis for determining the amount of
the capital gain or loss for the disposition of the shares. The Company will not
be entitled to a deduction at any time for the shares issued in satisfaction of
the discount obligation, if a participant holding such shares continues to hold
his or her shares or disposes of his or her shares after the required two-year
holding period or dies while holding such shares. If, however, a participant
disposes of such shares prior to the expiration of the two-year holding period,
the Company is allowed a deduction to the extent of the amount of ordinary
income includable in gross income by such participant for the taxable year as a
result of the premature disposition of the shares. Participants should consult
their own tax advisors with respect to all federal, state and local tax effects
of participation in the Stock Purchase Plan. Moreover, the Company does not
represent that the foregoing tax consequences will apply to any participant's
specific circumstances or will continue to apply in the future and makes no
undertaking to maintain the tax-qualified status of the Stock Purchase Plan.
1995 Stock Option Plan
General
The 1995 Option Plan was approved by the Company's Board of Directors on
February 10, 1995, and it became effective July 1, 1995. The 1995 Option Plan
authorizes the granting of non-qualified stock options with respect to an
aggregate of 1,250,000 shares of Common Stock, during the period July 1, 1995
through December 31, 1999. As of April 25, 1997, 6,200 such options have been
exercised and 842,000 are outstanding. The Plan will terminate and all
unexercised options will expire on December 31, 2007.
The exercise price of options granted under the 1995 Option Plan is
determined by the Compensation Committee and may not be less than 100% of the
most recent Formula Price of the Common Stock on the date of grant. Upon the
exercise of an option, the exercise price is fully payable, in whole or in part,
in cash or in shares of Common Stock valued at the Formula Price on the date of
exercise. Any withholding required as a result of the exercise of a
non-qualified option may, at the discretion of the Compensation Committee, be
satisfied by withholding in shares of Common Stock of the Company valued at the
Formula Price on the date of exercise. All options granted pursuant to the 1995
Option Plan are non-transferable except by will or the laws of intestate
succession. Options granted under the 1995 Option Plan may be exercised over a
period specified in the stock option agreement (which period may not exceed
seven years), subject to vesting provisions described below. If an optionee's
employment terminates as a result of death, permanent disability, or retirement
before reaching age 65, all options may be exercised, to the extent vested at
the date of termination, during the six month period following termination, but
in no event after their respective expiration dates. If an optionee retires at
or after age 65, all options, to the extent vested at the date of retirement,
may, for up to one additional year (but in no event later than their respective
expiration dates), be exercised by the optionee or by his legal representative
or permitted assignee. Upon termination of employment for any other reason, all
options (whether or not vested) will terminate as of the date of such
termination of employment, unless otherwise authorized by the Compensation
Committee (but in no event shall the option be exercisable for a period
extending beyond 90 days following such termination).
Eligibility and Participation
The persons eligible to receive options under the 1995 Option Plan are key
employees designated by the Compensation Committee and directors. No option may
be granted to any individual who, at the time the option is granted, owns more
than 10% of the total combined voting power of all classes of capital stock of
the Company.
Vesting of Options
The right to exercise options granted under the 1995 Option Plan shall vest
at the rate of 20% per year during the five-year period following the date of
the grant. Options that are forfeited due to termination of employment or
expiration shall be available for new grants under the Plan. All options shall
expire seven years after the date of grant unless earlier exercised upon
vesting. No grant of options will be made under the 1995 Option Plan that
permits exercise after more than seven years from the date of the grant.
In the event of a change of control involving the Company, all optionees
will be guaranteed either the continuation of a comparable stock option plan
with comparable rights (including identical rights with respect to options
granted prior to such change of control), or the right within a reasonable
period of time following such change of control, not to exceed one year, to
exercise all granted options under the 1995 Option Plan, whether or not vested.
Amendment and Termination
The 1995 Option Plan may be amended, suspended or terminated by the Board
of Directors, except that no such amendment may, without the approval of the
holders of outstanding shares of the Company having a majority of the general
voting power, (i) increase the maximum number of shares for which options may be
granted (other than by reason of changes in capitalization and similar
adjustments), (ii) change the provisions of the 1995 Option Plan relating to the
establishment of the exercise price (other than the provisions relating to the
manner of determination of fair market value of the Company's capital stock to
conform to any applicable requirements of the Code or regulations issued
thereunder) or (iii) permit the granting of options to members of the
Compensation Committee. No options will be granted under the 1995 Option Plan
after December 31, 1999.
General Provisions
All shares issued upon exercise of options granted under the 1995 Option
Plan are subject to (i) the Company's right of first refusal in the event that
the optionee desires to sell his or her shares other than on the Internal Market
and (ii) the Company's right of repurchase upon termination of the optionee's
employment or affiliation. See "Description of Capital Stock -- Restrictions on
Common Stock. "
Grants of stock options may be contingent upon a requirement that such
individuals purchase a specified number of shares of Common Stock on the
Internal Market at the prevailing Formula Price. The Compensation Committee may
also establish other terms relating to vesting and exercise, such as a target
Formula Price. If the outstanding shares of the Common Stock of the Company are
changed into, or exchanged for a different number or kind of shares or
securities of the Company through reorganization, merger, recapitalization,
reclassification, or similar transaction, or if the number of outstanding shares
is changed through a stock split, stock dividend, stock consolidation, or
similar transaction, an appropriate adjustment (determined by the Board of
Directors in its sole discretion) will be made in the number and kind of shares
and the exercise price per share of options which are outstanding or which may
be granted thereafter.
Administration
The 1995 Option Plan is administered by the Compensation Committee. The
Compensation Committee is appointed annually by the Board of Directors, which
may also fill vacancies or replace members of the Compensation Committee.
Subject to the express provisions of the 1995 Option Plan, the Compensation
Committee has the authority to (i) interpret the 1995 Option Plan, (ii)
prescribe, amend and rescind rules and regulations relating to the 1995 Option
Plan, (iii) determine the individuals to whom and the time or times at which
options may be granted and the number of shares to be subject to each option
granted under the 1995 Option Plan, (iv) determine the terms and conditions of
the option agreements under the 1995 Option Plan (which need not be identical)
and (v) make all other determinations necessary or advisable for the
administration of the 1995 Option Plan. In addition, the Compensation Committee
may, with the consent of the affected optionees and subject to the general
limitations of the 1995 Option Plan, make any adjustment in the exercise price,
the number of shares subject to, or the term of, any outstanding option by
cancellation of such option and a subsequent re-granting of such option, or by
amendment or substitution of such option. Options which have been so amended,
re-granted or substituted may have higher or lower exercise prices, cover a
greater or lesser number of shares of capital stock, or have longer or shorter
terms, than the prior options. The members of the Compensation Committee receive
no compensation from the 1995 Option Plan for services rendered in connection
therewith.
Federal Income Tax Consequences
In the Company's view, the following discussion includes a description of
all material federal income tax considerations relating to the 1995 Option Plan.
The Company has not received an opinion of counsel with respect to this
discussion.
All options granted under the 1995 Option Plan are non-qualified options.
Generally, the optionee will not be taxed upon grant of any non-qualified option
but rather, at the time of exercise of such option, the optionee will recognize
ordinary income for federal income tax purposes in an amount equal to the excess
of the fair market value at the time of exercise of the capital stock purchased
over the exercise price. The Company will generally be entitled to a tax
deduction at such time and in the same amount that the optionee realizes
ordinary income.
If capital stock acquired upon the exercise of a non-qualified option is
later sold or exchanged, then the difference between the sale price and the fair
market value of such capital stock on the date which governs the determination
of ordinary income is generally taxable (provided the stock is a capital asset
in the holder's hands) as long-term or short-term capital gain or loss depending
upon whether the holding period for such capital stock at the time of
disposition is more or less than one year.
If payment of the exercise price of a non-qualified option is made by
surrendering previously owned shares of capital stock, the following rules
apply:
(a) No gain or loss will be recognized as a result of the surrender of
shares in exchange for an equal number of shares subject to the non-qualified
option;
(b) The number of shares received equal to the shares surrendered will
have a basis equal to the shares surrendered and a holding period that includes
the holding period of the shares surrendered;
(c) Any additional shares received (i) will be
taxed as ordinary income in an amount equal to the fair market value of the
shares at the time of exercise, (ii) will have a basis equal to the amount
included in taxable income by the optionee, and (iii) will have a holding period
that begins on the date of the exercise.
Holders of options granted under the Option Plan should consult their own
tax advisors for specific advice with respect to all federal, state or local tax
effects before exercising any options and before disposing of any shares of
capital stock acquired upon the exercise of an option. Moreover, the Company
does not represent that the foregoing tax consequences apply to any particular
option holder's specific circumstances or will continue to apply in the future.
Executive Incentive Plan
General
The Company's current Executive Incentive Plan (the "EIP") became effective
in 1993. The EIP provides for the annual award of discretionary bonuses based on
the achievement of specific financial and individual performance goals. The EIP
was amended effective January 1, 1996, to provide for the payment of up to 20%
of each award in the form of shares of Common Stock, based on the most recent
Formula Price. 300,000 shares were reserved for possible issuance under the EIP
for calendar years 1996 through 2000. The EIP is not subject to ERISA and is not
intended to be qualified under Section 401(a) of the Code.
Eligibility and Participation
The officers and key managerial employees of the Company designated by the
Compensation Committee are eligible to participate in and receive bonuses under
the EIP.
Awards
Each year the Company establishes bonus pools representing the aggregate
targeted bonuses negotiated in advance with EIP participants. Awards under the
EIP are generally made based upon the achievement of certain individual and
financial performance criteria. Awards under the EIP are made based on
recommendations of the CEO to the Compensation Committee. Awards of bonuses
under the EIP are generally distributed after the end of the fiscal year to
which the bonus relates. Pursuant to the By-Laws, all shares of Common Stock
awarded under the EIP will be subject to the Company's right of first refusal in
the event that the participant desires to sell such shares other than on the
Internal Market. See "Description of Capital Stock -- Restrictions on Common
Stock." Awards of bonuses, including potential shares of Common Stock may also
be subject to forfeiture, in whole or in part, in the event of the termination
of the recipient's employment or affiliation with the Company prior to the date
for payment of awards.
Pursuant to the EIP, bonuses to the Chief Executive Officer must be
approved by the Compensation Committee. Members of the Compensation Committee
are ineligible to receive awards under the EIP. For services rendered during the
fiscal year ended December 31, 1996, a total of 45 individuals received an
aggregate of 11,636 shares of Common Stock as the stock portion of bonuses under
the EIP.
Federal Income Tax Consequences
In the Company's view, the following discussion includes a description of
all material federal income tax considerations relating to the EIP. The Company
has not received an opinion of counsel with respect to this discussion.
Awards under the EIP of cash bonuses and shares of Common Stock that are
not subject to forfeiture are taxable as ordinary income to the recipient in the
year received. Recipients of awards under the EIP should consult their own tax
advisors with respect to all federal, state, and local tax effects of
participation in the EIP. Moreover, the Company does not represent that the
foregoing tax consequences will apply to any particular participant's specific
circumstances.
Amendment and Termination
The EIP may at any time be amended or terminated by the Board of Directors,
except that no amendment or termination may, without a recipient's consent,
affect any bonus award previously made to such recipient.
Administration
The EIP is administered by the Compensation Committee.
Multiemployer Pension Plans
Union employees who are not participants in the ESOP are covered by
multiemployer pension plans under which the Company pays fixed amounts,
generally per hours worked, according to the provisions of the various labor
contracts covering such employees. In 1995, 1994 and 1993, the Company expensed
$2,514,000, $2,367,000 and $2,321,000 respectively, for these plans. In the
event of the termination of, or withdrawal of the Company's participation in,
any such plans, the Company may be liable for its proportionate share of the
plan's unfunded vested benefits liability, if any.
DESCRIPTION OF CAPITAL STOCK
General
The authorized capital stock of the Company consists of 20 million
shares of Common Stock, par value $0.10 per share, of which 8,987,054 are
outstanding, and 123,711 shares of Class C Preferred, par value $0.10 per share,
of which none are outstanding. As of April 25, 1997, there were approximately
487 holders of record of Common Stock.
As of April 25, 1997, there were also outstanding 1,447,876 Warrants to
acquire an identical number of shares of Common Stock at an exercise price of
$0.25 per warrant. Warrants were issued at the rate of 6.6767 Warrants for each
share of Common Stock acquired by certain management and other stockholders on
March 11, 1988 prior to the LBO, and 942,563 Warrants were issued to an
affiliate of the lead bank financing the LBO. A total of 5,066,003 Warrants were
issued in 1988, of which 3,618,127 or 71% have been exercised or surrendered
through April 25, 1997.
The following is a summary of certain of the detailed provisions of the
Certificate of Incorporation and By-Laws of the Company regarding the Company's
capital stock. The summary is not complete and is qualified in its entirety by
reference to the Certificate of Incorporation and to the By-Laws, copies of
which are incorporated by reference to the Registration Statement of which this
Prospectus is a part.
Common Stock
The holders of Common Stock are entitled to one vote per share held of
record in elections for directors and on all other matters required or permitted
to be approved by a vote of stockholders of the Company. Each share of Common
Stock is equal in respect of rights and liquidation and rights to dividends and
to distributions. Stockholders of the Company do not and will not have any
preferred or preemptive rights to subscribe for, purchase or receive additional
shares of any class of capital stock of the Company, or any options or warrants
for such shares, or any rights to subscribe for or purchase such shares, for any
securities convertible into or exchangeable for such shares, which may be
issued, sold or offered for sale by the Company.
Restrictions on Common Stock
The Board of Directors of the Company amended the By-Laws on May 10,
1995, to provide that, as to any share of Common Stock issued on or after May
11, 1995, such share may not be sold or transferred by the holder thereof to any
third party, other than (1) by descent or distribution, (2) by bona fide gift,
or (3) by bona fide sale after the holder thereof has first offered in writing
to sell the share to the Company at the same price and under substantially the
same terms as apply to the intended sale and the Company has failed or declined
in writing to accept such terms within 14 days of receipt of such written offer
or has refused to proceed to a closing on the transaction within a reasonable
time after such acceptance; provided, however, that the sale to the third party
following such failure, declination, or refusal must be made on the same terms
which were not previously accepted by the Company and within 60 days following
such event, or the Company must again be offered such refusal rights prior to a
sale of such share; provided further, however, that this right does not apply to
(A) any transactions made at the current Formula Price through the Internal
Market; (B) any transactions made at any time while the Common Stock is listed
for trading on a national securities exchange or on the over-the-counter market;
(C) sales to the ESOP; or (D) shares which have been reissued to the holder in
exchange for shares issued prior to May 11, 1995 to the extent such previously
issued shares were not subject to any right of first refusal by the Company or
its stockholders.
Shares of Common Stock purchased on the Internal Market will be subject
to contractual transfer restrictions having the same effect as those contained
in the By-Laws. Prior to trading on the Internal Market, each buyer will be
required to adhere to the Internal Market rules which impose such transfer
restrictions on all shares purchased on the Internal Market. Shares of Common
Stock issued prior to May 11, 1995 and not subsequently purchased on the
Internal Market are not subject to such restrictions. See "Risk Factors -- Right
of First Refusal."
Stockholders Agreement
Substantially all of the members of senior management, Capricorn and
other outside investors are parties to a Stockholders Agreement. The parties to
the Stockholders Agreement, who control approximately 34% of the voting stock on
a fully diluted basis, have agreed, among other things, to certain procedures
for making nominations to and voting on the election of the Directors and
selling shares on the Internal Stock Market or otherwise selling or transferring
DynCorp securities. Effective January 23, 1997, Capricorn waived its prior right
to nominate members to the Board of Directors, but not its obligation to vote in
accordance with the terms of the Stockholders Agreement.
VALIDITY OF COMMON STOCK
The validity of the Common Stock offered hereby will be passed upon for
the Company by H. Montgomery Hougen, Vice President and Secretary and Deputy
General Counsel of the Company. As of April 25, 1997, Mr. Hougen owned directly
and indirectly 25,078 shares of Common Stock and options to purchase 5,000
shares of Common Stock. Mr. Hougen is the beneficial owner of an additional
3,728 shares through the Company's benefit plans.
EXPERTS
The consolidated financial statements and schedules of the Company as
of and for the year ended December 31, 1996, incorporated by reference in this
Prospectus and elsewhere in this Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
<PAGE>
41
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PROSPECTUS
11,969,313 Shares
DynCorp
Common Stock
par value $0.10 per share
May ___, 1997
TABLE OF CONTENTS
Page
Available Information 4
Certain Information Incorporated by Reference 4
The Company 5
Risk Factors 5
Securities Offered by this Prospectus 10
Market Information 14
Use of Proceeds 17
Employee Benefit Plan 17
Description of Capital Stock 35
Validity of Common Stock 36
Experts 37
------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Not applicable.
Item 15. Indemnification of Directors and Officers.
Section 102 of the General Corporation Law of the State of Delaware
("GCL") allows a corporation to eliminate the personal liability of a director
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except in cases where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or a knowing violation of law, authorized the unlawful payment of a dividend or
approved an unlawful stock redemption or repurchase or obtained an improper
personal benefit. The Registrant's Amended and Restated Certificate of
Incorporation, a copy of which is filed as an exhibit to this Registration
Statement, contains a provision which eliminates directors' personal liability
as set forth above.
The Amended and Restated Certificate of Incorporation of the Registrant
and the Bylaws of the Registrant provide in effect that the Registrant shall
indemnify its directors, officers and employees to the extent permitted by
Section 145 of the GCL. Section 145 of the GCL provides that a Delaware
corporation has the power to indemnify its officers and directors in certain
circumstances.
Subsection (a) of Section 145 of the GCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal administrative or
investigative (other than an action by or in the right of the corporation),
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding provided that such director or officer acted in good faith in
a manner reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding,
provided that such director or officer had no cause to believe his or her
conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
director or officer, or former director or officer, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person acted in any of the capacities set forth
above, against expenses actually and reasonably incurred in connection with the
defense or settlement of such action or suit provided that such director or
officer acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made in respect of any claim, issue or matter as to which such director
or officer shall have been adjudged to be liable for negligence or misconduct in
the performance of his or her duty to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action was brought
shall determine that despite the adjudication of liability such director or
officer is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.
Section 145 further provides that to the extent a director or officer
of a corporation has been successful in the defense of any action, suit or
proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith; that indemnification provided for by Section 145 shall not
be deemed exclusive of any other rights to which the indemnified party may be
entitled; and empowers the corporation to purchase and maintain insurance on
behalf of a director or officer of the corporation against any liability
asserted against him or her or incurred by him or her in any such capacity or
arising out of his or her status as such whether or not the corporation would
have the power to indemnify him or her against such liabilities under Section
145.
Item 16. Exhibits.
An index of exhibits appears at page II-4 through II-5, which is
incorporated herein by reference.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
1. The file, during any period in which offers or sales are
being made, a post-effective amendment to the Registration Statement:
(a) To include any prospectus required by Section 10(a)(3)
of the Securities Act.
(b) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(c) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs 1(a) and 1(b) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to section 13 or
section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in conjunction with the securities being
registered, the Registrant will, unless in the opinion of its counsel of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this post-effective amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Fairfax, Commonwealth of Virginia, on May 7, 1997.
DynCorp
By: /s/ P.V. LOMBARDI
P.V. Lombardi
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature to
this post-effective amendment to Registration Statement appears below hereby
appoints Paul V. Lombardi, David L. Reichardt and H. Montgomery Hougen, and each
of them, any one of whom may act without the joiner of the others, as his or her
attorney in fact with full power of substitution and resubstitution to sign on
his or her behalf individually and in the capacity stated below, and to sign and
file all amendments and post-effective amendments to this post-effective
amendment to its Registration Statement and any and all other documents that may
be required in connection with the filing of this post-effective amendment to
Registration Statement, which amendments may make such changes and additions to
this post-effective amendment to Registration Statement as such attorney in fact
may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this post-effective amendment to its Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated:
Signature Title Date
/s/P.V. LOMBARDI
P.V. Lombardi President and Director (Principal May 7, 1997
Executive Officer)
/s/ P.C. FITZPATRICK Senior Vice President -- Chief May 7, 1997
P. C. FitzPatrick Financial Officer
(Principal Financial Officer)
/s/ D. L. REICHARDT Senior Vice President -- General May 7, 1997
D.L. Reichardt Counsel and Director
/s/ J.J.FITZGERALD Vice President and Controller May 7, 1997
J.J. Fitzgerald (Principal Accounting Officer)
* D. R. Bannister Director May 7, 1997
* T. E. Blanchard Director May 7 , 1997
* H. S. Winokur Director May 7, 1997
* D. C. Mecum Director May 7, 1997
* R. E. Doughery Director May 7, 1997
*
/s/ H. M. HOUGEN May 7, 1997
H. M. Hougen
Attorney-in-Fact
INDEX OF EXHIBITS
Exhibit Description
4.1 ____ Indenture and supplement, dated April 18, 1997 between
Dyn Funding Corporation (a wholly owned subsidiary of the
Registrant) and Bankers Trust Company relating to Contract
Receivable Collateralized Notes (filed herewith).
4.2 ____ Specimen Common Stock Certificate (incorporated by reference to
Registrant's Form 10-K for 1988, File No. 1-3879)
4.3 ____ Statement Respecting Warrants and Lapse of Certain Restrictions
(incorporated by reference to Registrant's Form 10-K for 1988,
File No. 1-3879)
4.4 ____ Amendment (effective March 26, 1991) to Statement Respecting
Warrants and Lapse of Certain Restrictions (incorporated by
reference to Registrant's Form 10-K for 1990, File No. 1-3879)
4.5 ____ Article Fourth of the Amended and Restated Certificate of
Incorporation (incorporated by reference to Registrant's Form
10-K/A for 1995, File No. 1-3879)
4.6 ____ Stockholders Agreement (incorporated by reference to Registrant's
Form S-1 for 1995, File No. 33-59279)
4.7 ____ Amended and Restated Credit Agreement by and among Citicorp North
America, Inc. and DynCorp dated March 14, 1996 (incorporated by
reference to Registrant's Form 10-K/A for 1995, File No. 1-3879)
4.8 ____ Registration Rights Agreement, dated as of March 17, 1997, among
the Company, and BT Securities Corporation and Citicorp
Securities, Inc. (incorporated by reference to the Registrant's
Form S-4, File No. 333-25355)
4.9 ____ Indenture, dated March 17, 1997, among the Company and United
States Trust Company of New York relating to the 9 1/2% Senior
Subordinated Notes due 2007 (incorporated by reference to the
Registrant's Form S-4, File No. 333-25355)
4.10 ____ Form of Exchange Notes (included in Exhibit 4.9)
5.1 ____ Opinion of H. Montgomery Hougen.*
10.1 ____ Deferred Compensation Plan (incorporated by reference to
Registrant's Form 10-K for 1987, File No. 1-3879)
10.2 ____ Management Incentive Plan (MIP) (incorporated by reference to
Registrant's Form 10-K for 1996, File No. 1-3879)
10.3 ____ DynCorp Executive Incentive Plan (EIP) (incorporated by reference
to Registrant's Form 10-K for 1996, File No. 1-3879)
10.4 ____ Management Severance Agreements (incorporated by reference to
Exhibits (c)(4) through (c)(12) to Schedule 14D-9 filed by
Registrant January 25, 1988)
10.5 ____ Employment Agreement of Paul V. Lombardi, Vice President,
Government Services Group (incorporated by reference to
Registrant's Form 10-K for 1993, File No. 1-3879)
10.6 ____ Restricted Stock Plan (incorporated by reference to Registrant's
Form 10-K/A for 1995, File No. 1-3879)
10.7 ____ 1995 Stock Option Plan (incorporated by reference to Registrant's
Form 10-K/A for 1995, File No. 1-3879)
<PAGE>
Exhibit Description
10.8 ____ Employment Agreement of Patrick C. FitzPatrick, Senior Vice
President and Chief Financial Officer (incorporated by
reference to Registrant's Form 10-K for 1996, File No. 1-3879)
11.1 ____ Computations of Earnings Per Common Share for the Years Ended
December 31, 1996, 1995 and 1994 (incorporated by reference to
Registrant's Form 10-K for 1996, File No. 1-3879)
21.1 ____ Subsidiaries of the Registrant (incorporated by reference to
Registrant's Form 10-K for 1996, File No. 1-3879)
23.1 ____ Consent of Arthur Andersen LLP (filed herewith)
24.1 ____ Powers of Attorney.(previously filed and filed herewith)
------
*Previously filed.
EXECUTION COPY
DYN FUNDING CORPORATION,
Issuer
and
BANKERS TRUST COMPANY,
Trustee
----------------------------------
DYNCORP TRADE RECEIVABLES MASTER INDENTURE
Dated April 18, 1997
<PAGE>
Table of Contents
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions................................................ 2
ARTICLE TWO
THE NOTES
Section 2.01. Form Generally.............................................. 29
Section 2.02. Form of Notes............................................... 29
Section 2.03. Denominations............................................... 29
Section 2.04. Execution, Authentication, Delivery and
Dating.................................................................... 29
Section 2.05. Registration, Registration of Transfer
and Exchange............................................................... 30
Section 2.06. Mutilated, Destroyed, Lost or Stolen
Notes...................................................................... 31
Section 2.07. Payment of Principal and Interest;
Principal and Interest Rights
Preserved.................................................................. 32
Section 2.08. Pners........................................................ 33
Section 2.09. Cancellation................................................. 33
Section 2.10. Purchase of Notes by Issuer.................................. 33
Section 2.11. New Issuances................................................ 34
ARTICLE THREE
AUTHENTICATION AND DELIVERY OF NOTES
Section 3.01. General Provisions.......................................... 36
Section 3.02. The Receivables............................................. 38
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of the Agreement..................39
Section 4.02. Application of Trust Money.................................. 39
ARTICLE FIVE
DEFAULTS AND REMEDIES
Section 5.01. Events of Default........................................... 41
Section 5.02. Acceleration of Maturity.................................... 43
<PAGE>
Section 5.03. Collection of Indebtedness and Suits for Enforcement.........43
by Trustee.
Section 5.04. Remedies.................................................... 45
Section 5.05. Trustee May Enforce Claims Without
Possession of Notes....................................................... 45
Section 5.06. Application of Proceeds..................................... 46
Section 5.07. Limitation on Suits......................................... 46
Section 5.08. Unconditional Rights of Noteholders to
Receive Principal and Interest............................................ 47
Section 5.09. Restoration of Rights and Remedies.......................... 47
Section 5.10. Rights and Remedies Cumulative.............................. 48
Section 5.11. Delay or Omission Not Waiver................................ 48
Section 5.12. Control by Noteholders...................................... 48
Section 5.13. Waiver of Past Defaults..................................... 49
Section 5.14. Undertaking for Costs....................................... 49
Section 5.15. Waiver of Stay or Extension Laws............................ 49
Section 5.16. Sale of Trust Estate........................................ 50
Section 5.17. Action on Notes............................................. 51
ARTICLE SIX
THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities......................... 52
Section 6.02. Notice of Default. ......................................... 53
Section 6.03. Certain Rights of Trustee................................... 53
Section 6.04. Not Responsible for Recitals or Issuance
of Notes................................................................... 55
Section 6.05. May Hold Notes............................................... 55
Section 6.06. Money Held in Trust.......................................... 55
Section 6.07. Compensation and Reimbursement............................... 56
Section 6.08. Corporate Trustee Required; Eligibility ..................... 56
Section 6.09. Resignation and Removal; Appointment
of Successor............................................................... 57
Section 6.10. Acceptance of Appointment by Successor....................... 58
Section 6.11. Merger, Conversion, Consolidation or Succession to Business
of Trustee................................................................. 59
Section 6.12. Trustee as Successor Servicer................................ 59
Section 6.13. Co-trustees and Separate Trustees............................ 59
Section 6.14. Rights of Trustee Upon Appointment of
Successor Servicer......................................................... 61
ARTICLE SEVEN
NOTEHOLDERS' LIST AND REPORTS BY TRUSTEE AND ISSUER
Section 7.01. Issuer to Furnish Trustee Names and
Addresses of Noteholders.................................................... 62
Section 7.02. Preservation of Information;
Communications to Noteholders............................................... 62
<PAGE>
Section 7.03 Reports by and Inspections of Issuer......................... 62
Section 7.04. Annual and Quarterly Statements as to
Compliance................................................................. 64
Section 7.05. Contract Schedule............................................ 65
Section 7.06. Primary Contract List........................................ 65
ARTICLE EIGHT
REPRESENTATIONS AND COVENANTS OF ISSUER
Section 8.01. Payment of Principal and Interest............................ 67
Section 8.02. Maintenance of Office or Agency.............................. 67
Section 8.03. Unclaimed Funds.............................................. 67
Section 8.04. Corporate Existence.......................................... 68
Section 8.05. Protection of Trust Estate................................... 68
Section 8.06. Representations and Covenants of Issuer...................... 69
Section 8.07. Negative Covenants. ......................................... 71
Section 8.08. Issuer May Consolidate, Etc., Only on Certain Terms.......... 72
Section 8.09. Successor Substituted........................................ 73
Section 8.10. Money for Note Payments to Be Held in Trust.................. 73
Section 8.11. Performance of Obligations; Servicing Agreement ............. 74
Section 8.12. Corporate Separateness of Issuer............................. 76
ARTICLE NINE
ACCOUNTING AND RELEASES
Section 9.01. Collection of Money.......................................... 78
Section 9.02 Collection Account............................................ 78
Section 9.03. Reports by Trustee; Contract Schedule........................ 81
Section 9.04. Trust Estate; Contract Documents............................. 81
Section 9.05. Amendments to Servicing Agreement............................ 82
Section 9.06. Servicer as Custodian and Bailee of Trustee.................. 82
ARTICLE TEN
SUPPLEMENTAL INDENTURES
Section 10.01. Supplemental Indentures..................................... 83
Section 10.02. Execution of Supplemental Indentures........................ 84
Section 10.03. Effect of Supplemental Indenture............................ 84
Section 10.04. Reference in Notes to Supplemental Indentures............... 85
<PAGE>
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Acts of Noteholders.......................................... 86
Section 11.02. Notices, Etc. to Trustee and Issuer.......................... 86
Section 11.03. Notices to Noteholders; Waiver............................... 87
Section 11.04. Effect of Headings and Table of Contents..................... 88
Section 11.05. Successors and Assigns....................................... 88
Section 11.06. Separability................................................. 88
Section 11.07. Benefits of Indenture........................................ 88
Section 11.08. Governing Law................................................ 88
Section 11.09. Counterparts................................................. 89
Section 11.10. Corporate Obligation......................................... 89
EXHIBITS AND SCHEDULES
Exhibit A Form of Credit and Collections Statement of Policy
Exhibit B Form of Opinion of Counsel to the Issuer
Exhibit C Form of Sale and Purchase Agreement
Exhibit D Form of Assignment of Claims Act Notice
Schedule A Contract Schedule
Schedule B Receivable Schedule
Schedule C List of Sellers
Schedule D Primary Contract List
<PAGE>
DYNCORP TRADE RECEIVABLES MASTER INDENTURE, dated April 18, 1997
(herein, as amended, modified or supplemented from time to time as permitted
hereby, called this "Indenture"), between Dyn Funding Corporation, a corporation
organized and existing under the laws of the State of Delaware (herein, together
with its permitted successors and assigns, called the "Issuer"), and Bankers
Trust Company, a New York State banking corporation, as trustee (herein,
together with its successors in the trusts hereunder, called the "Trustee").
This Indenture may be supplemented at any time and from time to time by a
supplement (a "Supplement", and any Supplement together with this Indenture and
amendments hereof collectively referred to as the "Agreement"). This Indenture
and any Supplement are separately and consecutively paginated, and each is an
integral part of the Agreement. If a conflict exists between the terms and
provisions of this Indenture and any Supplement, the terms and provisions of the
Supplement shall be controlling with respect to the related Series.
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of the
Agreement to provide for an issue of its Contract Receivable Collateralized
Notes (the "Notes") as provided in the Agreement.
All covenants and agreements made by the Issuer herein are for the benefit and
security of the holders of the Notes. The Issuer is entering into the Agreement,
and the Trustee is accepting the trusts created hereby, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.
Simultaneously with the delivery of this Indenture (a) the Issuer is
entering into Sale and Purchase Agreements with DynCorp, a corporation organized
and existing under the laws of the State of Delaware (the "Company"), and with
certain other subsidiaries of the Company named in such Sale and Purchase
Agreements (each referred to herein as a "Seller" and, with the Company when the
Company is being referred to as a seller of Receivables, collectively referred
to as the "Sellers") pursuant to which each of the Sellers will sell certain of
its receivables specified therein to the Issuer and (b) the Issuer, the Company
and the Trustee are entering into the Servicing Agreement pursuant to which the
Company will agree to service the Receivables and make collections thereon on
behalf of the Holders from time to time of the Notes.
Subsequent to the delivery of this Agreement, the Issuer may enter into
Sale and Purchase Agreements with certain subsidiaries of the Company named in
such Sale and Purchase Agreements (each
referred to herein as a "Seller") pursuant to which each of such Sellers, if
any, will sell certain of its receivables specified therein to the Issuer.
<PAGE>
GRANTING CLAUSES
The Issuer hereby Grants to the Trustee, for the exclusive benefit of
the Holders of the Notes, all of the Issuer's right, title and interest in and
to (a) the Receivables and all proceeds received in respect of such Receivables,
(b) all of the Sale and Purchase Agreements, (c) the Servicing Agreement as it
relates to such Receivables, (d) the Collection Account, including all Eligible
Investments therein and all income from the investment of funds therein, (e) any
Lockbox Account, including all Eligible Investments therein and all income from
the investment of funds therein and (f) all proceeds in any way derived from any
of the foregoing items. Such Grants are made in trust to secure the Notes
equally and ratably without prejudice, priority or distinction, except as
expressly provided in the Agreement, between any Note and any other Notes, and
to secure (i) the payment of all amounts due on the Notes in accordance with
their terms, (ii) the payment of all other sums payable under the Agreement and
(iii) compliance with the provisions of the Agreement all as provided in the
Agreement.
The Trustee acknowledges such Grants, accepts the trusts hereunder in
accordance with the provisions hereof and agrees to perform the duties herein
required to the end that the interests of the Noteholders may be adequately and
effectively protected.
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions.
Except as otherwise specified herein or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of the Agreement, and the definitions of such terms are equally
applicable both to the singular and plural forms of such terms and to the
masculine, feminine and neuter genders of such terms.
Accountants' Certificate: A certificate of a firm of independent
certified public accountants of national reputation appointed by the Issuer and
reasonably acceptable to the Trustee, which may be the firm of independent
accountants that audits the financial statements of the Issuer or the Company.
3/64971.8
<PAGE>
Accounts: The collective reference to the Collection Account, any
Lockbox Account and any other account so specified in the related Supplement.
Act and Acts of Noteholders: The meanings specified in Section 12.01
hereof.
Administrative Expenses: The sum of: (a) the amounts due the Trustee
under Section 6.07 hereof; (b) federal and state taxes of the Issuer and the
cost of preparing tax returns; (c) expenses relating to the maintenance of the
Receivables; (d) expenses incurred for general business operations of the
Issuer; and (e) all other expenses of the Issuer relating to the issuance of the
Notes (to the extent not paid out of the proceeds of the issuance of the Notes
or by the Servicer), including but not limited to, legal fees and expenses of
counsel and accountants' fees; provided, however, that Administrative Expenses
shall not include (a) the release of Excess Cash, (b) the Servicing Fee, (c) any
Deferred Purchase Price or (d) any damages or indemnities payable by the Issuer
to any Noteholder.
Affiliate: With respect to any Person, any other Person controlling or
controlled by or under common control with such Person. For the purposes of this
definition, "control", when used with respect to any specified 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, the terms "controlling" and "controlled" having meanings correlative
to the foregoing.
Aggregate Collateral Balance: As of any date of determination, the
sum of (a) the aggregate Stated Value of the Receivables Granted to the Trustee
and (b) all amounts on deposit in the Collection Account.
Amortization Date: With respect to any Series, the date specified in
the related Supplement.
Amortization Period: With respect to any Series, the period commencing
with the day after the Payment Date next preceding the Amortization Date to and
including the date on which the Notes of such Series are paid in full.
Assignment of Claims Act Notice: Any Assignment of Claims Acts Notice
substantially in the form of Exhibit D hereto.
Authorized Officer: With respect to the Company, the Issuer or any
Seller, the President or any Vice President, Secretary, Treasurer or Assistant
Treasurer of such entity.
<PAGE>
Average Daily Revenue: As of any Determination Date or Purchase Date
during the Non-Amortization Period and with respect to any Government Contract
or Government Subcontract (including any Qualified Joint Venture Contract), (a)
the aggregate amount of revenue recognized by the Company in its unaudited
financial statements and reports under such Government Contract or Government
Subcontract during the three immediately preceding Determination Periods divided
by (b) the number of Calendar Days in such three preceding Determination
Periods; provided that if the related Seller has performed under such Government
Contract or Government Subcontract for a period of less than three months as of
such Determination Date or Purchase Date, the Average Daily Revenue will be
calculated on the basis of such lesser period; provided, further, that the
Average Daily Revenue shall not be calculated on the basis of a period of less
than 28 Calendar Days. With respect to any Government Contract or Government
Subcontract if the amount of Average Daily Revenue is expected to permanently
decrease by more than 10% from the Average Daily Revenue for such Government
Contract or Government Subcontract as of the preceding Determination Date or
Purchase Date for which Average Daily Revenue was calculated, then the Average
Daily Revenue will be adjusted immediately to an amount equal to such decreased
level to the same extent as if such decrease had been in effect since the first
day of the period over which the Average Daily Revenue is being calculated.
Board of Directors: The Board of Directors of the Issuer or any
committee of that Board duly authorized to act on behalf of that Board with
respect to any matters arising under the Agreement.
Board Resolution: Any action by the Board of Directors, as evidenced
by a copy of a resolution certified by the Secretary or an Assistant Secretary
of the Issuer to have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification and delivery to the
Trustee.
Business Day: Any day that is not a Saturday, Sunday, holiday, or other
day on which commercial banking institutions in New York are authorized or
obligated by law or executive order to be closed.
Calendar Day: Any day of a month.
Called Principal: With respect to any Note, the Note Principal Balance
that is declared to be due and payable pursuant to (i) an Optional Redemption,
Mandatory Redemption or Special Redemption pursuant to the related Series
Supplement or (ii) an acceleration of maturity pursuant to Section 5.02 of this
Indenture.
<PAGE>
Class: With respect to any Series, any one of the classes of Notes of
that Series as defined in the related Supplement.
Closing Date: As specified in the Supplement related to any Series of
Notes, the date on which such Notes are first executed and delivered to the
Purchasers thereof.
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
Collateral Value Percentage: With respect to (a) any Government
Receivable (including any Receivable arising under a Qualified Joint Venture
Contract), 92% of its Stated Value, (b) any Government Subcontract Receivable,
80% of its Stated Value and (c) any Commercial Receivable, 76% of its Stated
Value.
Collateral Value Ratio: As of any date of determination, the ratio
obtained by dividing (a) the sum of (i) the aggregate Stated Values of the
Receivables Granted to the Trustee, less the aggregate Stated Values of Excluded
Receivables, all valued at the applicable Collateral Value Percentage, and (ii)
all amounts on deposit in the Collection Account by (b) the Outstanding Note
Principal Balance.
Collection Account: The account so denominated and extablished
pursuant to Section 9.02 hereof.
Collections: With respect to any Receivable, to the extent that such
Receivable has not been repurchased by a Seller pursuant to its Sale and
Purchase Agreement, all cash collections and other cash proceeds of such
Receivable that are collected in available funds by the Issuer or the Servicer
for deposit into a Lockbox Account or a Seller's Lockbox.
Commercial Contract: Any Contract other than a Government Contract or
a Government Subcontract.
Commercial Receivable: Any Receivable under a Commercial Contract.
Commission: The Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, as amended,
or any successor agency having similar power.
Commitment Fee: Any fee so specified in the related Supplement.
<PAGE>
Company: DynCorp, a Delaware corporation, and its successors and
assigns.
Compliance Audit: The meaning specified in Section 7.04 hereof.
Consolidated EBDAIT: For any period, (a) the sum of the amounts for
such period of (i) Consolidated Net Income, (ii) provision for taxes based on
income, (iii) Consolidated Interest Expense, (iv) depreciation expense, (v)
amortization expense, (vi) Restricted Stock Plan expense and (vii) Net ESOP
Contributions, less (b) the amount for such period of interest income (such
amount of interest income not to exceed $1,500,000 for any rolling twelve-month
period), all as determined on a consolidated basis in accordance with GAAP.
Consolidated Interest Expense: For any period, the total interest
expense of the Company and its subsidiaries on a consolidated basis with respect
to all outstanding indebtedness of the Company and its subsidiaries, including,
without limitation, all commissions, discounts, and other fees and charges owed
with respect to letters of credit and bankers' acceptance financings and net
costs under interest rate agreements, all as determined in accordance with GAAP.
Consolidated Net Cash Interest Expense: For any period, (a)
Consolidated Interest Expense, but excluding, however, interest expense not
payable in cash, amortization of debt discount and deferred financing costs,
less (b) interest income (such amount of interest income not to exceed
$1,500,000 for any rolling twelve-month period).
Consolidated Net Income: For any period, the net income (or loss) of
the Company and its subsidiaries on a consolidated basis for such period,
excluding the sum of (i) extraordinary: items, net of taxes based on income,
(ii) dividends on preferred stock, and (iii) amortization of issuance discount
on preferred stock, all as determined in accordance with GAAP.
Contract: An agreement between one of the Sellers and an Obligor, or
an open account of an Obligor evidenced by an invoice of a Seller, pursuant to
which such Obligor is obligated to pay for merchandise or services.
Receivables under GovernmentContracts or Government Subcontracts of a Seller
may be combined and aggregated in accordance with the following restrictions:
(i) the aggregate Stated Values of Receivables arising under each Government
Contract which is combined and aggregated must be less than $500,000; (ii) the
Stated Values of Receivables arising under each Government Subcontract, which is
combined and aggregated must be less than $250,000; (iii)
<PAGE>
Government Contracts may only be combined with other Government Contracts from
the same Seller and Government Subcontracts may only be combined with other
Government Subcontracts of the same Seller and the Contract Schedule must
separately identify each Contract included within each aggregate; and (iv) the
aggregate Stated Values of all Receivables so combined and aggregated may not
exceed 5% of the Aggregate Collateral Balance.
Contract Schedule: The list in the form attached hereto as Schedule A
identifying (a) each Government Contract and Government Subcontract as to which
Receivables arising thereunder are initially Granted hereunder and subsequent to
the Closing Date, (b) each of those Contracts provided in clause (a) above that
is a Qualified Joint Venture Contract and (c) each Obligor as to which
Commercial Receivables arising thereunder are initially Granted hereunder and
subsequent to the Closing Date.
Corporate Trust Office: The principal office of the Trustee at which at
any particular time its corporate trust business shall be administered, which
office at the date of the execution of this Agreement is located at Four Albany
Street, New York, New York 10006 (Attention: Corporate Trust and Agency Group,
Structured Finance Team).
Credit and Collection Practices: The Company's normal credit extension
practices and procedures and collection practices relating to the Contracts and
the Receivables thereunder, as amended from time to time, applied in accordance
with the statement of policy set forth in Exhibit A hereto.
Cut-Off Date: As to any Series of Notes, the "Cut-off Date" defined in
the related Supplement.
Date of Execution: The actual date of execution of this Indenture by
the Issuer and the Trustee as indicated by their respective acknowledgements
hereto annexed, and if the Issuer and the Trustee shall have executed this
Indenture at different dates, the later date.
Default: Any occurrence that is, or with notice or the lapse of time or
both would become, an Event of Default or, when used in association with
obligations created by an agreement other than the Agreement, the meaning
specified in such agreement.
Defaulted Receivable: Any Receivable that is not a Disputed Receivable
or an Ineligible Receivable and:
A. with respect to Government Receivables, that portion of a
Receivable (i) as to which any payment, or part thereof, remains unpaid
for 180 days from the original billing date, (ii) that portion of
which, consistent with the Credit and Collection Policy, would be
written off on the Company's financial statements or books of account
as uncollectible (excluding, however, any portion as to which
non-payment is the result of a dispute between the Government and the
Company regarding amounts payable by the Government to the Company
under the related Contract), or (iii) as to which the Government has
given notice to the Company, or the Company has reason to believe, that
such Receivable or portion thereof will not be paid (excluding,
however, any portion as to which non-payment is the result of a dispute
between the Government and the Company regarding amounts payable by the
Government to the Company under the related Contract); and
B. with respect to Commercial Receivables or Government
Subcontract Receivables, that portion of a Receivable (i) as to which
any payment, or part thereof, remains unpaid for 180 days from the
original billing date, (ii) as to which the related Obligor or Prime
Contractor becomes bankrupt, unless such Obligor or Prime Contractor
has the approval of a bankruptcy court of competent jurisdiction to
make payments under the related Contract and such payments are not the
subject of any legal challenge, (iii) that portion of which, consistent
with the Credit and Collection Policy, would be written off on the
Company's financial statements or books of account as uncollectible
(excluding, however, any portion as to which non-payment is the result
of a dispute regarding amounts payable to the Company under the related
Contract); provided that with respect to an Obligor or Prime Contractor
that is not rated Investment Grade and the Commercial Receivables or
Government Subcontract Receivables of which are Defaulted
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Receivables pursuant to any of clauses (i) through (iii) of this
paragraph (b), all remaining Commercial Receivables or Government
Subcontract Receivables of such Obligor or Prime Contractor will be
deemed Defaulted Receivables unless the Company delivers to the Trustee
an Officer's Certificate to the effect that: (i) the Company has no
reason to believe that the remaining Commercial Receivables or
Government Subcontract Receivables of such Obligor or Prime Contractor
will not be paid or will become Defaulted Receivables; and (ii) the
aggregate of the Stated Values of all Defaulted Receivables of such
Obligor (including Defaulted Receivables which have previously been
repurchased or substituted for) net of any collections on such
Defaulted Receivables, does not exceed the greater of $50,000 or 10% of
the total of the Stated Values of all Commercial Receivables and
Government Subcontract Receivables of such Obligor or Prime Contractor
(including Defaulted Receivables which have previously been repurchased
or substituted for) net of any collections on such Defaulted
Receivables. If all of the Receivables of an Obligor or Prime
Contractor become Defaulted Receivables, the receivables of such
Obligor or Prime Contractor will subsequently be deemed to be Eligible
Receivables upon consent of the Required Holders.
Deferred Purchase Price: On any date of determination, any portion of
the Purchase Price of an Eligible Receivable that is unpaid on the Purchase
Date on which such Eligible Receivable was purchased and is still unpaid as of
such date of determination.
Determination Date: With respect to any Payment Date, two Business
Days prior to such Payment Date.
Determination Date Statement: The statement required to be delivered
by the Servicer, on or before the Determination Date, pursuant to Section 4.02
of the Servicing Agreement.
Determination Period: With respect to any Determination Date, the
approximately one-calendar month period, as set forth in Schedule A to the
Servicing Agreement, most recently ended prior to such Determination Date.
Disputed Receivable: As to any date of determination, that portion of a
Receivable (a) with respect to which the related Obligor has disputed the amount
billed by the Company, whether such dispute arises over alleged unsatisfactory
performance of work under the related Contract or the contractual amount owed
the Company for services rendered, costs incurred or work completed, or (b) as
to which the related Obligor has withheld payment because of a dispute, or
settlement, with respect to a debt of the Company due such Obligor including,
but not limited to, a notification from the Government of its intention to
offset to satisfy any such claim; provided, however, that all remaining
Receivables of (i) the related Commercial Obligor or (ii) under the related
Government Contract or Government Subcontract will be deemed Disputed
Receivables unless the Company delivers to the Trustee an Officer's Certificate
to the effect that the Company has no reason to believe that all such remaining
Receivables (A)
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<PAGE>
will become Defaulted Receivables or (B) will become Disputed Receivables.
Distribution Account: With respect to any Series, any account so
denominated and established pursuant to the related Supplement.
Duff & Phelps: Duff & Phelps Credit Rating Co., and the successors
and assigns thereof.
Eligible Account: (a) A segregated account or accounts maintained with
a depository institution or trust company whose long-term unsecured debt
obligations are rated by S&P and Duff & Phelps at the time of any deposit
therein in one of the three highest rating categories (or, if such obligations
are, at the time of such deposit, not rated by S&P or Duff & Phelps, then such
rating shall be from any of S&P or Duff & Phelps and Moody's) or (b) a
segregated trust account or accounts maintained with a federal or state
chartered depository institution subject to regulations regarding fiduciary
funds on deposit substantially similar to 12 C.F.R. Section 9.10(b).
Eligible Investments: One or more of the following:
a obligations of, or guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof when
such obligations are backed by the full faith and credit of the
United States;
b. repurchase agreements on obligations specified in clause
(a) maturing not more than one month from the date of acquisition
thereof; provided that the long-term unsecured obligations of the party
agreeing to repurchase such obligations are at the time rated by S&P
and Duff & Phelps in one of the three highest rating categories
(without regard to numerical modifiers) available from S&P and Duff &
Phelps; and, provided, further, that the short-term debt obligations of
the party agreeing to repurchase shall be rated A-1 or higher by S&P
and Duff & Phelps.
c. federal funds, certificates of deposit, time deposits and
bankers' acceptances, each of which shall not have an original maturity
of more than 90 days, of any depository institution or trust company
incorporated under the laws of the United States or any state; provided
that the long-term unsecured debt obligations of such depository
institution or trust company at the date of acquisition thereof have
been rated by S&P and Duff & Phelps in one of the three highest rating
categories (without regard to numerical modifiers) available from S&P
and Duff & Phelps; and, provided, further, that the short-term
obligations of such depository institution or trust company shall be
rated A-1 or higher by S&P and Duff & Phelps;
d. commercial paper or commercial paper funds (having original
maturities of not more than 90 days) of any corporation incorporated
under the laws of the United States or any state thereof; provided that
any such commercial paper or commercial paper funds shall be rated A-1+
by S&P and Duff & Phelps; and
e. any no-load money market fund rated Am or Am-G or higher
by S&P, including but not limited to funds for which the Trustee is
investment manager or adviser;
provided that if either of S&P or Duff & Phelps does not rate the "Eligible
Investments" as described in clauses (a), (b), (c) or (d) of the definition
hereof, then such rating shall be from either of S&P or Duff & Phelps and
Moody's; provided further that Eligible Investments purchased from funds in the
Collection Account, any Distribution Account or any Reserve Fund shall include
only such obligations or securities that either may be redeemed daily or mature
no later than the Business Day next preceding the next Payment Date; and,
provided, further, that no instrument shall be an Eligible Investment if such
instrument evidences a right to receive only interest payments with respect to
the obligations underlying such instrument.
Eligible Receivable: (a) At any time, except as specified below, any
Government Receivable or Government Subcontract Receivable:
1. which is not a Defaulted Receivable;
2. which is not a Disputed Receivable;
3. which represents (A) amounts payable for services performed or
costs incurred under a Contract which have been billed to the related
Obligor, (B) amounts payable for services performed or costs incurred
under a Contract and which are unbilled but billable (pursuant to the
Company's policies) within 60 days of the Purchase Date on which
such Receivable is sold to the Issuer or (C) accrued fixed fees,
award fees, general and administrative expenses or overhead
expenses which arose under a Conbtract;
4. which is an "account" or a general intangible as defined in
the UCC, but, except for Permitted Milestone Accruals, only to the
extent that such Receivable constitutes rights fully earned by
performance;
5. is denominated and payable only in United States dollars;
6. which arose under a Contract which has been duly authorized and is
in full force and effect and which, together with such Contract,
constitutes the legal, valid and binding obligation enforceable against
such Obligor in accordance with its terms and is not the subject of, as
of the Purchase Date on which such Receivable is sold to the Issuer,
any material dispute, asserted offset, counterclaim or defense;
7. which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto and with respect to which no party to the Contract
related thereto is in violation of any such law, rule or regulation in
any material respect;
8. which, with respect to accrued and unbilled Receivables described in
clauses (iii)(B) and (C) above, arose under a Contract as to which the
related Seller has been performing for at least thirty days prior to
the Purchase Date on which such Receivable is sold to the Issuer; and
9. as to which, with respect to any Government Subcontract Receivable
arising under such Subcontract, if it relates to an Obligor which is
under the protection of a bankruptcy court, such bankruptcy court has
approved payment by such Obligor under the related Contract to the
related Seller.
(b) At any time, any Commercial Receivable:
1. which is not a Defaulted Receivable;
2. which is not a Disputed Receivable;
3. which represents amounts payable for services performed or costs
incurred under a Contract which have been billed to the related
Obligor;
4. which is an "account" or a "general intangible" as defined in the
UCC, but only to the extent that it constitutes rights fully earned
by performance;
5. is denominated and payable only in United States dollars;
6. which arose under a Contract which has been duly authorized and is
in full force and effect and which, together with such Contract,
constitutes the legal, valid and binding obligation of the Obligor of
such Receivable enforceable against such Obligor in accordance with its
terms and is not the subject of, as of the Purchase Date on which such
Receivable is sold to the Issuer, any material dispute, asserted
offset, counterclaim or defense whatsoever (except the discharge in
bankruptcy of such Obligor);
7. which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto and with respect to which no party to the Contract
related thereto is in violation of any such law, rule or regulation in
any material respect; and
8. as to which, if it relates to an Obligor which is under the
protection of a bankruptcy court, such bankruptcy court has approved
payment by such Obligor under the related Contract to the related
Seller.
(c) As of the Closing Date, all Receivables that are
"Eligible Receivables" (but not "Excluded Receivables")
under that certain transaction relative to the issuance of
the 8.54% Contract Receivable Collateralized Notes, Series
1992-1.
Enhancement: The rights and benefits provided to the Noteholders of any
Series or Class pursuant to any financial guaranty, insurance policy, letter of
credit, surety bond, cash collateral account, spread account, guaranteed rate
agreement, subordination agreement, maturity liquidity facility, tax
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<PAGE>
protection agreement, interest rate swap agreement or other similar arrangement
as specified in the related Supplement. The subordination of any Series or Class
to any other Series or Class shall be deemed to be an Enhancement.
Enhancement Agreement: Any agreement, instrument or
document governing the terms of any Enhancement or pursuant to
which any Enhancement is issued or outstanding as specified in
the related Supplement.
Enhancement Agreement Event of Default: The "events of
default" specified in the related Enhancement Agreement.
Enhancement Provider: The Person providing any Enhancement, as
specified in a Supplement, other than any Noteholders the Notes of which are
subordinated to any Series or Class as specified in the related Supplement. As
used herein any time that a provision requires the consent of an Enhancement
Provider, such consent must be from the Enhancement Provider for each Series.
ESOP: The Company's Employee Stock Ownership Plan, including
the trust fund established thereby.
Event of Default: The meaning specified in Section 5.01
hereof.
Excess Cash: With respect to each Determination Date, the amount, if
any, by which the Aggregate Collateral Balance, less the Stated Value of any
Excluded Receivables, exceeds the level required to maintain the Collateral
Value Ratio at 1.00 as of the last day of the preceding Determination Period.
Excluded Receivables: As of any date of determination
(without duplication):
(a) all Receivables which are Defaulted Receivables;
(b) all Receivables which are Disputed Receivables;
(c) all Receivables which are Ineligible Receivables;
(d) the excess of (i) the aggregate Stated Value of all
Receivables, or any specified portion of Receivables, which are
outstanding more than 120 days and less than 180 days from their
respective billing dates over (ii) (A) in the case of Commercial
Receivables, 7% of the Aggregate Collateral Balance on such date of
determination and (B) in the case of Government Receivables together
with Government Subcontract Receivables, 3%, of the Aggregate
Collateral Balance as calculated on each Determination Date;
(e) all Commercial Receivables or Government
Subcontract Receivables of an Obligor when the aggregate
Stated Value of Disputed Receivables and Ineligible
Receivables due from such Obligor exceeds 25% of the
aggregate Stated Value of all Receivables due from such
Obligor;
(f) (i) on each Determination Date only and with respect to
each Government Contract and Government Subcontract, the excess, if
any, of the aggregate Stated Value of all Government Receivables and
Government Subcontract Receivables accrued and unbilled under such
Contract as of the last day of the preceding Determination Period, less
the aggregate Stated Value of Government Receivables and Government
Subcontract Receivables billed under such Contract since the last day
of such preceding Determination Period, over the amount of Permitted
Accrued Receivables for such Contract and (ii) if after giving effect
to the limitation set forth in subclause (i) above, the total allowable
accrued and unbilled Government Receivables and Government Subcontract
Receivables exceeds 40% of the Aggregate Collateral Balance as of the
last day of the preceding Determination Period, those Receivables in
excess of 40%; and (iii) if after giving effect to the limitations set
forth in subclauses (i) and (ii) above, the total allowable accrued and
unbilled Government Subcontract Receivables exceeds 5% of the Aggregate
Collateral Balance
<PAGE>
as of the last day of the preceding Determination Period,
those Government Subcontract Receivables in excess of 5%;
and
Q. with respect to Permitted Milestone Accruals, (i) the
excess, if any, of the aggregate Stated Value of such Receivables
arising under all Task Orders over 3% of the Aggregate Collateral
Balance and (ii) such Receivables that have not been billed (pursuant
to the Company's policies) within 60 days of the Purchase Date on which
such Receivables were sold to the Issuer.
GAAP: Generally Accepted Accounting Principles applied on a
basis consistent with the Company's financial statements as set
forth in its Form 10-K.
Government: The federal government of the United States of
America or any department, division, agency or instrumentality
thereof.
<PAGE>
Government Contract: Any Contract the Obligor on which is
the Government or any Qualified Joint Venture Contract.
Government Receivable: (i) Any Receivable the payment of which is an
obligation of or is funded by the Government or (ii) any Receivable under (A) a
Government Contract or (B) a Qualified Joint Venture Contract; provided,
however, that with respect to subclause (ii)(B) above, (x) the Stated Value of
Receivables arising under any one such Qualified Joint Venture Contract in
excess of 5% of the Aggregate Collateral Balance shall not be Government
Receivables, and instead shall be Government Subcontract Receivables and (y) the
aggregate Stated Value of Receivables thereunder in excess of 20% of the
Aggregate Collateral Balance shall not be Government Receivables, and instead
shall be Government Subcontract Receivables for purposes of calculating
"Collateral Value Percentage", exclusive of amounts included in clause (x)
above.
Government Subcontract: A Contract between a Seller and a Prime
Contractor, through which the Seller is acting as a subcontractor to the
Government, and where the Seller is not itself in privity of contract with the
Government.
Government Subcontract Receivable: Any Receivable under a Government
Subcontract or any portion of a Receivable under a Joint Venture Contract so
described in the proviso to the definition of "Government Receivable".
Grant: To grant, bargain, sell, warrant, alienate, remise, demise,
release, convey, assign, transfer, mortgage, pledge, create and grant a first
priority security interest in and right of set-off against, deposit, set over
and confirm. A Grant of the Receivables shall include all rights, powers and
options (but none of the obligations) of the granting party thereunder,
including without limitation, the immediate continuing right to collect and
receive payments in respect of the Receivables; provided, however, that a Grant
of Government Receivables does not include the right of a Seller to enforce a
claim for payment of such Receivables under the related Contract.
Holder or Noteholder: The Person in whose name a Note is
registered in the Note Register.
Implied Rating: An Obligor with respect to Commercial Receivables and
Government Subcontract Receivables will have an "Implied Rating" if it meets one
of the following conditions as so certified by the Servicer to the Trustee: (i)
if any debt securities of such Obligor are rated by a Rating Agency the Implied
Rating will be equal to the senior unsecured debt rating of such Obligor or if
any such debt securities has a split
<PAGE>
rating, the lower of such ratings then in effect, (ii) if the debt obligations
of such Obligor are not rated by a Rating Agency, but such obligations are
guaranteed by a holding company, an Affiliate or other entity which has a senior
unsecured debt rating from a Rating Agency, the Implied Rating will be equal to
such senior unsecured rating or (iii) if such Obligor is a Non-U.S. Obligor
whose debt obligations are not rated by a Rating Agency, but such obligations
are either guaranteed by the related national government or a majority of its
stock is owned by such national government the Implied Rating of such Obligor
will be equal to the Rating Agency's rating of such related national government.
For purposes of this definition and Section 7.06 hereof, Kaiser-Hill Co., LLC
will be deemed to have an Implied Rating of "BBB-" with respect to the Contract
listed on the Primary Contract List on the date hereof, as the same such
Contract may be amended or supplemented from time to time.
Indenture: This instrument as amended. All references in this
instrument to designated "Articles," "Sections," "Subsections" and other
subdivisions are to the designated Articles, Sections, Subsections and other
subdivisions of this instrument as originally executed. The words "herein,"
"hereof," "hereunder" and other words of similar import refer to this Indenture
as a whole and not to any particular Article, Section, Subsection or other
subdivision.
Independent: When used with respect to any specified Person means such
a Person, who (a) is in fact independent of the Issuer and any other obligor
upon the Notes or a Related Person of the Issuer or such other obligor, (b) does
not have any direct financial interest or any material indirect financial
interest in the Issuer or in any such other obligor or in a Related Person of
the Issuer or such other obligor, and (c) is not connected with the Issuer or
any such other obligor as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions. Whenever it is
provided herein that any Independent Person's opinion or certificate shall be
furnished to the Trustee, such Person shall be appointed by Issuer Order and
approved by the Trustee and the Required Holders in the exercise of reasonable
care and such opinion or certificate shall state that the signer has read this
definition and that the signer is independent within the meaning thereof.
Ineligible Receivable: Any Receivable as to which a breach, on any
date, of any representation or warranty set forth in Section 4.02 of the related
Sale and Purchase Agreement has occurred and is continuing.
Initial Closing Date: April 18, 1997.
<PAGE>
Initial Cut-off Date: April 16, 1997.
Interest Coverage Ratio: For any period, (a) Consolidated
EBDAIT, divided by (b) Consolidated Net Cash Interest Expense.
Interest Period: The interest period as specified in the
related Supplement.
Investment Grade: A rating of at least "BBB-" or "Baa3"
assigned by a Rating Agency; provided if an entity has a split
rating, the lesser rating then in effect.
Issuer: Dyn Funding Corporation, a Delaware corporation, unless a
successor Person shall have become the Issuer pursuant to the applicable
provisions of this Indenture, and thereafter "Issuer" shall mean such successor
Person.
Issuer Officer: The Chairman of the Board of Directors, the
President or any Vice President of the Issuer.
Issuer Order and Issuer Request: A written order or request
signed in the name of the Issuer by an Issuer Officer or its
Treasurer, an Assistant Treasurer, Controller, an Assistant
Controller, Secretary, or an Assistant Secretary, and delivered
to the Trustee.
Joint Venture Contract: A Government Subcontract the Obligor on which
is a joint venture between the Seller and other Person(s), which joint venture
has no direct-hire employees.
Lien: Any lien, mortgage, security interest, pledge, charge, equity,
encumbrance or right of any kind whatsoever (except any lien, mortgage, security
interest, pledge, charge, equity, encumbrance or right of any kind granted under
a Sale and Purchase Agreement) with respect to the Receivables.
Lockbox Account: Each lockbox account established and
maintained by the Issuer with a depositary institution solely in
the name of the Trustee.
Lockbox Bank: Each depositary institution with which a
Lockbox Account is maintained.
Mandatory Redemption: A redemption by the Issuer of all of
the Notes of a Series pursuant to the related Supplement.
Mandatory Redemption Level: A Collateral Value Ratio of
0.95.
<PAGE>
Moody's: Moody's Investors Service, Inc., and the
successors and assigns thereof.
Net ESOP Contributions: For any period (a) cash contributions to the
ESOP, but only to the extent that such contributions are repaid by the ESOP to
the Company in the form of either (i) cash payments under loan agreements
between the Company and the ESOP, or (ii) cash proceeds from the sale of the
Company's common stock to the ESOP, plus (b) to the extent expensed, the fair
market value of the Company's common stock contributed to the ESOP, less (c) the
amount of principal payments pursuant to third party ESOP related financing
agreements, all determined on a consolidated basis in accordance with GAAP.
Non-Amortization Period: With respect to any Series, the period from
the Closing Date to the close of business on the Payment Date preceding the
Amortization Date for such Series.
Non-U.S. Obligor: An Obligor on a Contract relating to
Commercial Receivables or Government Subcontract Receivables that maintains its
principal place of business outside the United States of America.
Note Interest Payment: With respect to any Notes, the total
amount of interest payable on the Notes on any Payment Date, as
specified in the related Supplement.
Note Interest Rate: With respect to any Note, the note
interest rate payable on such Note as specified in the related
Supplement.
Note Payments: With respect to any Notes, the total amount
of principal and interest payable on the Notes on any Payment
Date, as specified in the related Supplement.
Note Principal Balance: With respect to any Note on any date of
determination, the principal balance thereof on the date of initial issuance,
plus amounts added to the principal balance thereof subsequent to the date of
initial issuance, minus all amounts distributed to the Noteholder of such Note
as of such date in respect thereof on account of principal.
Note Purchase Agreement: The Note Purchase Agreement relating to any
Series or Class of Notes by and among the Issuer, the Company and the Purchasers
of such Notes, as it may be supplemented or amended.
Note Register and Note Registrar: The respective meanings
specified in Section 2.05 hereof.
<PAGE>
Noteholder or Holder: The Person in whose name a Note is
registered in the Note Register.
Notes: Any notes authorized by, and authenticated and
delivered under the Agreement.
Obligor: Each Person who is obligated to pay for merchandise or
services pursuant to a Contract (including any guarantor thereof) and, in the
case of a Government Subcontract, the related Prime Contractor.
Officer: With respect to any corporation, the Chairman of
the Board of Directors, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or the
Assistant Treasurer of such corporation.
Officer's Certificate: For any Person, a certificate delivered to the
Trustee that has been signed on behalf of that Person by an individual who is
identified in that certificate as being an Officer of that Person or any other
individual authorized to execute the certificate.
Opinion of Counsel: A written opinion of an attorney at law admitted to
practice before the highest court of any state of the United States or the
District of Columbia or a law firm that may, except as otherwise expressly
provided in this Indenture, be counsel for the Issuer and who shall be
satisfactory to the Trustee and the Required Holders or, if specified in the
related Supplement with respect to a related Series of Notes, to a specified
percentage of the Outstanding Note Principal Balance relating to such Series of
Notes. Whenever an Opinion of Counsel is required hereunder, such opinion may
rely on opinions of other counsel who are so admitted; provided that any such
other opinion expressly permits such reliance.
Optional Redemption: A redemption at the request of the
Issuer of Notes as specified in the related Supplement.
Outstanding: As of any date of determination, "Outstanding"
refers to all Notes theretofore authenticated and delivered under
the Agreement except:
R. Notes theretofore canceled by the Note
Registrar or delivered to the Note Registrar for
cancellation;
Notes or portions thereof for which payment or
redemption money in the necessary amount has been theretofore deposited
pursuant to Section 4.01 hereof with the Trustee or any Paying Agent
(other than the Issuer) in trust or set aside and segregated in trust
by the Issuer for the Holders of such Notes; provided that if such
Notes or portions thereof are to be redeemed, notice of such redemption
has been duly given pursuant to the Agreement.
T. Notes in exchange for or in lieu of which
other Notes have been authenticated and delivered pursuant
to this Indenture unless proof satisfactory to the Trustee
is presented that any such Notes are held by a holder in due
course; and
U. Notes alleged to have been destroyed, lost or
stolen and for which replacement Notes have been issued as
provided in Section 2.06 hereof;
provided that, in determining whether the Holders of the requisite principal
amount of the Outstanding Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Notes owned by the Issuer or any
other obligor upon the Notes or any Related Person of the Issuer or of such
other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Notes that a Trustee Officer knows to be so owned shall be so disregarded. Notes
so owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Notes and that the pledgee is not the Issuer or
any other obligor upon the Notes or any Related Person of the Issuer or such
other obligor.
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Outstanding Note Principal Balance: As of the time of
reference thereto, the unpaid principal amount of the Notes
Outstanding as of such time of reference.
Parent Undertaking: The Parent Undertaking, dated the
Closing Date, by the Company in favor of the Issuer and the
Trustee.
Paying Agent: Any Person authorized by the Issuer to pay the
principal of or interest on any Notes on behalf of the Issuer.
Payment Date: The 30th day of each month (except that Payment Dates in
the month of February shall be the last day of such month), or, if such day is
not a Business Day, the next succeeding Business Day.
Permitted Accrued Receivables: As to any Determination Date and any
Government Contract or Government Subcontract, an amount equal to the product of
(A) 60 and (B) the Average Daily Revenue for such Government Contract or
Government Subcontract; provided that the related Seller has performed services,
incurred costs or completed work under such Government Contract or Government
Subcontract during the period for which such Average Daily Revenue was
calculated.
Permitted Milestone Accruals: Any Government Receivable or Government
Subcontract Receivable which represent amounts payable for services performed or
costs incurred under Qualified Task Orders issued pursuant to Government
Contracts or Government Subcontracts and which is unbilled but billable solely
upon the Obligor's acceptance of the services performed or goods provided, but
which is expected to be billed (pursuant to the Company's policies) within 60
days of the Purchase Date on which such Receivable is sold to the Issuer.
Person: Any individual, corporation, partnership, joint venture,
limited liability company, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
Primary Contract List: The list of Obligors on Contracts relating to
Commercial Receivables and Government Subcontract Receivables delivered to the
Trustee by the Issuer on the Closing Date and held by the Trustee, as such list
may be amended from time to time as provided in Section 7.06 hereof. The initial
Primary Contract List is attached hereto as Schedule D.
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Prime Contractor: In the case of a Government Subcontract,
the Person other than a Seller, which is in privity of contract
with the Government.
Principal Distribution Amount: With respect to each Payment
Date and any Series of Notes, the amount specified in the related
Supplement.
Principal Terms: With respect to any Series: (a) the name or
designation; (b) the initial principal amount (or method for calculating such
amount); (c) the Note Interest Rate (or method for the determination thereof);
(d) the Payment Date or dates and the date or dates from which interest shall
accrue; (e) the method for allocating collections to Noteholders; (f) the
designation of any accounts and the terms governing the operation of such
accounts with respect to the Series; (g) the Servicing Fee; (h) the Enhancement
Provider and terms of any form of Enhancement with respect thereto; (i) the
terms of which the Notes of such Series may be exchanged for Notes of another
Series, repurchased by the Issuer or remarketed to other investors; (j) the
Stated Maturity; (k) the number of Classes of Notes of such Series and, if more
than one Class, the rights and priorities of each such Class; and (l) fees of
the Trustee and any other applicable terms.
Proceeding: Any suit in equity, action at law or other
judicial or administrative proceeding.
Purchase Date: Each date on which any Receivable is
purchased by the Issuer pursuant to the terms of any Sale and
Purchase Agreement.
Purchase Price: The Purchase Price for each Receivable being purchased
on any Purchase Date, determined as set forth in Section 2.01 of each Sale and
Purchase Agreement.
Purchase Limit: With respect to any Class of Notes, the
Purchase Limit specified in the related Supplement.
Purchasers: The purchasers of any Series or Class of Notes
pursuant to, and identified in, the Note Purchase Agreement for
such Series or Class.
Qualified Bank: A bank having long term unsecured debt obligations
rated by S&P and Duff & Phelps in one of the three highest rating categories
(or, if such obligations are not rated by S&P and Duff & Phelps, then such
rating shall be from either of S&P or Duff & Phelps and Moody's). For purposes
of the next preceding sentence, a bank shall be deemed to have such rating if
such bank is the principal subsidiary of a bank holding company
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and the long term unsecured debt obligations of such bank holding company are
currently rated by S&P and Duff & Phelps in one of the three highest rating
categories (or, if such obligations are not rated by S&P and Duff & Phelps, then
such rating shall be from either of S&P or Duff & Phelps and Moody's). A bank
shall be deemed the principal subsidiary of a bank holding company if the bank's
net worth exceeds 66-2/3% of the consolidated net worth of such bank holding
company.
Qualified Joint Venture Contract: A Joint Venture Contract with respect
to which (i) the Company or a wholly owned subsidiary thereof possesses both
voting control over the Obligor and administrative responsibility for the
related Government Contract between the joint venture and the Government, (ii)
the Obligor has executed and issued to the Trustee an undated Assignment of
Claims Notice for the related Government Contract, in favor of an escrow agent
acting on behalf of the Trustee and the partners in the joint venture other than
the Seller and (iii) payments under the related Government Contract must be
directed to such escrow agent which, in turn, must direct to the Trustee the
portion thereof payable to the Seller under the Joint Venture Contract;
provided, however, that no Joint Venture Contract shall be a Qualified Joint
Venture Contract if, as of any date of determination:
(a) the aggregate Stated Value of Disputed
Receivables under Qualified Joint Venture Contracts
exceeds 25% of the aggregate Stated Value of all
Receivables under Qualified Joint Venture Contracts; or
(b) the aggregate Stated Value of Defaulted Receivables under
Qualified Joint Venture Contracts exceeds 10% of the aggregate Stated
Value of all Receivables under Qualified Joint Venture Contracts.
Qualified Task Order: An order issued under a long-term Government
Contract or Government Subcontract for the performance of services or provision
of goods, which order is not expected to generate more than $250,000 in revenues
in the aggregate.
Rating Agency: As applicable, S&P, Moody's and Duff &
Phelps.
Rating Agency Condition: With respect to any action, that a Rating
Agency shall have notified the Issuer and the Trustee in writing that such
action will not result in a reduction or withdrawal of the rating of any
outstanding Series or Class with respect to which it is a Rating Agency.
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Receivable: All rights to payments from an Obligor under a Contract
listed on the Contract Schedule for such amounts which have been purchased by
the Issuer from time to time pursuant to a Sale and Purchase Agreement, whether
constituting an account or general intangible, including the right to payment of
any interest or finance charges and other obligations of such Obligor with
respect thereto. The term Receivables includes Commercial Receivables,
Government Subcontract Receivables and Government Receivables and excludes that
portion of any Receivable (i) that has been repurchased or substituted for by a
Seller pursuant to Section 4.04 or 4.05 of the related Sale and Purchase
Agreement and (ii) as to which all amounts payable have been collected by the
Servicer.
Receivables Information: Any information provided in
writing by an Authorized Officer of the Sellers under the
Sale and Purchase Agreements to the Purchasers.
Receivables Schedule: The schedule attached as Schedule B
hereto and setting forth the following information as of the
Initial Cut-off Date:
V. With respect to Commercial Receivables:
1. the name of each Obligor:
2. the aggregate Stated Value of the Receivables
of each Obligor;
3. the invoice number of each Commercial
Receivable;
4. the aggregate amount of Disputed
Receivables, if any; and
5. the aggregate amount of Defaulted
Receivables, if any.
W. With respect to Government Receivables
(including Receivables arising under Qualified Joint Venture
Contracts):
1. identification of each Government Contract;
2. the aggregate amount of billed Receivables
for each Government Contract;
3. the aggregate amount of accrued and unbilled
Receivables for each Government Contract;
4. the Average Daily Revenue for each Government
Contract;
5. the aggregate amount of Disputed
Receivables, if any;
6. the aggregate amount of Defaulted
Receivables, if any;
7. the partners in respect of a Qualified Joint
Venture Contract; and
8. the escrow agent, if any, in respect of such
Qualified Joint Venture Contract.
X. With respect to Government Subcontract Receivables:
1. identification of each Government
Subcontract and the related Prime Contractor;
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2. the aggregate amount of billed Receivables
for each Government Subcontract;
3. the aggregate amount of accrued and unbilled
Receivables for each Government Subcontract;
4. the Average Daily Revenue for each Government
Subcontract;
5. the aggregate amount of Disputed Receivables, if any; and
6. the aggregate amount of Defaulted Receivables, if any.
Y. A calculation of the Collateral Value Ratio, including a
statement of the amount of cash to be deposited into the Collection
Account pursuant to Section 3.01(k) hereof in order to produce a
Collateral Value Ratio of 1.00 as of the Initial Cut-off Date.
Record Date: With respect to the Notes, the date on which the Holders
of Notes entitled to receive the payment due on the Notes on the next succeeding
Payment Date are determined, such date as to any Payment Date being the
fifteenth day of the month in which such Payment Date occurs, or would occur but
for the thirtieth day of such month not being a Business Day.
Redemption Date: With respect to the Called Principal of any Note, the
date on which such Called Principal is declared to be due and payable pursuant
to a redemption or an acceleration of maturity pursuant to Section 5.02 hereof
or pursuant to the applicable Supplement. With respect to a Special Redemption
or Mandatory Redemption, the Redemption Date shall be the Payment Date next
succeeding the Determination Date on which such Special
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Redemption or Mandatory Redemption is determined to be required on any other
date specified in the Supplement.
Registered Holder: The Person whose name appears on the Note
Register as the registered holder of a Note.
Related Person: With respect to any Person, any trade or business,
whether or not incorporated, which, together with such Person, is under common
control, as described in Section 414(b) or (c) of the Code.
Repurchase Date: The date determined as described in Section
4.04 of the Sale and Purchase Agreement.
Repurchase Price: The amount calculated as described in
Section 4.04 of the Sale and Purchase Agreement.
Required Holder(s): As of any date of determination, the Registered
Holder or Registered Holders of at least 66-2/3% of the Outstanding Note
Principal Balance in the aggregate, unless otherwise indicated, of all Series
Outstanding at such time; provided, however, that, for purposes of this
definition, Outstanding Note Principal Balance shall be deemed to include the
Purchase Limit with respect to any applicable Class of Notes.
Required Reserve Balance: With respect to any Series, the
balance required pursuant to the related Supplement.
Reserve Fund: With respect to any Series, any reserve fund
so denominated and established pursuant to the related
Supplement.
Responsible Officer: Any officer of the Issuer, the Servicer or a
Seller who is familiar with, and customarily performs functions relating to, the
Issuer's, the Servicer's or a Seller's obligations under the Indenture, the
Servicing Agreement and the Sale and Purchase Agreements, as the case may be.
Retainages: Amounts to be contractually withheld by an
Obligor pursuant to an underlying Contract.
Sale: The meaning specified in Section 5.16 hereof.
Sale and Purchase Agreement: Each Sale and Purchase Agreement,
substantially in the form of Exhibit C hereto, between the Issuer and a Seller
whereby the Receivables securing the Notes are sold by such Seller to the
Issuer.
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S&P: Standard & Poor's Ratings Services, a division of the McGraw-Hill
Companies, Inc., and the successors and assigns thereof.
Scheduled Principal Debt: The amount of principal scheduled to be due
but not yet paid, on indebtedness of the Company and its subsidiaries on a
consolidated basis, including amounts due by reason of acceleration.
Indebtedness shall include notes, debentures, capitalized lease obligations,
mortgages and other obligations recorded as notes payable or debt in the
Company's financial statements, all as determined in accordance with GAAP;
provided, however, that all amounts due under (i) term loans, letters of credit,
revolving credit facilities, and lines of credit due to banking institutions and
(ii) all Series of Notes shall be excluded, unless payment of such amounts due
as to any Series has been accelerated as a result of a default by the Company
under the related Supplement or under the Indenture.
Seller: Each of the Company and any majority-owned subsidiaries of the
Company that (a) enters into Sale and Purchase Agreements following the Closing
Date, each being party to a Sale and Purchase Agreement and (b) the obligations
of which, pursuant to the Parent Undertaking, are guaranteed by DynCorp. Major
divisions of a Seller will be deemed to be Sellers, provided that such divisions
will not enter into separate Sale and Purchase Agreements.
Seller's Lockbox: Each lockbox account established and
maintained by a Seller or the Servicer in its own name with a
depository institution.
Series: Any series of Notes issued pursuant to a Supplement, which may
include within any such Series, a Class or Classes of Notes subordinate to
another such Class or Classes of Notes.
Series Issuance Date: With respect to any Series, the date on which the
Notes of such Series are to be originally issued in accordance with Section 2.11
hereof and the related Supplement.
Servicer: DynCorp, or any successor thereto, in its capacity
as Servicer under the Servicing Agreement.
Servicing Agreement: The Servicing Agreement dated the date
hereof by and among the Issuer, the Trustee and the Servicer, as
it may be supplemented or amended.
Servicing Fee: With respect to each Payment Date with
respect to a Series of Notes, the servicing fee specified in the
related Supplement.
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Special Redemption: A redemption by the Issuer of Notes as
specified in the related Supplement.
Stated Maturity: With respect to any Notes, the date specified in such
Note and the related Supplement as the fixed date on which the final installment
of the principal of such Note is due and payable.
Stated Value: (a) As to any Receivable that has been billed, the amount
billed (net of any Retainages under the related Contract) for services rendered,
cost incurred or work completed pursuant to the related Contract, (b) as to any
Government Receivable (including any Receivable under a Qualified Joint Venture
Contract) or Government Subcontract Receivable that is accrued and unbilled,
including any accrued fixed fee, award fee, general and administrative expense
and overhead expense, the amount which has been determined with respect to a
Determination Period, and without regard to the 0.15 discount under clause
(c)(iii) below, and (c) as to that portion of a Government Receivable (including
any Receivable under a Qualified Joint Venture Contract) or Government
Subcontract Receivable that is accrued and unbilled (other than amounts in (b)
above), the product of (i) the Average Daily Revenue for the related Contract,
(ii) the number of Calendar Days since the Purchase Date on which accrued and
unbilled Government Receivables (including any Receivable under a Qualified
Joint Venture Contract) arising under such Contract were last sold to the Issuer
(taking into account any adjustment to the related Average Daily Revenue during
such period) and (iii) 0.85; provided that on each Determination Date, the
Stated Value of accrued and unbilled Government Receivables (including any
Receivable under a Qualified Joint Venture Contract) and Government Subcontract
Receivables, as determined in clause (c) above shall be the actual amount of
such accrued and unbilled Receivables as of the last day of the preceding
Determination Period as determined by the Seller on such current Determination
Date, without regard to the 0.15 discount under clause (c)(iii) above.
Successor Servicer: Any servicer appointed by the Issuer or
the Trustee pursuant to Section 5.03 of the Servicing Agreement.
Supplement: With respect to any Series, a supplement to this Indenture
complying with the terms of Section 2.11 hereof, executed in connection with any
issuance of any Series of Notes.
Trustee: Bankers Trust Company, a New York State banking
corporation, or its agents, attorneys, custodians or nominees
unless a successor Person shall have become the Trustee pursuant
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to the applicable provisions of this Indenture, and thereafter "Trustee" shall
mean such successor Person.
Trustee Officer: With respect to the Trustee, any officer assigned to
the Corporate Trust Office, including any managing director, vice president,
assistant vice president, assistant treasurer, assistant secretary or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and having direct
responsibility for the administration of this Agreement, and also, with respect
to a particular matter, any other officer, to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
Trust Estate: All money, instruments and other property subject or
intended to be subject to the lien of the Agreement, pursuant to the Granting
Clauses of the Agreement, for the benefit of the Holders of the Notes as of any
particular time (including, without limitation, all property and interests
Granted to the Trustee in the Agreement) and all right, title and interest of
the Trustee in, to and under the Servicing Agreement, each Sale and Purchase
Agreement and all money and property received or receivable by the Trustee
pursuant thereto or otherwise in respect of the Receivables and Eligible
Investments, including all proceeds thereof.
UCC: The Uniform Commercial Code as in effect in the
relevant jurisdiction.
Vice President: Any vice president, irrespective of whether
such title is modified by any other forms preceding or following.
Yield Maintenance Amount: With respect to any Series or
Class of Notes, the amount specified in the related Supplement.
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ARTICLE TWO
THE NOTES
Form Generally.
Any Series or Class of Notes and the Trustee's certificate of
authentication related thereto shall be in substantially the form set forth as
an exhibit to the related Supplement with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture or such Supplement, and may have such letters, numbers or other
marks of identification, as may, consistently herewith, be determined by the
Officers of the Issuer executing such Notes, as evidenced by their execution of
such Notes. Any portion of the text of any Note may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the Note.
The definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods, all as determined by
the Officers of the Issuer executing such Notes, as evidenced by their execution
of such Notes.
Form of Notes.
The Notes of each Series shall be substantially in the form set forth
as an exhibit to the Supplement related to such Series.
Denominations.
Unless otherwise specified in the related Supplement and the Notes, the
Notes shall be issuable in fully registered form, in the minimum principal
amount of $500,000 and integral multiples of $100,000 in excess thereof;
provided that one Note may be issued in such denomination as may be necessary to
represent the remainder of the Note Principal Balance.
Execution, Authentication, Delivery and Dating.
The Notes shall be executed by manual signature on behalf of the Issuer
by its President or one of its Vice Presidents.
Notes bearing the manual signature of an individual who was at any time
a proper Officer of the Issuer shall bind the Issuer, notwithstanding the fact
that such individual has ceased to hold such offices prior to the authentication
and delivery of such
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Notes or did not hold such offices at the date of issuance of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Notes executed by the Issuer to the
Trustee for authentication, and the Trustee shall authenticate and deliver such
Notes as in this Indenture or the related Supplement provided and not otherwise.
Notes which are authenticated and delivered by the Trustee to or upon
the order of the Issuer on the Closing Date shall be dated the Closing Date. All
other Notes which are authenticated after the Closing Date for any other purpose
hereunder shall be dated the date of their authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein or
in the related Supplement executed by the Trustee by manual signature, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder.
Registration, Registration of Transfer and
Exchange.
The Issuer shall cause to be kept a "Note Register" in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Trustee is hereby initially appointed "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided.
If a Person other than the Trustee is appointed by the Issuer as Note
Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of a Note Registrar and of the location, and any change in the
location, of the Note Register, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note Registrar by an Officer thereof as to the names and addresses of the
Holders of the Notes and the principal amounts and numbers of such Notes.
Upon surrender for registration of transfer of any Note in certificated
form at the office or agency of the Issuer to be maintained as provided in
Section 8.02 hereof, the Issuer shall execute, and, upon an Issuer Order, the
Trustee shall
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authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations of a like
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes in
any authorized denominations and of the like aggregate principal amount, upon
surrender of such Notes to be exchanged at the office or agency of the Issuer.
Whenever any Notes are so surrendered for exchange, the Issuer shall execute,
and upon an Issuer Order, the Trustee shall authenticate and deliver, the Notes
that the Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every such Note presented or surrendered for registration of transfer
or exchange shall (if so required by the Issuer or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Trustee duly executed by the Holder thereof
or his attorney duly authorized in writing, and by such other documents as the
Trustee may reasonably require, provided that the Trustee shall not require
legal opinions in connection with any such transfer or exchange.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of such Notes.
Mutilated, Destroyed, Lost or Stolen Notes.
If (a) any mutilated Note is surrendered to the Trustee, or the Issuer
and the Trustee receive evidence to their reasonable satisfaction of the
destruction, loss or theft of any Note (the
written statement of an institutional Noteholder shall be deemed
satisfactory for such purpose), and (b) there is delivered to the Issuer and the
Trustee such security or indemnity as may be required by them to save each of
them harmless (the unsecured agreement of indemnity of an institutional
Noteholder shall be deemed satisfactory for such purpose), then, in the absence
of notice to the Issuer or the Note Registrar that such Note has been acquired
by a bona fide purchaser, the Issuer shall execute and upon an Issuer Order the
Trustee shall authenticate and
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deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Note, a new Note of the same tenor and principal amount, bearing a number
not contemporaneously outstanding; provided, however, that if any such
mutilated, destroyed, lost or stolen Note shall have become or shall be about to
become due and payable, or shall have been selected or called for redemption,
instead of issuing a new Note, the Issuer may pay such Note without surrender
thereof, except that any mutilated Note shall be surrendered.
Upon the issuance of any new Note under this Section 2.06, the Issuer
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section 2.06 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
Payment of Principal and Interest; Principal and Interest Rights
Preserved.
A. Unless otherwise specified in an applicable Supplement, the Notes
shall bear interest from the applicable Closing Date until paid at the Note
Interest Rate. With respect to any Payment Date, interest on the Outstanding
Note Principal Balance of the Notes will accrue and be payable for the Interest
Period as defined in the related Supplement.
B. The principal of the Notes shall be payable as
specified in the related Supplement.
C. Payments on the Notes shall be made by the Trustee by wire transfer
of immediately available funds to the account of the Person entitled thereto at
a bank or other entity having appropriate facilities therefor if such Person
shall have so notified the Trustee in writing by the Record Date immediately
prior to such Payment Date and is the registered owner of Notes in the initial
aggregate principal amount equal to or in excess of $500,000. The final
installment of principal of and interest on each Note (or the Redemption Price
thereof in the case of a Note called for Optional Redemption) shall be payable
on or after its Stated Maturity. The Trustee shall notify the Person in whose
name a Note is registered at the close of business on the twenty-fifth day of
the month next preceding the month of the Payment Date on which the Issuer
expects that the final installment of principal of and interest on such Note
will be paid. Such notice shall be mailed no earlier than the sixtieth day, and
no later than the thirty-fifth day (or, in the case of a final Payment Date
occurring in the month of February, the thirty-third day), prior to such Payment
Date. Within 30 days after the final installment of principal of and interest on
each Note (or the Redemption Price thereof in the case of a Note called for
Optional Redemption), the Holders will return the Notes to the Trustee.
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D. The Holders of the Notes as of the Record Date in respect of a
Payment Date shall be entitled to the interest accrued and payable and principal
payable on such Payment Date. Payments of principal to such Holders shall be
made in the proportion that the unpaid principal balance of the Notes registered
in the name of each such Holder on such Record Date bears to the aggregate
unpaid principal balance of all the Notes on such Record Date. All payment
obligations under a Note are discharged to the extent such payments are made to
the Holder of record.
E. Each Note delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Note shall carry the
rights to unpaid interest and principal that were carried by such other Note.
Persons Deemed Owners.
Prior to due presentment for registration of transfer of any Note, the
Issuer, the Trustee and any agent of the Issuer or of the Trustee may treat the
Person in whose name any Note is registered as the owner of such Note for the
purpose of receiving payments of principal of, premium, if any, and interest on
such Note and for all other purposes whatsoever, (whether or not such Note is
overdue), and neither the Issuer, the Trustee nor any agent of the Issuer or the
Trustee shall be bound by notice to the contrary.
Cancellation.
All Notes surrendered for payment, registration of transfer, exchange
or redemption shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly canceled by it. The Issuer may at
any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
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lawful manner whatsoever, and all Notes so delivered shall be promptly canceled
by the Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes canceled as provided in this Section, except as expressly permitted by
this Indenture. All canceled Notes held by the Trustee shall be destroyed unless
the Issuer shall direct by a timely Issuer Order that they be returned to it.
Purchase of Notes by Issuer.
If the Issuer or any Affiliate of the Issuer offers to purchase Notes,
the Issuer must make such offer to all Noteholders pro rata in proportion to the
Note Principal Balance held by each Noteholder.
New Issuances.
A. The Issuer may from time to time issue one or more Series of Notes
pursuant to a Supplement. The Notes of all outstanding Series shall be equally
and ratably entitled as provided herein to the benefits of this Indenture
without preference, priority or distinction, all in accordance with the terms
and provisions of this Indenture except, with respect to any Series or Class, as
provided in the related Supplement. Interest on the Notes of all outstanding
Series shall be paid pro rata on each Payment Date unless otherwise indicated in
the Supplement relating to such outstanding Series. Principal of the Notes of
each outstanding Series shall be paid as indicated in the Supplement relating to
such outstanding Series.
B. On or before the Series Issuance Date relating to any new Series,
the parties hereto will execute and deliver a Supplement which will specify the
Principal Terms of such new Series and of any Classes within such Series. The
terms of such Supplement may modify or amend the terms of this Indenture solely
as applied to such new Series. The obligation of the Trustee to authenticate the
Notes of such new Series and to execute and deliver the related Supplement is
subject to the satisfaction of the following conditions:
(i) on or before the fifteenth Business Day immediately
preceding the Series Issuance Date, the Issuer shall have given the
Trustee, the Servicer, the Holders of each Series Outstanding and each
Rating Agency then rating any Outstanding Series of Notes written
notice of such issuance and the Series Issuance Date;
(ii) the Issuer shall have delivered to the
Trustee the related Supplement, executed by each party
hereto other than the Trustee;
(iii) the Issuer shall have delivered to the Trustee any
related Enhancement Agreement executed by each of the parties thereto,
other than the Trustee;
the Rating Agency Condition shall have been
satisfied with respect to such issuance;
(v) such issuance will not result in the occurrence of
an Event of Default and the Issuer shall have delivered to the Trustee
and any Paying Agent an Officer's Certificate, dated the Series
Issuance Date (upon which the Trustee may conclusively rely), to the
effect that such issuance will not result in the occurrence of an Event
of Default at some time in the future;
(vi) the Issuer shall have delivered to the Trustee an
Opinion of Counsel, dated the Series Issuance Date, to the effect that
the issuance of the Notes of such Series need not be registered under
the Securities Act of 1933, as amended, and will not result in the
requirement that any other Series of Notes not registered under the
Securities Act of 1933, as amended, be so registered (unless the Issuer
has elected, in its sole discretion, to register such Notes), and will
not result in the Trust Estate or the Issuer becoming subject to
registration as an investment company under the Investment Company Act
of 1940, as amended, and will not require this Agreement to be
qualified under the Trust Indenture Act of 1939, as amended;
(vii) the Issuer shall have delivered to the Trustee an
Opinion of Counsel, dated the Series Issuance Date, with respect to
such issuance to the effect that, for federal income and Delaware
income tax purposes, (x) such new issuance will not adversely affect
the characterization of the Notes of any outstanding issuance or Class
as debt of the Issuer, (y) such new issuance will not cause a taxable
event to any Noteholders and (z) such new issuance will be
characterized as debt of the Issuer; and
(viii) the Issuer shall have delivered to the Trustee an
Officer's Certificate certifying for the period six months prior to the
date of, and after giving effect to, a new issuance that (x) no Event
of Default shall have occurred, (y) the Collateral Value Ratio shall
have been maintained at not less than 1.00 and (z) any Reserve Fund
shall have been maintained at the Required Reserve Balance, each as
specified in the related Supplement.
C. Upon satisfaction of the above conditions, pursuant to Section 3.01
hereof, the Trustee shall execute the Supplement and the Issuer shall execute
and deliver the Notes of such Series for authentication and delivery to or upon
the order of the Issuer. The Trustee may, but shall not be obligated to, enter
into any such Supplement which affects the Trustee's own rights, duties or
immunities under the Agreement.
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ARTICLE THREE
AUTHENTICATION AND DELIVERY OF NOTES
General Provisions.
Notes complying with the requirements of the foregoing Article may be
executed by the Issuer and delivered to the Trustee for authentication and
thereupon the same shall be authenticated and delivered by the Trustee upon
Issuer Request and upon receipt by the Trustee on the Initial Closing Date of
the following:
A. an Officer's Certificate from the Issuer: (i) evidencing
the authorization of the execution, authentication and delivery of the
Notes and specifying the Stated Maturity, aggregate principal amount
and Note Interest Rate of the Notes to be authenticated and delivered;
(ii) certifying the Certificate of Incorporation and Bylaws of the
Issuer (copies of which are attached); (iii) stating that no approval,
authorization, consent, order, registration, qualification, license or
permit of or with any court or governmental agency or body (other than
those that have already been obtained, copies of which are attached) is
required for the execution and delivery of the Notes, or the execution,
delivery and performance of the Indenture, by the Issuer; and (iv)
stating that the issuance of the Notes will not result in a breach of
any of the terms, conditions or provisions of, or constitute a default
under, the Issuer's articles of incorporation or bylaws or any
indenture, mortgage, deed of trust or other agreement or instrument to
which the Issuer is a party or by which it is bound, or any order of
any court or administrative agency entered in any Proceeding to which
the Issuer is a party or by which it may be bound or to which it may be
subject;
B. a Board Resolution of the Issuer authorizing the execution,
performance and delivery of the Indenture and any related Supplement
and the execution, authentication by the Trustee and delivery of the
Notes and specifying the Stated Maturity and principal amounts of Notes
to be authenticated and delivered, certified by the secretary or
assistant secretary of the Issuer, which certificate shall state that
such Board Resolution has not been amended, modified, revoked or
rescinded as of the date of such certification;
C. evidence of the good standing of the Issuer;
an Opinion of Counsel to the Issuer dated not earlier
than such Issuer Request, to the effect set forth in Exhibit B hereto;
E. an Accountant's Certificate (1) confirming the information
with respect to the Receivables set forth in Schedule B by reference to
sources provided by the Company and (2) specifying procedures
undertaken by them to review data and computations relating to the
following statements and confirming that the following statements are
accurate:
1. as of the Cut-off Date the aggregate Stated Value
of all Receivables included in the Trust Estate, valued at the
applicable Collateral Value Percentage, together with any
amount required to be deposited in the Collection Account
pursuant to Section 3.01(k) is sufficient to produce a
Collateral Value Ratio of not less than 1.00; and
2. as of the Cut-off Date the composition of the
Receivables included in the Trust Estate satisfies the
requirements of Section 2.02(j)(i)-(vi), (k) and (l) of
the Sale and Purchase Agreement.
F. an Officer's Certificate from the Issuer, dated as of the
date of such Issuer Request, to the effect (which may be combined with
the Officer's Certificate required by Section 3.01(a) hereof) that, in
the case of the Receivables included in the Trust Estate on the Closing
Date or to be included in the Trust Estate on the date of closing
specified in the related Supplement;
1. the Issuer is the owner of such
Receivables arising under such Contract;
2. the Issuer has not assigned any interest or
participation in such Receivable except pursuant to
this Indenture (or, if any, such interest or
participation has been assigned, it has been released);
3. the Issuer has full right to Grant a security
interest in and assign and pledge the Trust Estate to
the Trustee; and
4. UCC financing statements with respect to the
Trust Estate have been filed with the Secretary of
State of the State of Delaware;
G. an executed copy of the Servicing Agreement;
an executed copy of each Sale and Purchase Agreement;
I. such other documents as the Trustee may reasonably
require;
J. an amount shall have been deposited in the
Collection Account representing the amount of cash required
to result in a Collateral Value Ratio of 1.00 as of the
Initial Cut-off Date; and
K. any required deposit to the Reserve Fund
pursuant to the related Supplement, which deposit may be
made out of the proceeds of the sale of the Notes; and
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L. an Officer's Certificate from the Issuer
certifying as of the Initial Cut-off Date the information
set forth in Sections 2.02(g), 2.02(j)(i)-(vi) and 2.02(k)
and (1) of the Sale and Purchase Agreements.
The Receivables.
The Issuer represents and warrants to the Trustee that the Receivables
listed on Schedule B hereof conform as of the Initial Cut-off Date for the
related Series, and additional Receivables purchased by the Issuer on any
Purchase Date after the Closing Date, will conform, to each of the
representations and warranties contained in Section 4.02 of the applicable Sale
and Purchase Agreement.
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
Satisfaction and Discharge of the Agreement.
The Agreement shall cease to be of further effect with respect to the
Notes except as to (a) rights of registration of transfer and exchange, (b)
substitution of mutilated, destroyed, lost or stolen Notes, (c) the rights of
Noteholders to receive payments of principal thereof and interest thereon, (d)
the rights, obligations and immunities of the Trustee hereunder, and (e) the
rights of Noteholders as beneficiaries hereof with respect to the property so
deposited with the Trustee and payable to all or any of them, and the Trustee,
on demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of the Agreement with respect to the
Notes when:
1. all Notes theretofore authenticated and delivered (other
than (1) Notes which have been destroyed, lost or stolen and which have
been replaced, or paid as provided in Section 2.06, and (2) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to the
Issuer or discharged from such trust, as provided in Section 8.03) have
been delivered to the Trustee for cancellation or an indemnity
reasonably satisfactory to the Trustee on account thereof has otherwise
been provided (the unsecured agreement of indemnity of the Noteholders
shall be deemed satisfactory for such purpose);
2. the Issuer has paid or caused to be paid all other
sums payable hereunder by the Issuer with respect to the
Notes; and
3. the Issuer has delivered to the Trustee an
Officer's Certificate stating that all amounts payable
hereunder to the Noteholders have been paid.
Notwithstanding the satisfaction and discharge of the Agreement, the
obligations of the Issuer to the Trustee under Section 6.07 and of the Trustee
to the Noteholders under Section 4.02 shall survive.
Application of Trust Money.
All monies deposited with the Trustee pursuant to Section 4.01 hereof
shall be held in trust and applied by it, in accordance with the provisions of
the Notes and the applicable Supplement, to make payments, either directly or
through any Paying Agent, as the Trustee may determine to the Person entitled
thereto of the principal and interest payable on the Notes in respect of which
such money has been deposited with the Trustee.
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ARTICLE FIVE
DEFAULTS AND REMEDIES
Events of Default.
"Event of Default" with respect to any Note of any Outstanding Series
wherever used herein, means any one of the following events (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
a. Default by the Issuer in the payment of any principal,
interest, Commitment Fees or premium in respect of any Note when the
same becomes due and payable pursuant to the Indenture or any
Supplement, which Default shall continue for a period of one Business
Day after the related Payment Date; or
b. Default in the performance, or breach, of any covenant or
warranty of the Issuer in the Agreement (other than a covenant or
warranty a Default in the performance, or breach, of which is elsewhere
in this Section 5.01 or in Article Nine specifically dealt with) or in
the Servicing Agreement or a Sale and Purchase Agreement (other than
those representations in Section 4.02 thereof), as applicable, that
would have a material adverse effect on the interests of the
Noteholders, and the continuance of such Default or breach for a period
of 30 days after the earlier to occur of (a) receipt by the Issuer of
written notice thereof or (b) a Responsible Officer of the Issuer shall
have had actual knowledge thereof; or
c. the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Issuer as bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Issuer under the Federal Bankruptcy Code or any other applicable
federal or state law, or appointing a receiver, liquidator, assignee,
or sequestrator (or other similar official) of the Issuer or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or
d. the institution by the Issuer of Proceedings to be
adjudicated as bankrupt or insolvent or for the appointment of or
taking possession by, a trustee, a receiver, custodian, liquidator or
similar official of the Issuer, or any such Proceedings are commenced
against the Issuer and the Issuer by any act indicates its approval
thereof, consent thereto or acquiescence therein, or the filing by it
of a petition or answer or consent seeking reorganization or relief
under the Federal Bankruptcy Code or any other similar applicable
federal or state law, or the consent by it to the filing of any such
petition; or
e. any order, judgment or decree is entered in
any Proceeding decreeing the dissolution of the Issuer and
such order, judgment or decree remains unstayed and in
effect for more than 60 days; or
f. a final judgment is rendered against the Issuer in an
amount greater than $100,000 and, within 60 days after entry thereof,
such judgment is not discharged or execution thereof stayed pending
appeal, or within 60 days after the expiration of any such stay, such
judgment is not discharged; or
g. the Issuer makes an assignment for the
benefit of creditors or is generally not paying its debts as
such debts become due; or
h. any representation or warranty (other than
those representations in Article IV of the Sale and Purchase
Agreement for which the sole remedy is the obligation to
repurchase such Receivables pursuant to Section 4.04 thereof) made in
writing by or on behalf of the Issuer herein or in any instrument
furnished in compliance herewith or in reference to the Agreement or
otherwise in connection with the transactions contemplated by the
Agreement shall be false in any material respect on the date as of
which made, and such breach shall not have been remedied within 30 days
after the earlier to occur of (a) receipt by the Issuer of written
notice thereof or (b) a Responsible Officer of the Issuer shall have
had actual knowledge thereof; or
i. the Issuer fails to perform or observe, or fails to cause
to be performed or observed, any other agreement, term or condition
contained herein that would have a material adverse effect on the
interests of the Noteholders and such default shall not have been
remedied within 30 days after the earlier to occur of (a) receipt by
the Issuer of written notice thereof and (b) a Responsible Officer of
the Issuer shall have had actual knowledge thereof; or
j. the occurrence of an event of default
pursuant to Section 5.01 of the Servicing Agreement.
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Acceleration of Maturity.
A. If an Event of Default specified in clause (3), (4) or (5) of
Section 5.01 hereof occurs, all of the Notes at the time Outstanding shall be
immediately due and payable at par together with interest accrued thereon and
all other accrued amounts owing under the Agreement; and
B. If any Event of Default other than that specified in Section 5.02(a)
hereof occurs, the Trustee, if directed by an Act of the Noteholders of all
Series evidencing 51% of the Outstanding Note Principal Balance, shall by notice
in writing to the Issuer and the Noteholders, declare all of the Notes and other
accrued amounts owing under the Agreement to be, and all of such Notes and such
other amounts owing under the Agreement shall thereupon be and become,
immediately due and payable together with interest accrued on such Notes.
Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Issuer covenants that upon the acceleration of the maturity of the
Notes pursuant to Section 5.02 hereof, the Issuer will, upon demand of the
Trustee, immediately pay to the Trustee for the benefit of the Holder of each
Note the whole amount then due and payable on such Note for principal and
interest, with interest upon the overdue principal and, to the extent that
payments of such interest shall be legally enforceable, upon overdue
installments of interest pursuant to Section 2.07(a) hereof, in the order set
forth in Section 5.06 hereof and, in addition thereto, 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.
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If the Issuer fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as Trustee of an express trust, may institute a
Proceeding for the collection of the sums
so due and unpaid, and may prosecute such Proceeding to judgment or final
decree, and may enforce the same against the Issuer and collect the monies
adjudged or decreed to be payable in the manner provided by law.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Noteholders by such appropriate proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in the Agreement or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Trustee by the Agreement or by law.
In case there shall be pending Proceedings relative to the Issuer under
Title 11 of the United States Code or any other applicable federal or state
bankruptcy, insolvency or other similar law, or in case a receiver, assignee or
trustee in bankruptcy or reorganization, liquidator, sequestrator or similar
official shall have been appointed for or taken possession of the Issuer or its
property, or in case of any other comparable judicial Proceedings relative to
the Issuer or the creditors or property of the Issuer, the Trustee, regardless
whether the principal of any Notes shall then be due and payable as therein
expressed or by declaration or otherwise and regardless whether the Trustee
shall have made any demand pursuant to the provisions of this Section 5.03,
shall be entitled and empowered, by intervention in such Proceedings or
otherwise:
A. to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes, and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee and each predecessor Trustee,
and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee, except as a
result of negligence or bad faith) and of the Noteholders allowed in
any Proceedings relative to the Issuer or other obligor upon the Notes,
or to the creditors or property of the Issuer or such other obligor,
B. unless prohibited by applicable law and
regulations, to vote on behalf of the Holders of the Notes
in any election of a trustee or a standby trustee in
arrangement, reorganization, liquidation or other bankruptcy
or insolvency Proceedings or Person performing similar
functions in comparable Proceedings, and
C. to collect and receive any monies or other property payable
or deliverable on any such claims, and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Trustee on their behalf; and any trustee, receiver or liquidator,
custodian or other similar official is hereby authorized by each of the
Noteholders to make payments to the Trustee, and, in the event that the
Trustee shall consent to the making of payments directly to the
Noteholders, to pay to the Trustee such amounts as shall be sufficient
to cover reasonable compensation to the Trustee, each predecessor
Trustee and their respective agents, attorneys and counsel, and all
other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence
or bad faith.
Amounts payable to the Trustee under this section are intended to
constitute Administrative Expenses. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or vote for or accept or adopt
on behalf of any Noteholder any plan of reorganization, arrangement, adjustment
or composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Noteholder in any
such Proceeding except, as aforesaid, to vote for the election of a trustee in
bankruptcy or similar person.
In any Proceedings brought by the Trustee (and also any Proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the Holders
of the Notes, and it shall not be necessary to make any Holders of the Notes
parties to any such Proceedings.
Remedies.
If an Event of Default shall have occurred and be continuing, the
Trustee shall, at the direction of the Required Holders, do one or more of the
following:
A. institute Proceedings for the collection of
all amounts then payable on the Notes or under the
Agreement, whether by declaration or otherwise, enforce any
judgment obtained, and collect from the Trust Estate
securing the Notes monies adjudged due;
B. sell all or a portion of the Trust Estate securing the
Notes or rights of interest therein, at one or more public or private
sales called and conducted in any manner permitted by law; provided
that the Trustee must obtain the prior consent of all Noteholders if
the proceeds of such sale are expected to be less than the Outstanding
Note Principal Balance;
C. institute Proceedings from time to time for
the complete or partial foreclosure of the Agreement with
respect to the Trust Estate securing the Notes; and
D. exercise any remedies of a secured party
under the UCC and take any other appropriate action to
protect and enforce the rights and remedies of the Trustee
or the Holders of the Notes hereunder.
Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under the Agreement or the Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any Proceeding relating thereto, and any such
Proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Notes and any other parties entitled thereto pursuant to the applicable
Supplement.
Application of Proceeds.
Any money collected by the Trustee pursuant to this Article Five shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in the case of the distribution of the entire amount due on account of
principal of and any interest on such Notes, upon presentation and surrender
thereof:
First: To the payment of any amounts due the Trustee
under Section 6.07 hereof;
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Second: To the payment of the amounts then due and owing upon
the Notes, first, for interest including interest on any principal of
or accrued interest on such Notes which was not paid when due, which
amounts shall bear interest as provided in the last sentence of Section
2.07(a) hereof, but only to the extent that the payment of interest on
overdue interest shall be legally enforceable; second, for principal;
and third, for any premium, including any Yield Maintenance Amount;
Third: To the payment of any unpaid amount, known to
the Trustee, due other Persons in respect of expenses of the
Issuer; and
Fourth: To the payment of any remaining balance to the
Issuer.
Limitation on Suits.
No Holder of any Note shall have any right to institute any
Proceedings, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
the Trustee has failed to declare all of the
Outstanding Notes due and payable as required by Section
5.02 hereof;
B. such Holder has previously given written
notice to the Trustee of a continuing Event of Default;
C. such Holder shall have made written request
to the Trustee to institute Proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
D. such Holder has offered to the Trustee
reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request;
E. the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to
institute any such Proceeding; and
F. no direction inconsistent with such written
request has been given to the Trustee during such
60-day period by the Required Holders;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of the Agreement to affect, disturb or prejudice the rights of any other Holders
of Notes or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under the Agreement, except in the manner herein
provided and for the equal and ratable benefit of all the Holders of Notes.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups
of Holders of Notes, each representing less than a majority of the then
aggregate Outstanding amount of the Outstanding Notes, the Trustee in its sole
discretion may determine what action, if any, shall be taken, notwithstanding
any other provisions of this Indenture.
Unconditional Rights of Noteholders to Receive Principal and
Interest.
Notwithstanding any other provision in the Agreement, the Holder of any
Note shall have the right which is absolute and unconditional to receive payment
of the principal of and interest in respect of such Note as such principal and
interest becomes due and payable and to institute suit for the enforcement of
any such payment, and such right shall not be impaired without the consent of
such Holder.
Restoration of Rights and Remedies.
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If the Trustee or any Noteholder has instituted any Proceeding to
enforce any right or remedy under the Agreement and such Proceeding has been
discontinued or abandoned, or has been determined adversely to the Trustee or to
such Noteholder, then and in every such case the Issuer, the Trustee and the
Noteholder shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Noteholders shall continue as
though no such Proceeding had been instituted.
Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee or
to the Noteholder is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy occurring upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article Five or by
law to the Trustee or to the Noteholders may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee or by the Noteholders, as
the case may be.
Control by Noteholders.
So long as any Notes are Outstanding, the Required Holders shall have
the right to direct the time, method and place of conducting any Proceeding for
any remedy available to the Trustee with respect to the Notes or exercising any
trust or power conferred on the Trustee with respect to the Notes; provided
that:
A. the Trustee shall have the right to decline
any such direction if the Trustee, being advised by counsel,
determines that the action so directed is in conflict with
any rule of law or with the Agreement, and
the Trustee may take any other action deemed proper
by a Trustee Officer that is not inconsistent with such direction;
provided, however, that, subject to Section 6.01 hereof, the Trustee
need not take any action that a Trustee Officer determines might
involve the Trustee in liability or be unjustly prejudicial to the
Noteholders not consenting.
Waiver of Past Defaults.
The Required Holders may on behalf of the Holders of all the Notes
waive in writing any past Default with respect to the Notes and its
consequences, except a Default:
A. in the payment of the principal or interest
in respect of any Note, or
B. in respect of a covenant or provision hereof
that under Section 10.01 hereof (except Subsection (b)(iii)
thereof) cannot be modified or amended without the consent
of the Holder of each Outstanding Note affected.
Upon any such written waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of the Agreement; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
Undertaking for Costs.
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All parties to the Agreement agree, and each Holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
the Agreement, or in any suit against the Trustee for any action taken, suffered
or omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Noteholder, or group of Noteholders, (in
compliance with Section 5.07 hereof), holding in the aggregate more than 10% in
principal amount of the Outstanding Notes, or to any suit instituted by any
Noteholder for the enforcement of the payment of the principal or interest in
respect of any Note on or after the Payment Date on which any of such amounts
was due (or, in the case of redemption, on or after the applicable Redemption
Date).
Waiver of Stay or Extension Laws.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any
stay or extension law wherever enacted, now or at any time here- after in force,
which may adversely affect the covenants or the performance of the Agreement;
and the Issuer (to the extent that it may lawfully do so) 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.
Sale of Trust Estate.
A. The method, manner, time, place and terms of any Sale of all or any
portion of the Trust Estate pursuant to Section 5.04 shall be commercially
reasonable. The Trustee may from time to time postpone any Sale by public
announcement made at the time and place of such Sale. The Trustee hereby
expressly waives its right to any amount fixed by law as compensation for any
Sale.
B. In connection with a Sale of all or any portion of the Trust Estate
pursuant to Section 5.04 hereof, any Noteholder may bid for and purchase the
property offered for Sale, and upon compliance with the terms of such Sale may
hold, retain and possess and dispose of such property, without further
accountability, and may, in paying the purchase money therefor, deliver any
Outstanding Notes or claims for interest thereon in lieu of cash up to the
amount that shall, upon distribution of the net proceeds of such Sale, be
payable thereon, and such Notes, in case the amounts so payable thereon shall be
less than the amount due thereon, shall be returned to the Holders thereof after
being appropriately stamped to show such partial payment.
C. The Trustee may bid for and acquire any portion of the Trust Estate
securing the Notes in connection with a public sale thereof, and may pay all or
part of the purchase price by crediting against amounts owing on the Notes other
amounts secured by the Agreement, all or part of the net proceeds of such Sale
after deducting the costs, charges and expenses incurred by the Trustee in
connection with such Sale notwithstanding the provisions of Section 6.07 hereof.
The Notes need not be produced in order to complete any such Sale, or in order
for the net proceeds of such Sale to be credited against amounts owing on the
Notes. The Trustee may hold, lease, operate, manage or otherwise deal with any
property so acquired in any manner permitted by law.
The Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of the Trust
Estate in connection with a Sale thereof. In addition, the Trustee is hereby
irrevocably appointed the agent and attorney-in-fact of the Issuer to transfer
and convey its interest in any portion of the Trust Estate in connection with a
Sale thereof, and to take all action necessary to effect such Sale. No purchaser
or transferee at such a Sale shall be bound to ascertain the Trustee's
authority, inquire into the satisfaction of any conditions precedent or see to
the application of any monies.
Action on Notes.
The Trustee's right to seek and recover judgment on the Notes or under
the Agreement shall not be affected by the seeking or obtaining of or
application for any other relief under or with respect to the Agreement. Neither
the lien of the Agreement nor any rights or remedies of the Trustee or the
Noteholders shall be impaired by the recovery of any judgment by the Trustee
against the Issuer or by the levy of any execution under such judgment upon any
portion of the Trust Estate or upon any of the assets of the Issuer.
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ARTICLE SIX
THE TRUSTEE
Certain Duties and Responsibilities.
A. Except during the continuance of an Event of Default,
1. the Trustee undertakes to perform such duties
and only such duties as are specifically set forth in the
Agreement, and no implied covenants or obligations shall be
read into the Agreement against the Trustee; and
2. in the absence of bad faith or gross negligence 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
the Agreement; but in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they substantially conform to the
requirements of the Agreement.
B. In case an Event of Default has occurred and is continuing and a
Trustee Officer shall have actual knowledge or written notice of such Event of
Default, the Trustee shall exercise such of the rights and powers vested in it
by the Agreement, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the
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circumstances in the conduct of his own affairs. Prior to the occurrence of an
Event of Default or after all Events of Default which may have occurred have
been cured or waived, the Trustee shall exercise such of the rights and powers
vested in it by the Agreement.
C. No provision of the Agreement shall be construed
to relieve the Trustee from liability for its own grossly
negligent action, its own grossly negligent failure to act, or
its own willful misconduct, except that:
1. this Subsection (c) shall not be construed to
limit the effect of Subsection (a) of this Section 6.01;
2. the Trustee shall not be liable for any error of
judgment made reasonably and in good faith by a Trustee
Officer, unless it shall be proved that the Trustee was
grossly negligent in ascertaining the pertinent facts;
to the extent required by the terms hereof, the Trustee shall
act in accordance with the directions of the Required Holders and, to
the extent not so provided herein, with respect to any act requiring
the Trustee to exercise its own discretion, the Trustee shall act in
accordance with the direction of the Required Holders relating to the
time, method and place of conducting any Proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under the Agreement and the Trustee shall not be
liable with respect to any action taken or omitted to be taken by it in
good faith in accordance with any such instruction; and
4. no provision of the Agreement 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 unless such risk
or liability relates to its ordinary services under the Agreement.
D. Whether or not therein expressly so provided, every provision of the
Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section
6.01.
E. The Trustee shall, at its own expense, maintain at all times during
which any Notes are Outstanding and keep in full force and effect, (i) fidelity
insurance, (ii) theft of documents insurance, (iii) forgery insurance and (iv)
errors and omissions insurance.
Notice of Default.
Upon the occurrence of any Event of Default of which a Trustee Officer
has actual knowledge or has received notice thereof, the Trustee shall transmit
by mail to all Holders of Notes and Duff & Phelps, as their names and addresses
appear on the Note Register, notice of such Event of Default hereunder known to
the Trustee.
Certain Rights of Trustee.
Except as otherwise provided in Section 6.01 hereof:
A. the Trustee may conclusively rely and shall fully be
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, note or other paper or document
reasonably believed by it to be genuine and to have been signed or
presented by the proper party or parties;
B. any request or direction of the Issuer
mentioned herein shall be sufficiently evidenced by an
Issuer Request or Issuer Order and any resolution of the
Board of Directors may be sufficiently evidenced by a Board
Resolution;
C. whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officer's
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Certificate. The Issuer shall provide a copy of such
Officer's Certificate to the Noteholders at or prior to the
time the Trustee receives such Officer's Certificate;
D. as a condition to the taking, suffering or omitting of any
action by it hereunder, the Trustee may consult with counsel and the
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
E. the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture or to honor the
request or direction of any of the Noteholders pursuant to this
Indenture, unless such Noteholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction;
F. the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document, but the Trustee,
in its discretion, may make such further inquiry or investigation
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into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Issuer,
personally or by agent or attorney;
G. the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents, attorneys, custodians or nominees and the Trustee shall
not be responsible for any (i) misconduct or negligence on the part of
any agent, attorney, custodians or nominees appointed with due care by
it hereunder or (ii) the supervision of such agents, attorneys,
custodians or nominees after such appointment with due care;
H. the Trustee shall not be liable for any
actions taken, suffered or omitted by it in good faith and
believed by it to be authorized or within the discretion or
rights conferred upon the Trustee by the Agreement;
I. the Trustee shall not be required to make any
initial or periodic examination of any documents or records
related to the Receivables for the purpose of establishing
the presence or absence of defects, the compliance by the
Issuer with its representations and warranties or for any
other purpose; and
J. in the event that the Trustee is also acting
as Paying Agent and Note Registrar, the rights and
protections afforded to the Trustee pursuant to this Article
Six shall also be afforded to such Paying Agent and Note Registrar.
Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except the certificate
of authentication, shall be taken as the statements of the Issuer, and the
Trustee assumes no responsibility for their correctness. The Trustee makes no
representation as to the validity or sufficiency of the Agreement, the Notes,
any Receivable or any related document. The Trustee shall not be accountable for
the use or application by the Issuer of Notes or the proceeds thereof, including
deposits, or withdrawals from, the Collection Account or any other account
established to effectuate the transactions contemplated hereby in accordance
herewith.
May Hold Notes.
The Trustee, any Paying Agent, Note Registrar or any other agent of the
Issuer, in its individual or any other capacity, may become the owner or pledgee
of Notes and may otherwise deal with the Issuer with the same rights it would
have if it were not Trustee, Paying Agent, Note Registrar or such other agent.
Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds held by the Trustee in trust hereunder except to the extent
required herein or required by law. The Trustee shall be under no liability for
interest on any money received by it hereunder except as otherwise agreed upon
by the Trustee and the Issuer.
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Compensation and Reimbursement.
The Issuer agrees:
A. to pay or cause the Servicer to pay the
Trustee from time to time reasonable compensation for all
services rendered by it hereunder (which compensation shall
not be limited by any provision of law in regard to the compensation
of a trustee of an express trust);
B. except as otherwise expressly provided herein, to reimburse
or cause the Servicer to reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture (including,
without limitation, all costs and expenses incurred by the Trustee in
connection with the exercise by the Trustee of any remedies under the
Indenture and the reasonable compensation and the expenses and
disbursements of its agents and counsel, except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith); and
C. to indemnify the Trustee, its officers, directors,
employees and agents for, and to hold it harmless against, any loss,
liability, expense, damage or injury suffered or sustained by reason of
any acts or omissions, or alleged acts or omissions without negligence
or bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
The Trustee's right to receive amounts pursuant to this Section 6.07
shall at all times be subordinate to the lien of the Notes, except as provided
in Section 5.06 hereof and Section 4.02 of the related Supplement, and the
Trustee shall receive amounts pursuant to Section 5.06 hereof and Section 4.02
of the related Supplement, only to the extent that the payment thereof will not
result in an Event of Default and the failure to pay such amounts to the Trustee
will not constitute an Event of Default. The Trustee hereby agrees not to cause
the filing of a petition in bankruptcy against the Issuer for the non-payment to
the Trustee of any amounts provided by this Section 6.07 until at least 91 days
after the payment in full of all the Notes issued under this Indenture.
Corporate Trustee Required; Eligibility
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any State, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $100,000,000, subject
to supervision or examination by federal or state authority and having an office
within the United States of America; provided, however, that in the event
Bankers Trust Company or its corporate successor is not Trustee, the Trustee
must be a Qualified Bank. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.08, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article Six.
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Resignation and Removal; Appointment of Successor.
A. No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article Six shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.10 hereof.
B. The Trustee may resign at any time by giving written notice thereof
to the Issuer. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
C. The Trustee may be removed at any time by Act of
the Required Holders, delivered to the Trustee and to the Issuer.
D. If at any time:
1. the Trustee shall cease to be eligible under
Section 6.08 hereof and shall fail to resign after written
request therefor by the Issuer or by any such Noteholder, or
2. the Trustee shall become legally incapable of acting with respect to
the Notes or shall be adjudged a bankrupt or insolvent or a receiver or
liquidator of the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (1) the Issuer by a Board Resolution may remove the
Trustee, or (2) subject to Section 5.14 hereof, any Noteholder who has been a
bona fide Holder of a Note for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
E. If the Trustee shall resign, be removed or become incapable of
acting in accordance with the provisions of this Section 6.09, or if a vacancy
shall occur in the office of the Trustee for any cause, the Issuer, by a Board
Resolution, shall promptly appoint a successor Trustee subject to the approval
of the Required Holders. If within 90 days after such resignation, removal or
incapability or the occurrence of such vacancy, a successor Trustee shall not
have been appointed by the Issuer, a successor Trustee shall be appointed by Act
of the Required Holders delivered to the Issuer and the retiring Trustee. The
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee. To qualify, the successor so
appointed shall satisfy the requirements set forth in Section 6.08 hereof. If no
successor Trustee shall have been so appointed by the Issuer or the Noteholders
and shall have accepted appointment in the manner hereinafter provided, any
Noteholder who has been a bona fide Holder of a Note for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee.
F. The Issuer shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of the
Notes as their names and addresses appear in the Note Register. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
G. The obligations of the Issuer under this Indenture
shall survive the resignation or removal of the Trustee.
H. No Trustee under this Indenture shall be
personally liable for any action or omission of any successor
Trustee.
Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Issuer, the Noteholders and the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts, duties and obligations of the retiring Trustee; but, on
request of the Issuer, the Required Holders or the successor Trustee, such
retiring Trustee shall, upon payment of any amounts due it under Section 6.07
hereof then unpaid, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring
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Trustee, and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder, subject
nevertheless to its lien, if any, provided for in Section 6.07 hereof. Upon
request of any such successor Trustee or the Required Holders, the Issuer shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
Merger, Conversion, Consolidation or Succession to Business of
Trustee.
Any Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any Person
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such Person
shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto. In case any Notes have been authenticated, but not delivered, by
the Trustee then in office, any successor by merger, conversion or consolidation
to such authenticating Trustee may adopt such authentication and deliver the
Notes so authenticated with the same effect as if such successor Trustee had
itself authenticated such Notes.
Trustee as Successor Servicer.
The Trustee hereby expressly agrees to assume the obligations of the
successor to the Servicer pursuant to and in accordance with the provisions of
Section 5.03 of the Servicing Agreement, subject to the right of the Trustee to
appoint a successor servicer contained in such Section 5.03.
Co-trustees and Separate Trustees.
At any time or times, for the purpose of meeting the legal requirements
of any jurisdiction in which any of the Trust Estate may at any time be located,
the Issuer and the Trustee shall have power to appoint, and, upon the written
request of the Trustee or of the Required Holders, the Issuer shall for such
purpose join with the Trustee in the execution, delivery and performance of, all
instruments and agreements necessary or proper to appoint, one or more Persons
approved by the Trustee either to act as
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co-trustee, jointly with the Trustee, of all or any part of such Trust Estate,
or to act as separate trustee of any such property, in either case with such
powers as may be provided in the instrument of appointment, and to vest in such
Person or Persons in the capacity aforesaid, any property, title, right or power
deemed necessary or desirable, subject to the other provisions of this Section.
If the Issuer does not join in such appointment within 15 days after the receipt
by it of a request so to do, or in case an Event of Default has occurred and is
continuing, the Trustee alone shall have power to make such appointment.
Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Issuer.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
a. The Notes shall be authenticated and delivered and all
rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Trustee hereunder, shall
be exercised, solely by the Trustee.
b. The rights, powers, duties and obligations
hereby conferred or imposed upon the Trustee shall be
conferred or imposed upon and exercised or performed by the
Trustee or by the Trustee and such co-trustee or separate trustee
jointly, as shall be provided in the instrument appointing such
co-trustee or separate trustee, except to the extent that under any law
of any jurisdiction in which any particular act is to be performed, the
Trustee shall be incompetent or unqualified to perform such act, in
which event such rights, powers, duties and obligations shall be
exercised and performed by such co-trustee or separate trustee.
c. The Trustee at any time, by an instrument in writing
executed by it, with the concurrence of the Issuer evidenced by a Board
Resolution, may accept the resignation of or remove any co-trustee or
separate trustee appointed under this Section 6.13, and, in case an
Event of Default has occurred and is continuing, the Trustee shall have
power to accept the resignation of, or remove, any such co-trustee or
separate trustee without the concurrence of the Issuer. Upon the
written request of the Trustee, the Issuer shall join with the Trustee
in the execution, delivery and performance of all instruments and
agreements necessary or proper to effectuate such resignation or
removal. A successor to any co-trustee or separate trustee so resigned
or removed may be appointed in the manner provided in this Section
6.13.
d. No co-trustee or separate trustee hereunder
shall be personally liable by reason of any act or omission
of the Trustee, or any other such trustee hereunder.
e. Any Act of Noteholders delivered to the
Trustee shall be deemed to have delivered to each such
co-trustee and separate trustee.
Rights of Trustee Upon Appointment of
Successor Servicer.
At any time following the effective date of a designation of a
Successor Servicer pursuant to Section 5.03 of the Servicing Agreement, the
Trustee is authorized at any time to date and to deliver to the Government
Contract Obligors the Assignment of Claims Act Notices. In case any authorized
signatory of a Seller whose signature appears on an Assignment of Claims Act
Notice shall cease to have such authority before the delivery of such Assignment
of Claims Act Notice, such signature shall nevertheless be valid following the
designation of a Successor Servicer as if such authority had remained in force.
The Trustee may notify the Obligors, at any time following the effective date of
the designation of a Successor Servicer, of the ownership of the Company under
this Agreement and may also direct that payments of all amounts due, or that
become due, under any or all Receivables be made directly to the Trustee or its
designee. In furtherance of the foregoing, the Trustee shall be entitled to take
all such actions as it deems necessary or advisable to exercise dominion and
control over the collection and servicing of the Receivables, including such
action as shall be necessary or desirable to cause all Collections to come into
the possession of the Trustee rather than the Seller or the Company.
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ARTICLE SEVEN
NOTEHOLDERS' LIST AND REPORTS BY TRUSTEE AND ISSUER
Section 7.01. Issuer to Furnish Trustee Names and Addresses of
Noteholders.
The Issuer will furnish or cause to be furnished to the Trustee (a)
upon each transfer of a Note, a list, in such form as the Trustee may reasonably
require, of the names, addresses and taxpayer identification numbers of the
Holders of Notes as they appear on the Note Register as of such Record Date, and
(b) at such other times, as the Trustee may request in writing, within 30 days
after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that for so long as the Trustee is the Note
Registrar, no such list shall be required to be furnished; provided, further,
that for so long as the Trustee is the Note Registrar, the Trustee shall furnish
to the Issuer such list in the same manner prescribed in clause (b) above.
Section 7.02. Preservation of Information; Communications to
Noteholders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Trustee as provided in Section 7.01 hereof and
the names, addresses and taxpayer identification numbers of the Holders of Notes
received by the Trustee in its capacity as Note Registrar. The Trustee may
destroy any list furnished to it as provided in Section 7.01 hereof upon receipt
of a new list so furnished.
(b) If any Holder of Notes applies in writing to the Trustee stating
that it desires to communicate with other Holders of Notes or with the Holders
of all Notes with respect to their rights under the Agreement or under the
Notes, then the Trustee shall, within five Business Days after the receipt of
such appli cation, afford such Holder access to the information preserved at the
time by the Trustee in accordance with Subsection (a) of this Section 7.02.
Section 7.03. Reports by and Inspections of Issuer.
(a) Issuer will deliver or cause to be delivered, in
duplicate, to each Noteholder and the Trustee:
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(i) as soon as practicable and in any event within 50 days
after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, statements of income and cash flows for
the Issuer for the period from the beginning of the current fiscal year
to the end of such quarterly period, and a balance sheet of the Issuer
as at the end of such quarterly period, setting forth in each case
figures for the corresponding period in the preceding fiscal year, all
in reasonable detail and certified by the authorized financial officer
of the Issuer, subject to changes resulting from normal year-end
adjustments;
(ii) as soon as practicable and in any event within 95 days after
the end of each fiscal year, audited statements of income and cash
flows for the Issuer for such year, and a balance sheet of the Issuer
as at the end of such year, setting forth in each case corresponding
figures from the preceding annual financial statements, all in
reasonable detail and certified by a firm of independent accountants;
(iii) promptly upon receipt thereof, a copy of any report submitted
to the Issuer by independent accountants in connection with any annual,
interim or special audit made by them of the financial records of the
Issuer;
(iv) together with each delivery of financial statements required
by clauses (i) and (ii) above, the Issuer will deliver to each
Purchaser that is also a Noteholder and to any other Noteholder who so
requests in writing and to the Trustee, an Officer's Certificate
stating that the signer has reviewed the terms of the Agreement, the
Servicing Agreement, the Sale and Purchase Agreements and the Notes and
has made, or caused to be made under his supervision, a review in
reasonable detail of the transactions and condition of the Issuer
during the fiscal period covered by such financial statements and that
(a) such review has not disclosed the existence during or at the end of
such fiscal period, and that the signer has no knowledge of the
existence, as at the date of the Officer's Certificate, of any
condition or event which constitutes a Default or Event of Default
under any of the aforementioned agreements or Notes or which
constitutes a breach of a representation, warranty or covenant with
respect to any of the aforementioned agreements or Notes, or (b) if any
such condition or event existed or exists, specifying the nature and
period of existence thereof and what action the Issuer has taken or is
taking or proposes to take with respect thereto;
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(v) promptly upon an Officer of the Issuer obtaining knowledge
(a) both that a condition or event exists and that such condition or
event constitutes an Event of Default, (b) that any Holder of a Note
has given any notice or taken any other action with respect to a
claimed Default or Event of Default under the Agreement, (c) of any
condition or event which, in the opinion of management of the Issuer,
would have a material adverse effect on the business, condition
(financial or other), assets, properties or operations of the Issuer,
or (d) of the institution of any litigation involving claims against
the Issuer equal to or greater than $100,000 with respect to any single
cause of action or of any adverse determination in any litigation
involving a potential liability to the Issuer equal to or greater than
$100,000 with respect to any single cause of action, or with respect to
all related causes of action, an aggregate amount equal to or greater
than $200,000, an Officer's Certificate specifying the nature and
period of existence of any such condition or event, or specifying the
notice given or action taken by such holder or Person and the nature of
such claimed Default, Event of Default, event or condition, and what
action the Issuer has taken, is taking or proposes to take with respect
thereto; and
(vi) with reasonable promptness, such other information and data
with respect to the Issuer as from time to time may be reasonably
requested by a Noteholder.
(b) The Issuer will permit any authorized representative designated by
the Trustee or any Noteholder, to visit and inspect any of the properties of the
Issuer, to examine the corporate books and financial records of the Issuer, and
make copies thereof or extracts therefrom and to discuss the affairs, finances,
and accounts of the Issuer with its principal officers, as applicable, and its
independent public accountants, all at such reasonable times and as often as the
Trustee or any holder of Notes may reasonably request. Any expense incident to
the exercise by the Trustee or any Noteholder of any right under this Section
7.03 shall be borne by the Trustee, subject to Section 6.01(c)(iv) hereof, or
the Noteholder, as the case may be; provided that, if an inspection is begun
during the continuance of an Event of Default hereunder or under any other
indenture of the Issuer, the expense incident to such audit shall be borne by
the Issuer.
Section 7.04. Annual and Quarterly Statements as to Compliance.
(a) The Issuer shall cause a firm of independent public accountants
which is a member of the American Institute of Certified Public Accountants to
deliver to the Trustee on or
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before April 15 of each year, beginning April 15, 1998, an Accountants'
Certificate stating whether, based upon their audit of the Issuer's financial
statements for the preceding fiscal year, the Issuer has maintained the
Collateral Value Ratio at not less than 1.00 as reported on each Determination
Date, or, if such independent public accountants have knowledge of an Event of
Default in the fulfillment of any such obligations, and such Event of Default
shall be continuing, specifying each such Event of Default known to such firm of
independent public accountants and the nature and status thereof (a "Compliance
Audit").
(b) The Issuer shall cause such firm of independent public accountants
to deliver an Accountants' Certificate containing a quarterly Compliance Audit,
within 50 days following the end of such calendar quarter, upon:
(i) a request by the Required Holders, provided such request
covers either the first, second or third quarter (but limited to not
more than one such request per fiscal year) of the Issuer's fiscal year
and is given with 90 days' notice; and
(ii) the occurrence of a Special Redemption, after which a
Compliance Audit shall be delivered, unless waived by the Required
Holders, for the succeeding four quarters following such Special
Redemption, excluding the fourth quarter of any fiscal year following
which an annual Compliance Audit shall be deemed to satisfy this clause
(ii).
Section 7.05. Contract Schedule.
(a) At any time during the respective Non-Amortization
Period, the Issuer may add, remove or replace Government
Contracts, Government Subcontracts or Commercial Obligors set
forth on the Contract Schedule.
(b) Within 10 days of each anniversary of the date of this Indenture,
or upon the written request of a Noteholder at any other time, the Trustee shall
provide to such Noteholder a Contract Schedule, as provided to the Trustee by
the Issuer, as of the most recent Determination Date.
Section 7.06. Primary Contract List.
(a) On the Initial Closing Date the Issuer shall deliver to
the Trustee the Primary Contract List.
(b) The Issuer may add Obligors to the Primary Contract
List:
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(i) without the consent of the Noteholders if the
Obligor to be added has an Implied Rating of Investment
Grade or higher by a Rating Agency; and
(ii) with the consent of the Required Holders, provided, that
the Issuer shall notify the Noteholders, in writing, of its desire to
add such Obligor and, if the Required Holders do not reject such
Obligor within 30 days after notice has been sent by the Issuer, such
consent shall be deemed given and the Obligor may be added to the
Primary Contract List.
(c) The Issuer shall review the Primary Contract List on each
Determination Date and shall remove an Obligor from the Primary Contract List
if:
(i) all of the Receivables of such Obligor become
Defaulted Receivables; or
(ii) the Implied Rating of such Obligor was Investment Grade
or higher at the time such Obligor was placed on the Primary Contract
List and the Issuer has actual knowledge such Implied Rating
subsequently falls below Investment Grade or is withdrawn, by a Rating
Agency; provided, however, that such Obligor may be subsequently added
to the Primary Contract list pursuant to the provisions of Subsection
(b) above.
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ARTICLE EIGHT
REPRESENTATIONS AND COVENANTS OF ISSUER
Section 8.01. Payment of Principal and Interest.
The Issuer will duly and punctually pay the principal and interest in
respect of the Notes.
Section 8.02. Maintenance of Office or Agency.
The Issuer will maintain an office or agency within the United States
of America where Notes may be presented or surrendered for payment, where Notes
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Issuer in respect of the Notes and the Agreement may
be served. The Issuer hereby initially appoints the Trustee such office or
agency. The Issuer will give prompt written notice to the Trustee and the
Noteholders of the location, and of any change in the location, of any such
office or agency. If at any time the Issuer shall fail to maintain any such
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
Corporate Trust Office, and the Issuer hereby appoints the Trustee at its
Corporate Trust Office as its agent to receive all such presentations,
surrenders, notices and demands.
Section 8.03. Unclaimed Funds.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Issuer, in trust for the payment of the principal of or interest on any
Note and remaining unclaimed for three years after such principal or interest
has become due and payable shall be paid to the Issuer on Issuer Request, or (if
then held by the Issuer) shall be discharged from such trust; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to the
Issuer for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money (but only to the extent of the amounts so
paid to the Issuer), and all liability of the Issuer as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such release or payment, may at the expense of
the Issuer cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in New York, New York and in the city in which the Corporate Trust Office is
located, notice that such money remains unclaimed and that, after a date
specified therein,
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which shall be not less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Issuer. The
Trustee may also adopt and employ, at the expense of the Issuer, any other
reasonable means of notification of such release of payment (including, but not
limited to, mailing notice of such release to Holders whose Notes have been
called but have not been surrendered for redemption or whose right to or
interest in monies due and payable but not claimed is determinable from the
records of any Paying Agent, at the last address of record of each such Holder).
Section 8.04. Corporate Existence.
The Issuer will keep in full effect its existence, rights and
franchises as a corporation under the laws of the State of Delaware and will
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of the Agreement and the Notes. The
Issuer shall at all times operate in accordance with its Certificate of
Incorporation and By-laws.
Section 8.05. Protection of Trust Estate.
The Issuer will from time to time prepare, or cause to be prepared,
execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action as the Trustee or the
Required Holders deem necessary or advisable to:
(a) grant more effectively all or any portion of the Trust
Estate for the Notes;
(b) maintain or preserve the lien (and the priority thereof)
of the Agreement or to carry out more effectively the purposes
hereof;
(c) perfect, publish notice of, or protect the validity of
any Grant made or to be made by the Agreement; or
(d) preserve and defend title to the Trust Estate securing the Notes
and the rights therein of the Trustee and the Holders of the Notes secured
thereby against the claims of all persons and parties.
The Issuer hereby designates the Trustee its agent and attorney-in-fact
to execute any financing statement, continuation statement or other instrument
required by the Trustee pursuant to this Section 8.05.
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The Issuer shall pay or cause to be paid any taxes levied on the
account of the beneficial ownership by the Issuer of Contracts that secures the
Notes.
Section 8.06. Representations and Covenants of Issuer.
(a) As of each Closing Date, the Issuer will hereby represent and
warrant to the Trustee and the Noteholders of such Series being issued on such
date that as of such date:
(i) Organization and Good Standing; Licensing. The Issuer
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the corporate power to
own its assets and to transact the business in which it is currently
engaged. The Issuer is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
character of the business transacted by it or properties owned or
leased by it requires such qualification and in which the failure so to
qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or other) of the Issuer.
(ii) Authorization; Binding Obligations. The Issuer has the
power and authority to make, execute, deliver and perform the Agreement
and all the transactions contemplated under the Agreement, and has
taken all necessary corporate action to authorize the execution,
delivery and performance of the Agreement. When executed and delivered,
the Agreement will constitute the legal, valid and binding obligation
of the Issuer enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally
and by the availability of equitable remedies.
(iii) No Consent Required. The Issuer is not required to
obtain the consent of any other party or any consent, license, approval
or authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of the
Agreement, except such as have been obtained.
(iv) No Violations. The execution, delivery and
performance of the Agreement by the Issuer will not violate
any provision of any existing law or regulation or any order
or decree of any court applicable to the Issuer or the
charter or bylaws of the Issuer, or constitute a breach of
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any mortgage, indenture, contract or other agreement to which the
Issuer is a party or by which the Issuer may be bound.
(v) Litigation. No litigation or administrative proceeding
of or before any court, tribunal or governmental body is currently
pending, or to the knowledge of the Issuer threatened, against the
Issuer or any of its properties or with respect to the Agreement or the
Notes which, if adversely determined, would in the opinion of the
Issuer have a material adverse effect on the transactions contemplated
by the Agreement.
(vi) Offering of Notes. Neither the Issuer nor any agent
acting on its behalf has, directly or indirectly, offered any Note or
any similar security of the Issuer for sale to, or solicited any offer
to buy any Note or any similar security of the Issuer from, or
otherwise approached or negotiated with respect thereto with, any
Person which, and neither the Issuer nor any agent acting on its behalf
has taken or will take any action which, would subject the issuance or
sale of any Note to the provisions of Section 5 of the Securities Act
of 1933, as amended, or to the provisions of any securities or Blue Sky
law of any applicable jurisdiction.
(vii) Disclosure. Neither the Agreement nor any other
document, certificate or statement in writing furnished by or on behalf
of the Issuer in connection with the offering of the Notes issued
hereunder contains any untrue statement of a material fact or omits to
state a fact material to the issuance of the Notes necessary in order
to make the statements contained herein and therein not misleading.
(viii) Investment Company Act. The Issuer is not an
"investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(ix) Taxes. The Issuer has no delinquent amounts
owing to any governmental entity in respect of taxes.
(x) Use of Proceeds. The Issuer shall use the proceeds from
the sale of the Notes issued hereunder, simultaneously with such sale,
to purchase the Receivables securing the Notes from the Sellers, make
any required deposit to the Reserve Fund and pay expenses relating to
the issuance of the Notes.
(xi) Regulation G. The Issuer does not own and has
no intention of acquiring any "margin stock" as defined in
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Regulation G (12 CFR Part 207) of the Board of Governors of the Federal
Reserve System (herein called "margin stock"). None of the proceeds of
sale of any Note issued hereunder will be used, directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any margin stock or for the purpose of
maintaining, reducing or retiring any indebtedness which was originally
incurred to purchase or carry any stock that is currently a margin
stock or for any other purpose which might constitute this transaction
a "purpose credit" within the meaning of such Regulation G. Neither the
Issuer nor any agent acting on its behalf has taken or will take any
action which might cause the Agreement or the Notes to violate
Regulation G, Regulation T or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities
Exchange Act of 1934, as amended, in each case as in effect now or as
the same may hereafter be in effect, nor will the Issuer at any time
acquire or hold any margin stock at any time during the term of the
Agreement. Notwithstanding the foregoing, nothing herein shall prevent
the Issuer from repurchasing its own stock.
(xii) Insolvency. There is no insolvency of the Issuer or
admission in writing by the Issuer of its inability to pay its debts as
they come due, or the commencement by the Issuer of a voluntary case
under the Bankruptcy Code, or any other federal or state bankruptcy,
insolvency or similar law, or consent by the Issuer to the appointment
of, or taking possession by, a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Issuer or of
any substantial part of its property, or the making by the Issuer of an
assignment for the benefit of creditors, or the failure by the Issuer
to pay its debts generally as such debts become due or the taking of
corporate action by the Issuer in furtherance of any of the foregoing.
(xiii) Tax Treatment. The Issuer, by entering into this
Indenture, and each Noteholder, by its acceptance of a Note, agree to
treat the Notes for all purposes including federal, state and local
income, single business and franchise tax purposes as indebtedness of
the Issuer.
(xiv) Legal Name. The Issuer is not doing business
under any other name.
(b) As of the Closing Date, the Issuer hereby covenants that
it will exercise all due diligence in order to assure that it
complies with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority,
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noncompliance with which would materially adversely affect its business,
condition (financial or other), prospects, assets, property or operations.
Section 8.07. Negative Covenants.
The Issuer will not:
(a) sell, transfer, exchange, pledge or otherwise dispose of
any part of the Trust Estate except as expressly permitted by the
Agreement; or
(b) claim any credit on, or make any deduction from, the principal or
interest payable in respect of the Notes by reason of the payment of any taxes
levied or assessed upon any part of the Trust Estate; or
(c) incur any debt other than as permitted in its
Certificate of Incorporation;
(d) relocate its chief executive office without providing
the Trustee with 90 days' notice thereof; or
(e) without the consent of the Required Holders (i) amend its
Certificate of Incorporation, (ii) amend or waive the provisions of the
Servicing Agreement or any Sale and Purchase Agreement or (iii) consent to the
assignment of the Seller's or the Servicer's rights or obligations under any
Sale and Purchase Agreement or the Servicing Agreement, respectively.
Section 8.08. Issuer May Consolidate, Etc., Only on Certain
Terms.
The Issuer shall not consolidate or merge with or into any other Person
or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(a) such consolidation, merger, conveyance, or transfer is
permitted by the Issuer's Certificate of Incorporation;
(b) the Person (if other than the Issuer) formed or surviving such
consolidation or merger or that acquires by conveyance or transfer the
properties and assets of the Issuer substantially as an entirety shall be a
Person (i) organized and existing under the laws of the United States of America
or any state or the District of Columbia and (ii) which is subject to the
limitations on conduct contained in Articles 9 and 10 of the Amended Certificate
of Incorporation of the Issuer, and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee and the Noteholders,
in form
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satisfactory to the Trustee and the Noteholders, the due and punctual payment of
the principal of and interest on all Notes and the performance of every covenant
of the Agreement on the part of the Issuer to be performed or observed;
(c) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be
continuing; and
(d) the Issuer shall have delivered to the Trustee and the Noteholders
an Officer's Certificate and an Opinion of Counsel each stating that (i) such
consolidation, merger, conveyance or transfer and such supplemental indenture
comply with this Article, (ii) all conditions precedent in this Article Eight
provided for relating to such transaction have been complied with, (iii) such
supplemental indenture is duly authorized, executed and delivered and is valid,
binding and enforceable against such person and (iv) such consolidation, merger,
conveyance or transfer shall not have a material adverse effect on the corporate
separateness of the Issuer from the Servicer.
Section 8.09. Successor Substituted.
Upon any consolidation or merger, or any conveyance or transfer of the
properties and assets of the Issuer substantially as an entirety in accordance
with Section 8.08 hereof, the Person formed by or surviving such consolidation
or merger (if other than the Issuer) or the Person to which such conveyance or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Issuer under the Agreement with the same effect as
if such Person had been named as the Issuer herein. In the event of any such
conveyance or transfer, the Person named as the Issuer in the first paragraph of
this instrument or any successor which shall theretofore have become such in the
manner prescribed in this Article Eight may be dissolved, wound-up and
liquidated at any time thereafter, and such Person thereafter shall be released
from its liabilities as obligor and maker on all the Notes and from its
obligations under the Agreement.
Section 8.10. Money for Note Payments to Be Held in Trust.
As provided in the related Supplement, all payments of amounts due and
payable with respect to the Notes which are to be made from amounts withdrawn
from the Collection Account shall be made on behalf of the Issuer by the Trustee
or by the Paying Agent, and no amounts so withdrawn from the Collection Account
shall be paid over to or at the direction of the Issuer except as provided in
this Section 8.10 and in the related Supplement.
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Whenever the Issuer shall have a Paying Agent other than the Trustee,
it will, on or before the Business Day next preceding each Payment Date, direct
the Trustee to deposit with such Paying Agent on or before such Payment Date an
aggregate sum sufficient to pay the amounts then becoming due, such sum to be
(i) held in trust for the benefit of Persons entitled thereto and (ii) invested,
pursuant to an Issuer Order, by the Paying Agent in an Eligible Investment in
accordance with the terms of the related Supplement, the earned income of such
investment to be remitted to the Issuer, unless an Event of Default, Mandatory
Redemption or Special Redemption has occurred and is continuing. For all
investments made by a Paying Agent under this Section 8.10, such Paying Agent
shall be entitled to all of the rights and obligations of the Trustee under the
related Supplement, such rights and obligations being incorporated in this
Paragraph by this reference.
The Issuer will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee (and if the Trustee acts as Paying Agent, it hereby
so agrees), subject to the provisions of this Section 8.10, that such Paying
Agent, in acting as Paying Agent, is an express agent of the Trustee and,
further, that such Paying Agent will:
(a) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and pay such sums to such Persons as herein provided;
(b) give the Trustee notice of any Default by the Issuer (or any other
obligor upon the Notes) in the making of any payment required to be made with
respect to the Notes; and
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of the Agreement or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Trustee all sums held in trust by
such Paying Agent, such sums to be held by the Trustee upon the same trusts as
those upon which such sums were held by such Paying Agent; and upon such payment
by any Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Section 8.11. Performance of Obligations; Servicing Agreement.
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(a) The Issuer will punctually perform and observe all of its
obligations and agreements contained in the Servicing Agreement.
(b) The Issuer will not take any action or permit any action to be
taken by others which would release any Person from any of such Person's
covenants or obligations under any instrument included in the Trust Estate, or
which would result in the amendment, hypothecation, subordination, termination
or discharge of, or impair the validity or effectiveness of any such instrument,
except as expressly provided in the Agreement, the Servicing Agreement or such
other instrument.
(c) If the Issuer shall have knowledge of the occurrence of an Event of
Default under the Servicing Agreement, the Issuer shall promptly notify the
Trustee thereof, and shall specify in such notice the action, if any, the Issuer
is taking in respect of such Event of Default. If such Event of Default arises
from the failure of the Servicer to perform any of its duties or obligations
under the Servicing Agreement with respect to the Receivables securing the
Notes, the Issuer may remedy such failure, provided that a failure by the
Servicer to pay the fees and expenses of the Trustee pursuant to Section 3.06 of
the Servicing Agreement shall not release the Issuer from its obligation to pay
such fees and expenses pursuant to Section 6.07 hereof. So long as any such
Event of Default under the Servicing Agreement shall be continuing, the Trustee
may, and upon the direction of the Issuer or the Required Holders the Trustee
shall, terminate all of the rights and powers of the Servicer under the
Servicing Agreement pursuant to Section 5.02 of the Servicing Agreement. Unless
directed or permitted by the Trustee and the Required Holders, the Issuer may
not waive any such Event of Default under the Servicing Agreement or terminate
the rights and powers of the Servicer under the Servicing Agreement.
(d) Upon any termination of the Servicer's rights and powers pursuant
to Section 5.02 of the Servicing Agreement, all rights, powers, duties,
obligations and responsibilities of the Servicer
(other than any rights of the Servicer as a Seller) with respect to the
Receivables (including, without limitation, the obligations set forth in Section
5.02 of the Servicing Agreement) shall vest in and be assumed by the Trustee,
and the Trustee shall be the successor in all respects to the Servicer in its
capacity as servicer with respect to such Receivables under the Servicing
Agreement, except for any obligations of the Servicer under Section 4.04 of the
Servicing Agreement. The Trustee may resign as the Servicer by giving written
notice of such resignation to the Issuer and in such event will be released from
such duties and obligations, such release not to be effective until the date a
new servicer enters into a servicing agreement
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with the Issuer as provided below. Upon delivery of any such notice to the
Issuer, the Issuer shall obtain a new servicer, satisfactory in all respects to
the Trustee and the Required Holders, which successor servicer shall enter into
a servicing agreement with the Issuer and the Trustee, such agreement to be
substantially similar to the Servicing Agreement. If, within 30 days after the
delivery of the notice referred to above, the Issuer shall not have obtained
such a new servicer, the Trustee may appoint, or may petition a court of
competent jurisdiction to appoint, a successor servicer to service the
Receivables. In connection with any such appointment, the Trustee may make such
arrangements for the compensation of such successor as it, such successor, and
the Issuer shall agree and shall enter into an agreement with such successor for
the servicing of such Receivables, such agreement to be in form and substance
satisfactory to the Trustee and the Required Holders. Any such compensation of
the successor servicer shall not be in excess of that payable to the Servicer
under the Servicing Agreement, unless the Servicer or some other Person agrees
to pay such additional compensation or such additional compensation as is
approved by the Required Holders. If the Trustee shall succeed to the Servicer's
duties as servicer of the Contracts as provided herein, it shall do so in its
individual capacity and not in its capacity as Trustee and, accordingly, the
provisions of Article Six shall be inapplicable to the Trustee in its duties as
the successor to the Servicer and the servicing of the Receivables. Neither the
Trustee nor the Issuer shall appoint a successor
servicer whose appointment would result in the rating assigned to the
Notes on the Closing Date by the Rating Agencies being reduced to a lower rating
so long as there is a Person who satisfies the requirements of this Section for
a successor servicer and is willing to accept an appointment as successor
servicer as provided in this Section and whose appointment as successor servicer
would not so lower such rating.
Section 8.12. Corporate Separateness of Issuer.
The Issuer shall at all times hold itself out to the public, including
its parent, under the Issuer's own name and as a separate and distinct entity
from its parent. At all times at least one director and one executive officer of
the Issuer (or one individual serving in both capacities) shall be a Person who
is not a director, officer or employee of any Person owning of
record more than 10% of the outstanding shares of common stock of the
Issuer or any Person which owns beneficially more than 10% of the outstanding
common stock of the Issuer. The Issuer shall maintain separate corporate
records, financial statements and books of account from those of its parent,
shall not commingle its assets with any other Person (except to the
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limited extent permitted by Section 3.02 of the Servicing Agreement) and shall
take appropriate Board of Directors action to authorize its corporate actions.
The Issuer shall not engage in business transactions (other than the
transactions contemplated in this Indenture) with any of its Affiliates on terms
and conditions less favorable to the Issuer than those available to the Issuer
for comparable transactions with Persons who are not Affiliates of the Issuer.
The Issuer shall maintain its chief executive office and principal place of
business in the State of Delaware and separate and apart from any office of the
Servicer.
The Issuer will maintain the Issuer's separate existence and identity
and will take all steps necessary to make it apparent to third parties that the
Issuer is an entity with assets and liabilities distinct from those of each
Seller or any other subsidiary or Affiliate of any Seller. Such steps and
indicia of the Issuer's separate identity will include the following:
(a) The Issuer will maintain its own stationery and other business
forms that are separate and distinct from those of any Seller or any other
subsidiary or Affiliate of any Seller.
(b) The Issuer will strictly observe corporate formalities in its
dealings with its Affiliates. Among other things, the Issuer will maintain its
own books of account, financial reports and corporate records separate and
distinct from those of any Seller or any other subsidiary or Affiliates of any
Seller.
(c) The Issuer will conduct its business solely in its own corporate
name, and in such a separate manner so as not to mislead others with whom they
are dealing.
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ARTICLE NINE
ACCOUNTING AND RELEASES
Section 9.01. Collection of Money.
Except as otherwise expressly provided herein and in the related
Supplement, the Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by the
Trustee pursuant to the Agreement, including all payments due on account of any
of the Receivables pledged to secure the Notes. The Trustee shall hold all such
money and property received by it in trust for the Holders of the Notes and
shall apply it as provided in the Agreement. Except as otherwise expressly
provided in the Agreement, if any Default occurs in the making of any payment or
performance under the Servicing Agreement, the Trustee may, and upon the request
of the Required Holders (as evidenced by the Note Register) shall, take such
action as may be appropriate to enforce such payment or performance, including
the institution and prosecution of appropriate Proceedings. Any such action
shall be without prejudice to any right to claim a Default or Event of Default
under the Agreement and to proceed thereafter as provided in Article Six hereof.
Section 9.02 Collection Account. (a) Prior to the initial authentication and
delivery of Notes, the Issuer shall open, at a depository institution (which may
be the Trustee), an Eligible Account denominated "Collection Account -- Bankers
Trust Company, as trustee in respect of Contract Receivable Collateralized
Notes". The Collection Account shall be held, in the corporate trust department
of such depositary institution, in trust and funds in the Collection Account
shall be held as provided in Section 6.06 of this Indenture. The Issuer shall
give the Trustee at least five Business Days' written notice of any change in
the location of the Collection Account and any related account identification
information. All payments to be made from time to time to the Holders of Notes,
out of funds in the Collection Account pursuant to the Agreement shall be made
by the Trustee as the Paying Agent of the Issuer or, pursuant to Section 8.10
hereof, by any other Paying Agent appointed by the Issuer. All moneys deposited
from time to time in the Collection Account, including the deposits to be made
by the Servicer in the Collection Account pursuant to the Servicing Agreement,
and all investments made with such moneys, shall be held by the Trustee as part
of the Trust Estate as herein provided. All funds
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withdrawn from the Collection Account pursuant to Section 9.02(d) and (e) hereof
for the purpose of making payments to holders shall be applied in accordance
with Section 8.10 hereof.
(b) So long as no Default or Event of Default shall have occurred and
be continuing, all or a portion of the Collection Account shall be invested and
reinvested by the Trustee at the Issuer's written direction in one or more
Eligible Investments bearing interest or sold at discount. All income or other
gain from investment of moneys deposited in the Collection Account shall be
deposited in such Account immediately upon receipt, and any loss resulting from
such investment shall be charged to such Account. Notwithstanding the definition
of "Eligible Investments", in the case of an Account maintained with the Paying
Agent, Eligible Investments on which the Paying Agent is the obligor (including
repurchase agreements on which the Paying Agent in its commercial capacity is
liable as principal), may mature on the Payment Date next succeeding the date of
investment.
(c) So long as the Notes have not been declared due and payable
pursuant to Section 5.02 hereof, the Trustee shall take the following actions in
the following order of priority, as applicable:
(i) on any Business Day, if the amount on deposit in any
Reserve Fund established on the related Closing Date for such Series is
less than the Required Reserve Balance for the Series related thereto,
withdraw funds from the Collection Account for deposit in such Reserve
Fund until the amount on deposit therein equals such Required Reserve
Balance;
(ii) on any Business Day, upon receipt of a request from the
Servicer pursuant to Section 3.04 of the Servicing Agreement, withdraw
funds from the Collection Account to repay the Servicer any amounts
that duplicate other payments in the account or that are not part of
the Trust Estate, including, but not limited to, funds deposited in
error into the Collection Account;
(iii) on any Business Day during the Non-Amortization Period,
upon receipt of an Issuer Request including a certification that the
Collateral Value Ratio, taking into account the proposed withdrawal of
funds, is at least 1.00 on such Business Day, withdraw funds from the
Collection Account in an amount equal to any Deferred Purchase Price
and release such funds to the Issuer;
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(iv) on any Business Day during the Non-Amortization Period,
upon receipt of an Issuer Request including a certification that the
Collateral Value Ratio, taking into account the proposed withdrawal of
funds, is at least 1.00 on such Business Day, withdraw funds from the
Collection Account in an amount equal to the unpaid portion, if any, of
Excess Cash that was payable to the Issuer on a prior Payment Date and
release such funds to the Issuer; and
(v) on any Business Day during the Non-Amortization Period,
upon receipt of an Issuer Order, withdraw funds from the Collection
Account and apply such funds to the purchase of Eligible Receivables,
subject to Section 2.02 of each Sale and Purchase Agreement;
provided, however, that the Trustee shall not withdraw funds from the Collection
Account or any Lock-box Account pursuant to clauses (iii) or (iv) above unless
on such Business Day (a) no Default or Event of Default exists, (b) no Special
Redemption amounts remain unpaid, (c) no Mandatory Redemption is in effect and
(d) amounts on deposit in any Reserve Fund are at least equal to the Required
Reserve Balance.
(d) So long as the Notes have not been declared due and payable
pursuant to Section 5.02 hereof, no later than the Business Day preceding each
Payment Date during the Non-Amortization Period, the Trustee as directed in the
Determination Date Statement shall withdraw funds from the Collection Account,
in the amounts required, for application as follows:
first, to any Reserve Fund, until the amount on deposit
therein equals the Required Reserve Balance; provided however that
amounts required to be deposited in any Reserve Fund established after
the Initial Closing Date in excess of 3% of the principal amount of the
related Note Principal Balance shall be subordinate in funding to the
amounts applied hereunder in respect of the Required Reserve Balance
established on the Initial Closing Date;
second, to the Distribution Account the sum of (i) an amount
equal to all interest due and payable on the Notes on the succeeding
Payment Date, (ii) the amount, if any, required for a Special
Redemption, Mandatory Redemption or Optional Redemption on such Payment
Date, (iii) the Commitment Fees, if any and (iv) any other principal to
be paid as designated by the Issuer;
third, to the Servicer, all amounts owing to the
Servicer on such Payment Date; and
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fourth, to the payment of Administrative Expenses due
and payable at the direction of the Issuer; and
fifth, to the Issuer all amounts that are determined to
be Excess Cash.
(e) So long as the Notes have not been declared due and payable
pursuant to Section 5.02 hereof, on the Business Day preceding each Payment Date
on and after the Amortization Date, the Trustee as directed in the Determination
Date Statement shall withdraw the aggregate of the amount on deposit in the
Collection Account as of that Business Day preceding the related Determination
Date from the Collection Account, in the amounts required, for application as
follows:
first, to any Reserve Fund, until the amount on deposit
therein equals the Required Reserve Balance; provided however that
amounts required to be deposited in any Reserve Fund established after
the Initial Closing Date in excess of 3% of the principal amount of the
related Note Principal Balance shall be subordinate in funding to the
amounts applied hereunder in respect of the Required Reserve Balance
established on the Initial Closing Date;
second, to the Distribution Account, an amount equal to all
interest and principal due and payable on the Notes, either as a
Principal Distribution Amount or to redeem such Notes, on the
succeeding Payment Date;
third, to the Servicer, an amount equal to all amounts
owing to the Servicer on the succeeding Payment Date; and
fourth, to the payment of Administrative Expenses due
and payable at the direction of the Issuer.
Section 9.03. Reports by Trustee; Contract Schedule.
(a) The Trustee shall report to the Issuer and the Servicer with
respect to the amount of each Account or any Reserve Fund and the identity of
the investments included therein, as the Issuer or the Servicer may from time to
time request and shall provide accounting of deposits into and withdrawals from
the Accounts and any Reserve Fund, and of the investments made therein.
(b) The Trustee shall hold the Contract Schedule and the Receivable
Schedule as provided to the Trustee by the Servicer.
Section 9.04. Trust Estate; Contract Documents.
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(a) Subject to the payment of its fees and expenses, the Trustee may,
and when required by the provisions of the Agreement shall, execute instruments
to release property from the lien of the Agreement, or convey the Trustee's
interest in the same, in a manner and under circumstances which are not
inconsistent with the provisions of the Agreement. No party relying upon an
instrument executed by the Trustee as provided in this Article Nine shall be
bound to ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(b) In order to facilitate the servicing of the Receivables by the
Servicer, the Servicer is hereby authorized in the name and on behalf of the
Trustee and the Issuer, to execute instruments of satisfaction or cancellation,
or of partial or full release or discharge, and other comparable instruments
with respect to the Receivables (and the Trustee shall execute any such
documents on request of the Servicer), subject to the obligations of the
Servicer under the Servicing Agreement.
(c) Upon Issuer Order, the Trustee shall, at such time as there are no
Notes Outstanding, release and transfer, without recourse, all of the Trust
Estate that secured the Notes (other than any cash held for the payment of the
Notes pursuant to Section 4.02 hereof).
Section 9.05. Amendments to Servicing Agreement.
The Trustee may, without the consent of any Noteholder, enter into or
consent to any amendment or supplement to the Servicing Agreement for the
purpose of increasing the obligations or duties of any party other than the
Trustee or the Noteholders.
The Trustee may, in its discretion, decline to enter into or consent to
any such supplement or amendment if its own rights, duties or immunities shall
be adversely affected.
Section 9.06. Servicer as Custodian and Bailee of Trustee.
In order to facilitate the servicing of the Receivables by
the Servicer, the Servicer shall retain all proceeds of any
Collections which it receives, prior to their deposit in the Collection
Account, any Lock-box Account or the Distribution Account, as the case may be,
in accordance with the Servicing Agreement, solely as custodian and bailee of
the Trustee. Solely for purposes of perfection under Section 9-305 of the UCC of
the state in which such property is held by the Servicer, the Trustee hereby
acknowledges that the Servicer is acting as custodian and bailee of the Trustee
in holding such property pursuant to the
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Servicing Agreement, and any other items constituting a part of the Trust Estate
which from time to time come into the possession of the Servicer. It is intended
that, by the Servicer's acceptance of such custodianship and bailment pursuant
to the Servicing Agreement, the Trustee, as a secured party, will be deemed to
have possession of such monies and such other items for purposes of Section
9-305 of the UCC of the state in which such property is held by the Servicer.
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ARTICLE TEN
SUPPLEMENTAL INDENTURES
Section 10.01. Supplemental Indentures.
(a) The Issuer and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto for the purpose of
modifying this Indenture without the consent of the Noteholders for the
following purposes:
(i) to add to the duties or obligations of the Issuer
or the Trustee hereunder;
(ii) to maintain or improve the rating of the Notes
then given by a Rating Agency; or
(iii) to evidence and provide for the acceptance of appointment by a
successor Trustee and to add to or change any of the provisions of the
Agreement as shall be necessary to facilitate the administration of the
Trust Estate by more than one Trustee.
(b) With the consent of the Required Holders of the Notes, the Issuer
and the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto for the purpose of modifying the Agreement;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Note affected thereby:
(i) change the Stated Maturity of the principal of, or any
installment of principal or interest on, any Note, or reduce the
principal amount thereof or the Note Interest Rate thereon or the
Redemption Price with respect thereto, change the provisions of the
Agreement relating to the application of proceeds of the Trust Estate
to the payment of principal of Notes or change any place where, or the
coin or currency in which, any Note or the interest thereon is payable,
or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the applicable Redemption Date);
(ii) reduce the percentage in principal amount of the Outstanding
Notes, the consent of the Holders of which is required for the
execution of any such supplemental indenture, or the consent of the
Holders of which is required for any waiver of compliance with certain
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provisions of the Agreement or certain Defaults hereunder
and their consequences provided for in the Agreement;
(iii) impair or adversely affect the Trust Estate except
as otherwise permitted herein;
(iv) permit the creation of any lien ranking prior to or on a
parity with the lien of the Indenture with respect to any part of a
Trust Estate or terminate the lien of the Agreement on any property at
any time subject hereto or deprive the Holder of any Note of the
security afforded by the lien of the Agreement;
(v) change the percentage required to direct the
Trustee to sell or liquidate the Trust Estate pursuant to
Section 5.04 hereof; or
(vi) modify any of the provisions of this Section or Section 5.13
hereof, except to increase any such percentage or to provide that
certain other provisions of the Agreement
cannot be modified or waived without the consent of the Holder
of each Outstanding Note as evidenced by the Note Register affected
thereby.
(c) The Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture that affects the
Trustee's own rights, duties, liabilities or immunities under this Indenture or
otherwise except to the extent required by law.
(d) Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section 10.01, the Issuer shall mail to
the Holders of the Notes as their names appear on the Note Register to which
such supplemental indenture relates, a copy of such supplemental indenture. Any
failure of the Issuer 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 10.02. Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by the Agreement, the Trustee shall be entitled to receive,
and (subject to Section 6.01) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may,
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but shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under the Agreement or
otherwise.
Section 10.03. Effect of Supplemental Indenture.
Upon the execution of any supplemental indenture under this Article
Ten, the Agreement shall be modified in accordance therewith, and such
supplemental indenture shall form a part of the Agreement for all purposes, and
every Holder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 10.04. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article Ten may, and if required by the
Trustee shall, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Issuer shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the
Issuer, to any such supplemental indenture may be prepared and executed by the
Issuer and authenticated and delivered by the Trustee in exchange for the
Outstanding Notes.
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ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by the Agreement to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agent
duly appointed in writing and satisfying any requisite percentages as to minimum
number or dollar value of outstanding principal amount represented by such
Noteholders; and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered to the
Trustee, and, where it is hereby expressly required, to the Issuer. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and conclusive in favor of the Trustee and the Issuer,
if made in the manner provided in this Section 11.01.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder (and any
transferee thereof) of every Note issued upon the registration thereof or in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Issuer in reliance thereon, whether or
not notation of such action is made upon such Note.
Section 11.02. Notices, Etc. to Trustee and Issuer.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by the Agreement
to be made upon, given or furnished to, or filed with:
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(a) the Trustee by any Noteholder or by the Issuer shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing to a
Trustee Officer, by facsimile transmission or by other means acceptable to the
Trustee to or with the Trustee at its Corporate Trust Office; or
(b) the Issuer by the Trustee or by any Noteholder shall be sufficient
for every purpose hereunder (except as provided in Section 6.01(2) hereof) if in
writing and mailed, first-class postage prepaid, to the Issuer addressed to it
at 1105 North Market Street, Suite 1150, Wilmington, Delaware 19899, Attention:
President, or at any other address previously furnished in writing to the
Trustee by the Issuer. A copy of each notice to the Issuer shall be sent in
writing and mailed, first-class postage prepaid, to the Company at 2000 Edmund
Halley Drive, Reston, Virginia 22091-3436, Attention: Senior Vice President and
Chief-Financial Officer.
Section 11.03. Notices to Noteholders; Waiver.
With respect to any Series issued on the Initial Closing Date, unless
otherwise instructed by the Purchasers, the Trustee and the Issuer shall send a
duplicate copy to the Purchasers of every notice sent by each hereunder. The
Issuer shall send a copy of the Officer's Certificate delivered pursuant to
Section 6.03(2) hereof to the Purchaser.
Where the Agreement provides for notice to Noteholders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed by registered or certified mail or first
class postage prepaid or national overnight courier service to each Noteholder
affected by such event, at his address as it appears on the Note Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to Noteholders is given
by mail, neither the failure to mail such notice, nor any defect in any notice
so mailed, to any particular Noteholder shall affect the sufficiency of such
notice with respect to other Noteholders, and any notice which is mailed in the
manner herein provided shall conclusively be presumed to have been duly given.
Notwithstanding the foregoing, notice to be given pursuant to Sections
7.06(b)(ii) and 11.02(c) hereof shall be sent in duplicate in such manner and to
such officers of each Noteholder as such Noteholder may from time to time
specify.
Where the Agreement provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by
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Noteholders shall be filed with the Trustee but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
In the event that, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Noteholders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Trustee shall be
deemed to be a sufficient giving of such notice.
The Issuer shall give prompt written notice to Duff & Phelps, of any of
the following occurrences: (a) the appointment of a successor Trustee, (b) the
execution of a supplemental indenture pursuant to Article Ten, (c) the adoption
of any amendment to the Servicing Agreement, and (d) the payment of the entire
principal of the Notes. Such notice shall be sufficient if furnished in writing
to Duff & Phelps Credit Rating Co., 55 East Monroe, Suite 4000, Chicago,
Illinois 60603, Attention: J.
Grant Jones.
Section 11.04. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 11.05. Successors and Assigns.
All covenants and agreements in the Agreement by the Issuer shall bind
its successors and assigns, whether so expressed or not.
Section 11.06. Separability.
In case any provision in the Agreement or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality, and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 11.07. Benefits of Indenture.
Nothing in the Agreement or in the Notes, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, and the Noteholders, any benefit.
Section 11.08. Governing Law.
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The Agreement and each Note shall be construed in accordance with and governed
by the laws of the State of New York applicable to agreements made and to be
performed therein.
Section 11.09. Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 11.10. Corporate Obligation.
No recourse may be taken, directly or indirectly, against any
incorporator, subscriber to the capital stock, stockholder, officer, director or
employee of the Issuer or of any predecessor or successor of the Issuer with
respect to the Issuer's obligations on the Notes or under the Agreement.
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IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Indenture to be duly executed by their respective officers thereunto duly
authorized and attested, all as of the day and year first above written.
DYN FUNDING CORPORATION
By: ________________________
Name:
Title:
BANKERS TRUST COMPANY, not in
its individual capacity, but
solely as Trustee
By: _________________________
Name:
Title:
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EXECUTION COPY
DYN FUNDING CORPORATION
Issuer
and
BANKERS TRUST COMPANY
Trustee
on behalf of the Series 1997-1 Noteholders
SERIES 1997-1 SUPPLEMENT
Dated April 18, 1997
to
DYNCORP TRADE RECEIVABLES MASTER INDENTURE
Dated April 18, 1997
$50,000,000
7.486% FIXED RATE CONTRACT RECEIVABLE COLLATERALIZED NOTES
SERIES 1997-1, CLASS A
Up to $90,000,000
FLOATING RATE CONTRACT RECEIVABLE COLLATERALIZED NOTES
SERIES 1997-1, CLASS B
TABLE OF CONTENTS
Page
ARTICLE I
Creation of Series 1997-1 Notes
Section 1.01. Designation................................................... 2
ARTICLE II
Definitions
Section 2.01. Definitions.................................................. 3
ARTICLE III
Reserve Fund
Section 3.01. Reserve Fund................................................. 8
ARTICLE IV
Rights of Series 1997-1 Noteholders
and Distribution of Collections
Section 4.01. Collection and Distribution of Money........................ 10
Section 4.02. Distribution Account........................................ 11
Section 4.03. General Provisions Regarding
Distribution Account and Reserve Fund..................................... 13
Section 4.04. Determination of LIBOR...................................... 14
ARTICLE V
Redemption of Series 1997-1 Notes
Section 5.01. Optional Redemption......................................... 16
Section 5.02. Special and Mandatory Redemptions........................... 16
Section 5.03. Notice of Optional Redemption by Issuer..................... 18
Section 5.04. Deposit of Redemption Price for Optional, Special........... 18
and Mandatory Redemptions
Section 5.05. Series 1997-1 Notes Payable on Redemption Date.............. 19
Section 5.06. Payments Upon Certain Events of Default and Triggers........ 20
ARTICLE VI
Transfer of Notes
Section 6.01. Exemption from Securities Act............................... 21
Section 6.02. Further Restrictions on Transfer............................ 21
Section 7.01. Amendment................................................... 22
Section 7.02. Governing Law............................................... 22
Section 7.03. Counterparts................................................ 22
Section 7.04. Ratification of Indenture................................... 22
Section 7.05. Cross-references............................................ 22
Section 7.06. Issuer Covenant............................................. 22
Section 7.07. Tax Treatment............................................... 22
Exhibits
Exhibit A. Form of Class A Note
Exhibit B. Form of Class B Note
Exhibit C. Form of Representation Letter
<PAGE>
SERIES 1997-1 SUPPLEMENT dated April 18, 1997 (this "Series
1997-1 Supplement") between DYN FUNDING CORPORATION, a
corporation organized and existing under the laws of the State of
Delaware (herein, together with its permitted successors and
assigns, the "Issuer"), and BANKERS TRUST COMPANY, a New York
banking corporation, as trustee (herein, together with its
successors in the trusts thereunder as provided in the Indenture
referred to below, the "Trustee"), under the DynCorp Trade
Receivables Master Indenture, dated April 18, 1997 (the
"Indenture") between the Issuer and the Trustee (the Indenture
together with this Series 1997-1 Supplement, the "Agreement").
Pursuant to Section 2.04 of the Indenture, the Issuer may
direct the Trustee to authenticate the initial Series of Notes.
The Principal Terms of this Series are set forth in this Series
1997-1 Supplement to the Indenture.
Pursuant to this Series 1997-1 Supplement, the Issuer shall
create the initial Series of Notes and specify the Principal
Terms thereof.
In addition to the Grant of the Indenture, the Issuer hereby
Grants to the Trustee, for the exclusive benefit of the Holders
of the Series 1997-1 Notes, all of the Issuer's right, title and
interest in and to the Distribution Account, including all
Eligible Investments therein and all income from the investment
of funds therein, and the Reserve Fund and all proceeds in any
way derived from any of the foregoing items. Such Grants are
made in trust to secure the Series 1997-1 Notes equally and
ratably without prejudice, priority or distinction, except as
expressly provided in the Agreement, between any Series 1997-1
Notes, and to secure (i) the payment of all amounts due on the
Series 1997-1 Notes in accordance with their terms, (ii) the
payment of all other sums payable under the Agreement and (iii)
compliance with the provisions of the Agreement all as provided
in the Agreement.
The Trustee acknowledges such Grant, accepts the trusts
hereunder in accordance with the provisions hereof and agrees to
perform the duties herein.
<PAGE>
I
<PAGE>
Creation of Series 1997-1 Notes
Designation. (a) There is hereby created a Series of
Notes to be issued pursuant to this Series 1997-1 Supplement.
The Class A Notes shall be designated generally as the "7.486%
Fixed Rate Contract Receivable Collateralized Notes, Series 1997-
1, Class A" or the "Class A Notes." The Class B Notes shall be
designated generally as the "Floating Rate Contract Receivable
Collateralized Notes, Series 1997-1, Class B" or the "Class B
Notes". The Class A Notes and the Class B Notes shall be
designated generally as the "Series 1997-1 Notes". Such Notes
shall be issued in minimum principal amounts of $500,000 and any
amount in excess thereof.
(a) In the event that any term or provision contained
herein shall conflict with or be inconsistent with any term or
provision contained in the Indenture, the terms and provisions of
this Series 1997-1 Supplement shall be controlling. All
capitalized terms not otherwise defined herein are defined in the
Indenture. Each capitalized term defined herein shall relate
only to the Series 1997-1 Notes and no other Series of Notes
issued by the Issuer.
Definitions
Definitions. (a) Whenever used in this Series 1997-1
Supplement, the following words and phrases shall have the
following meanings:
Account: The Collection Account, the Distribution Account
or any Lockbox Account.
Amortization Date: April 30, 2002.
Called Principal: With respect to any Series 1997-1 Note,
the Class A Note Principal Balance or the Class B Note Principal
Balance, as applicable, that is declared to be due and payable
pursuant to (i) an Optional Redemption, Mandatory Redemption or
Special Redemption pursuant to Article V hereof or (ii) an
acceleration of maturity pursuant to Section 5.02 of the
Indenture.
Class A Initial Note Principal Balance: $50,000,000.
Class A Note: The meaning specified in Section 1.01 hereof.
<PAGE>
Class A Note Interest Rate: With respect to any Class A
Note, a rate equal to 7.486% per annum.
Class A Note Principal Balance: As of any day, an amount
equal to (a) the Class A Initial Note Principal Balance, minus
(b) all amounts in respect of principal distributed to the Class
A Noteholders in reduction of the Class A Note Principal Balance
from time to time prior to such date.
Class A Stated Maturity: October 31, 2002.
Class B Note: The meaning specified in Section 1.01 hereof.
Class B Note Interest Rate: With respect to each Increase,
LIBOR plus 0.70% per annum.
Class B Note Principal Balance: As of any day, an amount
equal to (a) $0.00, plus (b) the aggregate amount of any Increase
in the Class B Note Principal Balance after the Closing Date,
minus (c) all amounts in respect of principal distributed to the
Class B Noteholders in reduction of the Class B Note Principal
Balance from time to time prior to such date.
Class B Note Purchase Agreement: The Class B Note Purchase
Agreement dated April 18, 1997 among the Purchaser, the Issuer
and any other purchaser specified therein from time to time.
Class B Purchase Limit: $90,000,000 on any day.
Class B Stated Maturity: October 31, 2002.
Closing Date: April 18, 1997.
Commitment Fee: For any Interest Period, an amount accruing
at a rate of 0.25% per annum on the average daily amount by which
the Class B Purchase Limit exceeds the Class B Note Principal
Balance.
Cut-off Date: April 16, 1997.
Distribution Account: The Eligible Account established and
maintained with the Trustee pursuant to Section 4.02 hereof.
Discounted Value: With respect to the Called Principal of
any Class A Note, the amount obtained by discounting all
Remaining Scheduled Payments with respect to such Called
Principal from their respective scheduled due date to the
Redemption Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount
factor (applied on a monthly basis) equal to the applicable
Reinvestment Yield with respect to such Called Principal.
<PAGE>
Increase: Any increase in the Class B Note Principal
Balance corresponding to the amount of each advance of funds by
the Purchaser to the Issuer under the Class B Note Purchase
Agreement. Any such Increase shall not occur more frequently
than once per week.
Interest Period: With respect to the related Payment Date,
the period from and including the prior Payment Date to and
excluding such Payment Date; provided that the first Interest
Period shall begin on and include the Closing Date and end on and
include the day prior to the first Payment Date.
LIBOR Rate: The London interbank offered rate for one-month
Eurodollar deposits, calculated as provided in Section 4.04
hereof.
LIBOR Determination Date: With respect to any Payment Date,
the second Business Day immediately preceding such Payment Date.
London Business Day: Any Business Day on which dealings in
deposits in Eurodollars are transacted in the London interbank
market.
Mandatory Redemption: A redemption by the Issuer of all of
the Series 1997-1 Notes pursuant to Section 5.02(b) hereof.
Mandatory Redemption Level: A Collateral Value Ratio of
0.95.
Non-Amortization Period: The period beginning on the
Closing Date and ending on the close of business on the Payment
Date before the Amortization Date.
Optional Redemption: A redemption by the Issuer of all of
the Class A Notes pursuant to Section 5.01 hereof.
Payment Date: The 30th day of each month (except that
Payment Dates in the month of February shall be the last day of
such month), or, if such 30th day is not a Business Day, the next
succeeding Business Day commencing on April 30, 1997.
Principal Distribution Amount: With respect to each Payment
Date during the Amortization Period, the excess of (a) all
amounts on deposit in the Collection Account and the Distribution
Account representing Collections on the Receivables received from
and including the next preceding Determination Date (or, in the
case of the Amortization Date, from and including the first day
of the Amortization Period) through the day immediately preceding
such current Determination Date, including reinvestment income
thereon, and any other amounts on deposit in the Collection
<PAGE>
Account and the Distribution Account over (b) the sum of the
amounts payable on such Payment Date in respect of (i) amounts
payable in respect of Administrative Expenses, (ii) all interest
due on the Series 1997-1 Notes, (iii) the amount payable pursuant
to any Special Redemption or Mandatory Redemption, (iv) any
amounts to be deposited in the Reserve Fund pursuant to Section
9.02(c) of the Indenture and (v) the Series 1997-1 Pro Rata Share
of the Servicing Fee plus any previously unpaid Series 1997-1 Pro
Rata Share of the Servicing Fee.
Purchasers: With respect to the Class B Notes, the
Purchasers of Class B Notes under the Class B Note Purchase
Agreement and their successors and assigns.
Redemption Date: With respect to the Called Principal of
any Series 1997-1 Note, the date on which such Called Principal
is declared to be due and payable pursuant to a redemption or an
acceleration of maturity pursuant to Section 5.02 of the
Indenture or Article V hereof. With respect to a Special
Redemption or Mandatory Redemption, the Redemption Date shall be
the Payment Date next succeeding the Determination Date on which
such Special Redemption or Mandatory Redemption is determined to
be required.
Redemption Price: With respect to any Series 1997-1 Note to
be redeemed by the Issuer pursuant to a Special Redemption,
Mandatory Redemption or Optional Redemption, the sum of (i) 100%
of the then Outstanding Note Principal Balance of the Series
1997-1 Notes to be redeemed, (ii) accrued and unpaid interest
thereon to the applicable Redemption Date and (iii) with respect
to the Class A Notes only, the applicable Yield Maintenance
Amount, if any.
Reference Banks: Barclays Bank PLC, Lloyds Bank PLC,
Citibank, N.A. and The Chase Manhattan Bank.
Reinvestment Yield: With respect to the Called Principal of
any Class A Note, the sum of (A) the yield to maturity implied by
(i) the yields reported, as of 10:00 a.m. (New York City time) on
(a) with respect to an Optional Redemption, the 16th Business Day
preceding the Redemption Date with respect to such Called
Principal and (b) with respect to a Special Redemption, Mandatory
Redemption or an acceleration pursuant to Section 5.02(c) of the
Indenture, the Business Day next preceding the Redemption Date
with respect to such Called Principal, on the display designated
as "Page 678" or "Page 3750" on the Dow Jones Telerate Service
(or such other displays as may replace Page 678 or Page 3750 on
the Dow Jones Telerate Service) for actively traded U.S. Treasury
securities having a maturity nearest to the Remaining Average
Life of such Called Principal as of such Redemption Date, or (ii)
if such yields shall not be reported as of such time or the
<PAGE>
yields reported as of such time shall not be ascertainable, the
Treasury Constant Maturity Series yields reported, for the latest
day for which such yields shall have been so reported as of (a)
with respect to an Optional Redemption, the 16th Business Day
preceding the Redemption Date with respect to such Called
Principal and (b) with respect to a Special Redemption, Mandatory
Redemption or an acceleration pursuant to Section 5.02(c) of the
Indenture, the Business Day next preceding the Redemption Date
with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having
a constant maturity equal to the Remaining Average Life of such
Called Principal as of such Redemption Date and (B) with respect
to an Optional Redemption, 0%, with respect to a Special
Redemption, a Mandatory Redemption pursuant to Section 5.02(b)
hereof and with respect to an acceleration pursuant to Section
5.02(c) of the Indenture, 0.50% and with respect to a Mandatory
Redemption pursuant to Section 5.02(c) hereof, 1.00%. Such
implied yield in (A) above shall be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b)
interpolating linearly between reported yields.
Remaining Average Life: With respect to the Called
Principal of any Class A Note, the number of years (calculated to
the nearest one-twelfth year) obtained by dividing (i) such
Called Principal into (ii) the sum of the products obtained by
multiplying (a) each Remaining Scheduled Payment of such Called
Principal (but not of interest thereon) by (b) the number of
years (calculated to the nearest one-twelfth year) which will
elapse between (x) with respect to an Optional Redemption, the
15th Business Day prior to the Redemption Date with respect to
such Called Principal and (y) with respect to a Special
Redemption or Mandatory Redemption, the Redemption Date with
respect to such Called Principal and the Amortization Date.
Remaining Scheduled Payments: With respect to the Called
Principal of any Class A Note, all payments of such Called
Principal and interest thereon that would be due on or after the
Redemption Date with respect to such Called Principal if no
payment of such Called Principal were made prior to the
Amortization Date and assuming such Called Principal is paid in
full on the Amortization Date.
Required Reserve Balance: With respect to any Payment Date,
3% of the Class A Initial Note Principal Balance.
Reserve Fund: The Eligible Account established and
maintained with the Trustee pursuant to Section 3.01 hereof.
<PAGE>
Series 1997-1 Noteholder: Any Holder of a Series 1997-1
Note.
Series 1997-1 Notes: The Series of Class A Notes and Class
B Notes issued pursuant to this Series 1997-1 Supplement on the
Series Issuance Date and designated "Series 1997-1".
Series 1997-1 Pro Rata Share: With respect to any
Determination Date, a fraction expressed as a percentage, (i) the
numerator of which is the sum of the Class A Note Principal
Balance and the Class B Note Principal Balance and (ii) the
denominator of which is the Note Principal Balance of all Series
or Classes of Notes issued by the Issuer.
Series Issuance Date: April 18, 1997.
Servicing Fee: With respect to each Payment Date, for so
long as the Company is Servicer, an amount equal to one-twelfth
of one percent of the aggregate Stated Value of all Eligible
Receivables that are pledged to the Trustee, calculated as of the
end of the preceding Determination Period.
Special Redemption: A redemption by the Issuer of the
Series 1997-1 Notes pursuant to Section 5.02(a) hereof.
Yield Maintenance Amount: With respect to any Class A Note,
as of the related Redemption Date, a premium equal to the excess,
if any, of the Discounted Value of the Called Principal of such
Series 1997-1 Note over such Called Principal. The Yield
Maintenance Amount shall in no event be less than zero.
Reserve Fund
Reserve Fund. (a) On or before the Closing Date the
Issuer shall establish with the Trustee, an Eligible Account in
the corporate trust department of the Trustee denominated
"Reserve Fund -- Bankers Trust Company, as Trustee in respect of
7.486% Fixed Rate Contract Receivable Collateralized Notes,
Series 1997-1, Class A, and Floating Rate Contract Receivable
Collateralized Notes, Series 1997-1, Class B". The Issuer shall
deposit in such account on or before the Closing Date, and
maintain thereafter, an amount equal to the Required Reserve
Balance. All moneys received by the Trustee pursuant to Sections
9.02(d) or (e) of the Indenture, or otherwise from the Issuer,
for deposit in the Reserve Fund, together with any Eligible
Investments in which such moneys are or will be invested or
reinvested during the term of the Indenture, shall be held by the
Trustee in the Reserve Fund as part of the Trust Estate granted
to secure the Notes, subject to disbursement and withdrawal as
herein provided. Income earned on Eligible Investments held in
the Reserve Fund will not be a part of the Trust Estate and will
be released to the Issuer on any Business Day upon receipt by the
Trustee of an Issuer Request, so long as the amount on deposit in
the Reserve Fund is at least equal to the Required Reserve
Balance.
(b) So long as no Default or Event of Default shall have
occurred and be continuing, all or a portion of any moneys in the
Reserve Fund shall be invested and reinvested by the Trustee at
the Issuer's written direction in one or more Eligible
Investments bearing interest or sold at discount.
Notwithstanding the definition of "Eligible Investments",
investments on which the Paying Agent in its commercial capacity
is the obligor may mature on the Payment Date next succeeding the
date of investment. All income or other gain from investments of
money held in the Reserve Fund shall be deposited by the Trustee
in the Reserve Fund promptly upon receipt, and any loss resulting
from such investments shall be charged to the Reserve Fund.
(c) Unless the Notes have been declared due and payable
pursuant to Section 5.02 of the Indenture, on each Payment Date
the Trustee shall withdraw from the Reserve Fund in accordance
with the Determination Date Statement, and deposit in the
Distribution Account an amount equal to the amount, if any, by
which the Note Interest Payment for such Payment Date exceeds the
amount on deposit in the Distribution Account on such Payment
Date that is available for such payment (before giving effect to
any withdrawal from the Reserve Fund on such date for deposit in
the Distribution Account).
(d) On any Redemption Date on which an Optional Redemption
has been declared by the Issuer, the Trustee shall upon receipt
of an Issuer Order withdraw from the Reserve Fund, to the extent
of funds on deposit therein, and deposit in the Distribution
Account the amount, if any, by which the Redemption Price exceeds
the amount on deposit in the Distribution Account on such
Redemption Date that is available for such payment (before giving
effect to any withdrawal from the Reserve Fund on such date for
deposit in the Distribution Account); provided that on such
Redemption Date the full Redemption Price is paid to the
Outstanding Noteholders.
(e) On the Stated Maturity of the Notes, a Mandatory
Redemption Date, a Special Redemption Date or an Optional
Redemption Date, the Trustee shall withdraw from the Reserve Fund
and deposit in the Distribution Account the amount, if any, by
which the Note Payment for such Payment Date exceeds the amount
on deposit in the Distribution Account on such Payment Date that
<PAGE>
is available for such payment (before giving effect to any
withdrawal from the Reserve Fund on such date for deposit in the
Distribution Account); provided, in the case of Mandatory
Redemption or an Optional Redemption, that on such Payment Date
the full Redemption Price is paid to the Outstanding Noteholders.
Upon the satisfaction and discharge of the Agreement in
accordance with Article Four of the Indenture, upon receipt of an
Issuer Request, the Trustee shall pay or transfer to the Issuer
all money or Eligible Investments then in the Reserve Fund.
<PAGE>
IV
<PAGE>
Rights of Series 1997-1 Noteholders
and Distribution of Collections
Collection and Distribution of Money. (a) The Class A
Notes shall bear interest from the Closing Date until paid at the
Class A Note Interest Rate. Thirty days of interest shall be due
and payable on each Payment Date (other than the first and, if
applicable, last Payment Date) on the Note Principal Balance of
the Class A Notes, determined as of the Closing Date with respect
to the first Payment Date, and thereafter, the preceding Payment
Date (after giving effect to any principal payment made on such
Notes on such date). Interest will be calculated on the basis of
a 360-day year consisting of twelve 30-day months. If the
amounts available in the Distribution Account and Reserve Fund
are insufficient to pay the amount of interest due and payable on
the Class A Notes on any Payment Date, such shortfall will be
carried forward and added to the amount due on such Class A Notes
on the next Payment Date. Any such amount carried forward will
bear interest, to the extent legally permissible, at a rate per
annum which shall be equal to 200 basis points in excess of the
Class A Note Interest Rate.
(a) The principal of the Class A Notes shall be payable
commencing on the Amortization Date and on each Payment Date
thereafter, to the extent of the amount available after payment
of all interest payable on the Notes, to the extent that funds
remain in the Collection Account as provided in Section 4.02
hereof.
(b) The Class B Notes shall bear interest on the average
daily Class B Note Principal Balance for the related Interest
Period at the Class B Note Interest Rate. Interest on the Class
B Notes shall be payable on each Payment Date for the related
Interest Period. Interest will be calculated on the basis of the
actual number of days elapsed in the Interest Period and a 360-
day year. If the amounts available in the Distribution Account
and the Reserve Fund are insufficient to pay the amount of
interest due and payable on the Class B Notes on any Payment
Date, such shortfall will be carried forward and added to the
amount due on such Class B Notes on the next Payment Date. Any
such amount carried forward will bear interest, to the extent
legally permissible, at a rate per annum which shall be equal to
200 basis points in excess of the Class B Note Interest Rate.
(c) The principal of the Class B Notes shall be payable
commencing on the Amortization Date and on each Payment Date
<PAGE>
thereafter, to the extent of the amount available after payment
of all interest payable on the Notes, to the extent that funds
remain in the Collection Account as provided in Section 4.02
hereof. On any Payment Date during the Non-Amortization Period,
the Issuer may designate amounts on deposit in the Collection
Account to pay principal in whole or in part of the Class B
Notes.
(d) Except as otherwise expressly provided herein or in the
Indenture, the Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or
assistance of any fiscal agent or other intermediary, all money
and other property payable to or receivable by the Trustee
pursuant to the Agreement, including all payments due on account
of any of the Receivables pledged to secure the Notes. The
Trustee shall hold all such money and property received by it in
trust for the Holders of the Notes and shall apply it as provided
in the Agreement. Except as otherwise expressly provided in the
Agreement, if any Default occurs in the making of any payment or
performance under the Servicing Agreement, the Trustee may, and
upon the written request of the Required Holders (as evidenced by
the Note Register) shall, take such action as may be appropriate
to enforce such payment or performance, including the institution
and prosecution of appropriate Proceedings. Any such action
shall be without prejudice to any right to claim a Default or
Event of Default under the Agreement and to proceed thereafter as
provided in Article Six of the Indenture.
Distribution Account. (a) Prior to the initial
authentication and delivery of the Notes, the Issuer shall open,
at a depository institution (which may be the Trustee), an
Eligible Account denominated "Distribution Account -- Bankers
Trust Company, as trustee in respect of 7.486% Fixed Rate
Contract Receivable Collateralized Notes, Series 1997-1, Class A
and Floating Rate Contract Receivable Collateralized Notes,
Series 1997-1, Class B". The Distribution Account shall be held
in the corporate trust department of such depositary institution,
in trust and shall relate solely to the Series 1997-1 Notes and
Eligible Investments securing the Series 1997-1 Notes. Funds in
the Distribution Account shall be held as provided in Section
6.06 of the Indenture. The Issuer shall give the Trustee at
least five Business Days' written notice of any change in the
location of the Distribution Account and any related account
identification information. All payments to be made from time to
time to the Holders of Series 1997-1 Notes, out of funds in the
Distribution Account pursuant to this Series 1997-1 Supplement
shall be made by the Trustee as the Paying Agent of the Issuer
or, pursuant to Section 8.10 of the Indenture, by any other
Paying Agent appointed by the Issuer. All moneys deposited from
time to time in the Distribution Account, including the deposits
to be made by the Servicer in the Distribution Account pursuant
to the Servicing Agreement, and all investments made with such
moneys, shall be held by the Trustee as part of the Trust Estate
as herein provided.
(b) So long as no Default or Event of Default shall have
occurred and be continuing, all or a portion of the Distribution
Account shall be invested and reinvested by the Trustee at the
Issuer's written direction in one or more Eligible Investments
bearing interest or sold at discount. All income or other gain
from investment of moneys deposited in the Distribution Account
shall be deposited in the Distribution Account immediately upon
receipt, and any loss resulting from such investment shall be
charged to such Distribution Account. Notwithstanding the
definition of "Eligible Investments", in the case of an Account
maintained with the Paying Agent, Eligible Investments on which
the Paying Agent is the obligor (including repurchase agreements
on which the Paying Agent in its commercial capacity is liable as
principal), may mature on the Payment Date next succeeding the
date of investment.
(c) On each Payment Date during the Non-Amortization
Period, amounts that have been deposited in the Distribution
Account pursuant to Section 9.02(d) of the Indenture will be
distributed as follows:
first, to the payment of all interest due on the Series
1997-1 Notes and any Commitment Fee due to the Purchaser
pursuant to the Class B Note Purchase Agreement;
second, to the payment of principal on any Class B
Notes as is designated by the Issuer;
third, to the payment of all principal due on any Class
A Notes that have been called for redemption; and
fourth, to the payment of any Yield Maintenance Amount
due on any Class A Notes that have been called for
redemption.
(d) On each Payment Date during the Amortization Period,
amounts that have been deposited in the Distribution Account
pursuant to Section 9.02(e) of the Indenture will be distributed
as follows:
first, to the payment of all interest due on the Series
1997-1 Notes;
second, to the payment of all principal due on any
Series 1997-1 Notes that have been called for redemption to
<PAGE>
be distributed to the Holders thereof on a pro rata basis;
and
third, to the payment (or distribution to the Issuer
for payment) of the Principal Distribution Amount due on the
Series 1997-1 Notes to be distributed to the Holders thereof
on a pro rata basis.
(e) On any Payment Date if amounts on deposit in the
Distribution Account are not sufficient to make any portion of
the Note Interest Payment on such Payment Date, an amount equal
to the amount by which the amount available in the Distribution
Account is less than the Note Interest Payment will be withdrawn
from the Reserve Fund in accordance with the Determination Date
Statement, to pay, to the extent available, all interest payable
on the Series 1997-1 Notes on such Payment Date.
General Provisions Regarding Distribution Account and
Reserve Fund. (a) The Issuer shall not direct the Trustee to
make any investment of any funds in an Account or the Reserve
Fund or to sell any investment held in an Account or the Reserve
Fund except under the following terms and conditions: (i) (A)
each such investment shall be made in the name of the Trustee (in
its capacity as such) or its agents, custodians or nominees (or,
if, as indicated by an Opinion of Independent Counsel delivered
to the Trustee, applicable law provides for perfection of pledges
of an investment not evidenced by a certificate or other
instrument through registration of such pledge on books
maintained by or on behalf of the issuer of such investment, such
pledge may be so registered), (B) the Trustee shall have sole
investment control over such investment, the income thereon and
the proceeds thereof, and (C) any instrument evidencing such
investment shall be delivered directly to the Trustee or its
agent; and (ii) the proceeds of each such sale of an investment
shall be remitted by the purchaser thereof directly to the
Trustee for deposit in the Account or the Reserve Fund in which
such investment was held.
(b) If any amounts are needed for disbursement from an
Account or the Reserve Fund and sufficient uninvested funds are
not available to make such disbursement, in the absence of an
Issuer Order for the liquidation of investments in an amount
sufficient to provide the required funds, the Trustee shall cause
to be sold or otherwise converted to cash a sufficient amount of
the investments in such Account or the Reserve Fund; provided
that such investments shall be sold in arm's-length transactions
for not less than their fair market value; provided, further,
that the Trustee may rely upon the appraisal of an independent
appraiser in determining such fair market value.
<PAGE>
(c) The Trustee shall not in any way be held liable by
reason of any insufficiency in any Account or the Reserve Fund
resulting from any loss on any Eligible Investment included
therein except that the Trustee shall remain liable on Eligible
Investments which are obligations of the Trustee in its
commercial capacity.
(d) All investments of funds in an Account or the Reserve
Fund and all sales of Eligible Investments held in an Account or
the Reserve Fund shall, except as otherwise expressly provided in
the Agreement, be made by the Trustee in accordance with an
Issuer Order. Such Issuer Order may prescribe specific actions
(including, without limitation, that such funds shall not be
invested, in which case such funds shall remain deposited in the
Distribution Account or Reserve Fund) or may be a general,
standing order authorizing the Trustee to act within certain
general parameters or to act on written, facsimile or telephonic
instructions (which telephonic instructions shall be confirmed in
writing) of specified personnel or agents of the Issuer.
In the event that:
(i) the Issuer shall have failed to give investment
directions to the Trustee by 12:01 p.m. New York time on any
Business Day authorizing the Trustee to invest the funds
then in an Account or the Reserve Fund,
(ii) a Default or Event of Default shall have occurred
and be continuing but the Series 1997-1 Notes shall not have
been declared due and payable pursuant to Section 5.02 of
the Indenture, or
(iii) an Event of Default shall have occurred and be
continuing, the Series 1997-1 Notes shall have been declared
due and payable pursuant to Section 5.02 of the Indenture,
and amounts collected or receivable from the related Trust
Estate are being applied in accordance with Section 5.06 of
the Indenture, the Trustee shall invest and reinvest the
funds then in each Account or the Reserve Fund to the
fullest extent practicable, but only in one or more Eligible
Investments bearing interest or sold at a discount, upon
written direction by the Issuer. All investments made
pursuant to clause (i) above shall mature on the next
Business Day following the date of such investment, all such
investments made pursuant to clause (ii) above shall mature
no later than the latest maturity date therefor permitted
for Eligible Investments, and all investments made pursuant
to clause (iii) above shall mature no later than the first
date following the date of such investment on which the
Trustee proposes to make a distribution to Series 1997-1
Noteholders pursuant to Section 5.06 of the Indenture.
<PAGE>
Determination of LIBOR. (a) On each LIBOR Determination
Date, the Trustee will determine LIBOR on the basis of the rate
for deposits in Eurodollars for a one-month period which appears
on Telerate Page 3750 as of 11:00 a.m., London time, on such
date. If such rate does not appear on Telerate Page 3750, the
rate for that LIBOR Determination Date will be determined on the
basis of the rates at which deposits in Eurodollars are offered
by the Reference Banks at approximately 11:00 a.m., London time,
on that day to prime banks in the London interbank market for a
one-month period. The Trustee will request the principal London
office of each of the Reference Banks to provide a quotation of
its rate. If at least two such quotations are provided, the rate
for that LIBOR Determination Date will be the arithmetic mean of
the quotations. If fewer than two quotations are provided as
requested, the rate for that LIBOR Determination Date will be the
arithmetic mean of the rates quoted by major banks in New York
City, selected by the Issuer, at approximately 11:00 a.m., New
York City time, on that day for loans in Eurodollars to leading
European banks for a one-month period.
(a) On each LIBOR Determination Date, the Trustee shall
send to the Issuer, the Servicer and the Purchaser by facsimile,
notification of the LIBOR Rate for the following Interest Period.
<PAGE>
V
<PAGE>
Redemption of Series 1997-1 Notes
Optional Redemption. The Class A Notes will be
redeemable in whole on any day on which the Class B Note
Principal Balance is equal to zero, at the option of the Issuer,
at the Redemption Price for an Optional Redemption; provided,
however, that if such day occurs on or after the Amortization
Date, the Redemption Price of such Notes shall not include any
Yield Maintenance Amount.
Section 5.02. Special and Mandatory Redemptions.
(a) Special Redemption. If, on any Determination Date, (i)
the Collateral Value Ratio as set forth in the Determination Date
Statement prepared in accordance with Section 4.02 of the
Servicing Agreement is below 1.00 and the Issuer does not
substitute Receivables or deposit cash into the Collection
Account or reduce the Class B Note Principal Balance such that
the Collateral Value Ratio, as set forth in such Determination
Date Statement, is raised to 1.00 prior to the related Payment
Date and (ii) such ratio was below 1.00 on the previous
Determination Date and the Company did not substitute Receivables
or deposit cash into the Collection Account or reduce the Class B
Note Principal Balance such that the Collateral Value Ratio, as
set forth in the Determination Date Statement for such previous
Determination Date, was raised to 1.00 prior to the current
Determination Date, the Trustee shall promptly give notice that
it will redeem a portion of the Series 1997-1 Notes on the next
Payment Date. The Trustee shall call for a Special Redemption of
the Series 1997-1 Notes in an amount equal to the lesser of
(i)(A) the Outstanding Note Principal Balance minus (B) the sum
of (1) the aggregate Stated Value of the Receivables, less the
aggregate Stated Value of any Excluded Receivables, in each case
valued at the applicable Collateral Value Percentage and (2) the
amount on deposit in the Collection Account and (ii) the
Outstanding Note Principal Balance. The amounts in clauses (A)
and (B)(1) above shall be calculated by the Issuer as of the end
of the Determination Period preceding such Determination Date.
Such redemption will be at the Redemption Price for a Special
Redemption.
During the period from the Determination Date on which the
Trustee gives notice of a Special Redemption until the succeeding
Payment Date, subject to Section 4.02(c) hereof and Section
9.02(c) of the Indenture, Collections will be retained in the
<PAGE>
Collection Account until the amount of funds on deposit therein
is equal to the Redemption Price for such Special Redemption.
If, after the Payment Date on which a Special Redemption is to be
made during the Non-Amortization Period, any portion of the
related Redemption Price has not been paid, funds may not be
withdrawn from the Collection Account to purchase Eligible
Receivables pursuant to Section 4.02(c) hereof until the amount
required for such Special Redemption is on deposit in the
Collection Account and transferred to the Distribution Account.
Any Special Redemption will be paid, to the extent of funds
available in the Collection Account and the Distribution Account,
first to the payment of all amounts owing on the Class B Notes
until the Class B Note Principal Balance is reduced to zero and
second to the payment of all amounts owing on the Class A Notes.
(b) Mandatory Redemption. The Trustee shall as soon as
practicable on any Determination Date promptly give notice of a
Mandatory Redemption of all the Outstanding Series 1997-1 Notes,
based on information contained in the Determination Date
Statement, if:
(i) on the preceding Determination Date, the
Collateral Value Ratio was determined to be less than or
equal to the Mandatory Redemption Level as of the last day
of the second preceding Determination Period and the Company
has not caused the Collateral Value Ratio to be increased
above the Mandatory Redemption Level by substitution of
Receivables or depositing cash into the Collection Account
or reduction of the Class B Note Principal Balance;
(ii) three Special Redemptions (including such current
Determination Date) are required within any consecutive
12-month period; or
(iii) on any Determination Date, (a) the aggregate
Stated Value of all Ineligible Receivables which have been
Ineligible Receivables for more than 30 days exceeds 7% of
the Aggregate Collateral Balance and (b) the Collateral
Value Ratio is less than 1.00.
In the case of clause (i) above, the payment of principal
pursuant to the Mandatory Redemption will be due on the Payment
Date immediately following the Determination Date next succeeding
such notice of a Mandatory Redemption, and in the case of clauses
(ii) or (iii) above, such payment will be due on the Payment Date
next succeeding such notice. Such redemption will be at the
Redemption Price for a Mandatory Redemption. Any Mandatory
Redemption will be paid, to the extent of funds available in the
Collection Account and the Distribution Account, to the Series
1997-1 Noteholders in the proportion that the Note Principal
<PAGE>
Balance of each Series 1997-1 Note to be redeemed bears to the
Outstanding Note Principal Balance; provided that if funds
available on such Payment Date in the Collection Account and the
Distribution Account are insufficient therefor, payment of a
Mandatory Redemption may include funds on deposit in the Reserve
Fund; provided, further, that the aggregate of funds available on
such Payment Date in the Collection Account, the Distribution
Account and the Reserve Fund are sufficient to pay in full the
Outstanding Note Principal Balance.
(c) Mandatory Redemption upon Direction of Noteholders. If
on any date of determination the Issuer is prohibited from
purchasing additional Eligible Receivables pursuant to Section
3.03 of the Sale and Purchase Agreements, the Issuer shall give
notice thereof to the Series 1997-1 Noteholders, which notice
shall reference this Section 5.02(c) relating to Mandatory
Redemption. If the Required Holders of the Series 1997-1 Notes
so direct the Trustee in writing, the Trustee shall give notice
of a Mandatory Redemption of all the Outstanding Series 1997-1
Notes. Payment will be due on the Payment Date next succeeding
such direction from the Required Holders of the Series 1997-1
Notes at the Redemption Price for a Mandatory Redemption.
Section 5.03. Notice of Optional Redemption by Issuer.
The Issuer shall give the Trustee and each Class A
Noteholder fifteen Business Days prior written notice of any
Optional Redemption.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price (including any Yield Maintenance
Amount, if applicable);
(c) that interest thereon shall cease to accrue on the date
specified on the notice;
(d) the place where such Series 1997-1 Notes are to be
surrendered (or an indemnity reasonably satisfactory to the
Trustee provided) for payment of the Redemption Price, which
shall be the office or agency of the Trustee to be maintained as
provided herein.
Failure to give notice of redemption, or any defect therein,
to any Holder of any Series 1997-1 Note selected for redemption
shall not impair or affect the validity of the redemption of any
other Series 1997-1 Note.
<PAGE>
Section 5.04. Deposit of Redemption Price for Optional,
Special and Mandatory Redemptions.
(a) In the case of an Optional Redemption, on or before the
Payment Date on which such Optional Redemption is to be made, the
Issuer shall deposit in the Distribution Account cash in an
amount sufficient to provide for payment of the Redemption Price
of all of the Class A Notes (unless such payment is to be made
from funds on deposit in the Collection Account, any Lock-box
Account or the Reserve Fund).
(b) In the case of all Special Redemptions and any
Mandatory Redemption, on or before the Payment Date on which a
Special Redemption or Mandatory Redemption is to be made, the
Issuer shall deposit into the Distribution Account cash in an
amount sufficient to provide payment of the Redemption Price for
all of the Series 1997-1 Notes that are to be redeemed on such
Payment Date. If during the Non-Amortization Period any portion
of the amount to be paid on a Payment Date as a Special
Redemption or Mandatory Redemption remains outstanding after such
Payment Date, cash will not be released from the Collection
Account for the purpose of acquiring additional Eligible
Receivables or for the payment of the Series 1997-1 Pro Rata
Share of the Servicing Fee until such unpaid Special Redemption
or Mandatory Redemption Amount is paid or cash therefor is on
deposit in the Distribution Account. Any Special Redemption and
Mandatory Redemption will be paid to the Series 1997-1
Noteholders in the proportion that the Note Principal Balance of
each Series 1997-1 Note to be redeemed bears to the Outstanding
Note Principal Balance.
Section 5.05. Series 1997-1 Notes Payable on Redemption
Date.
Notice of redemption having been given as provided in
Section 5.03 hereof, the Series 1997-1 Notes or portions thereof
so to be redeemed shall, on the applicable Redemption Date,
become due and payable at the Redemption Price and on such
Redemption Date (unless the Issuer shall Default in the payment
of the Redemption Price) such Series 1997-1 Notes (or portion
thereof) shall cease to bear interest as specified in the
Agreement. On or after the Redemption Date, such Series 1997-1
Notes shall be paid by the Issuer at the Redemption Price;
provided, however, that payments due on a Redemption Date which
is also a Payment Date shall be payable to the Holders of such
Series 1997-1 Notes registered as such on the relevant Record
Dates according to their terms.
<PAGE>
If any Outstanding Series 1997-1 Note called for Optional
Redemption pursuant to Section 5.01 hereof shall not be so paid
upon surrender thereof for redemption, the principal shall, until
paid, bear interest from the Redemption Date at a per annum rate
equal to 200 basis points in excess of the applicable Note
Interest Rate.
Section 5.06. Payments Upon Certain Events of Default and
Triggers.
(a) If an Event of Default specified in clause (1), (2),
(8), (9), (10) (as to clause (10), with respect to Sections
5.01(c) and (d) only of the Servicing Agreement) or clauses (3)
or (4), to the extent permitted by law, of Section 5.01 of the
Indenture occurs, the amounts payable on the Class A Notes
pursuant to Section 5.02(b) of the Indenture shall include Yield
Maintenance Amount.
(b) If (a) at the close of business on the date of any
Increase, after giving effect to the Increase and any withdrawals
from the Collection Account, the amount on deposit in the
Collection Account is in excess of $45,000,000, and (b) the
foregoing condition continues for the three Business Days
following such date of Increase, then, on the next following
Business Day (x) the amount by which the amount on deposit in the
Collection Account at the end of the preceding Business Day
exceeded the amount of $45,000,000 shall be paid as a reduction
in principal of the Class B Notes and (y) the Issuer shall pay a
fee of $2,000 to the Class B Noteholders.
<PAGE>
VI
<PAGE>
Transfer of Notes
Exemption from Securities Act. No transfer of the
Series 1997-1 Notes may be made from the date of issuance of the
Series 1997-1 Notes (other than a transfer as to which the
proposed transferee has provided a representation letter
substantially in the form of Exhibit C hereto) unless the
transferee provides an opinion of counsel satisfactory to the
Trustee (which may be in-house counsel of the transferee) with
respect to the availability of an exemption from the registration
requirements of the Securities Act of 1933, as amended, pursuant
to Section 4(2) under the Securities Act of 1933, as amended.
Further Restrictions on Transfer. Without the consent
of the Company, transfer of the Series 1997-1 Notes may not be
made from the date of issuance of the Series 1997-1 Notes to any
Person domiciled in a country other than the United States of
America or a competitor of the Company or any of its Affiliates.
<PAGE>
VII
<PAGE>
Miscellaneous Provisions
Amendment. No amendment may be made to this Series
1997-1 Supplement other than as provided in the Agreement.
Governing Law. THE AGREEMENT AND EACH SERIES 1997-1
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED THEREIN.
Counterparts. This Series 1997-1 Supplement may be
executed in two or more counterparts (and by different parties on
separate counterparts), each of which shall be an original, but
all of which together shall constitute one and the same instru
ment.
Ratification of Indenture. As supplemented by this
Series 1997-1 Supplement, the Indenture is in all respects
ratified and confirmed and the Indenture as so supplemented by
this Series 1997-1 Supplement shall be read, taken, and construed
as one and the same instrument.
Cross-references. Cross-references to sections and
subsections correspond to sections and subsections of this Series
1997-1 Supplement except where otherwise indicated.
Issuer Covenant. The Issuer hereby covenants to deliver
all lien searches under the UCC dated a recent date as soon as
possible after the date hereof as required by the Sale and
Purchase Agreement .
Tax Treatment. The Issuer, by entering into this Series
1997-1 Supplement, and each Noteholder, by its acceptance of a
Series 1997-1 Note, agree to treat the Series 1997-1 Notes for
all purposes including federal, state and local income, single
business and franchise tax purposes as indebtedness of the
Issuer.
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Trustee have caused
this Series 1997-1 Supplement to be duly executed by their
respective officers as of the day and year first above written.
DYN FUNDING CORPORATION,
Issuer
By:____________________________
Name:
Title:
BANKERS TRUST COMPANY,
Trustee
By:____________________________
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF CLASS A NOTE
THE CLASS A NOTES ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT, THE
INVESTMENT COMPANY ACT AND APPLICABLE STATE SECURITIES LAWS. THE
CLASS A NOTES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT TO (A)
"QUALIFIED INSTITUTIONAL BUYERS" (AS DEFINED IN RULE 144A UNDER
THE ACT ("RULE 144A")) AS PERMITTED UNDER RULE 144A OR (B)
INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE ACT) AND AS PERMITTED UNDER
APPLICABLE STATE SECURITIES LAWS.
THE PRINCIPAL OF THIS CLASS A NOTE IS SUBJECT TO PREPAYMENT
FROM TIME TO TIME WITHOUT SURRENDER OF OR NOTATION ON THIS CLASS
A NOTE. ACCORDINGLY, THE UNPAID PRINCIPAL BALANCE OF THIS CLASS
A NOTE MAY BE LESS THAN THAT SET FORTH BELOW. ANYONE ACQUIRING
THIS CLASS A NOTE MAY ASCERTAIN ITS CURRENT PRINCIPAL BALANCE BY
INQUIRY OF THE TRUSTEE. THE RIGHTS OF A HOLDER OF THIS CLASS A
NOTE ARE SUBJECT TO THE PROVISIONS OF THE WITHIN-REFERENCED
AGREEMENT.
DYN FUNDING CORPORATION
7.486% Fixed Rate Contract Receivable Collateralized Note
Series 1997-1, Class A
7.486% Class A Note Class A Initial Note
Interest Rate Principal Amount: $50,000,000
Note No. __ Stated Maturity: October 31, 2002
CUSIP No. 267743 AA 0
Dyn Funding Corporation, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay
to ____________________ or registered assigns, in accordance with
the terms of the DynCorp Trade Receivables Master Indenture,
dated April 18, 1997 (the "Indenture"), between the Issuer and
Bankers Trust Company, as trustee (the "Trustee", which term
includes any successor Trustee), as supplemented by the Series
1997-1 Supplement, dated April 18, 1997 (the "Series 1997-1
Supplement"), between the Issuer and the Trustee (the Series
1997-1 Supplement and the Indenture being collectively referred
to herein as the "Agreement"), the principal sum of
____________________ DOLLARS ($__________) as herein described,
and interest on the unpaid amount hereof in the manner
<PAGE>
hereinafter described until this Class A Note has been paid in
full.
This Class A Note is one of a duly authorized issue of
Series 1997-1 Notes of the Issuer, designated as the 7.486% Fixed
Rate Contract Receivable Collateralized Notes, Series 1997-1,
Class A (herein referred to as the "Class A Notes"), limited in
aggregate principal amount to $50,000,000 under the Agreement,
subject to the terms, provisions and conditions of the Agreement,
to which Agreement reference is made for a statement of the
respective rights thereunder of the Issuer, the Trustee and the
Holders of the Series 1997-1 Notes, and the terms upon which the
Series 1997-1 Notes are, and are to be, authenticated and
delivered. Also issued under the Agreement are the Floating Rate
Contract Receivable Collateralized Notes, Series 1997-1, Class B.
A summary of certain of the pertinent provisions of the
Agreement is set forth hereinafter. All terms used in this Class
A Note that are not otherwise defined herein shall have the
meanings assigned to them in the Agreement.
Each payment of this Class A Note shall be applied first to
the payment of interest accrued and unpaid on this Class A Note
and then, if principal is then payable, to the payment of
principal of this Class A Note.
The interest on this Class A Note and principal of this
Class A Note shall be distributable in lawful money of the United
States in the following manner:
(a) Interest shall be payable on this Class A Note at
the rate of 7.486% per annum (the "Class A Note Interest
Rate"). Thirty days of interest shall be due and payable on
the 30th day of each month or, if such day is not a Business
Day, the next succeeding Business Day (each, a "Payment
Date") commencing on April 30, 1997 on the Class A Note
Principal Balance of the Class A Notes, determined as of the
Closing Date with respect to the first Payment Date, and
thereafter, the preceding Payment Date (after giving effect
to any principal payment made on such Notes on such date).
Interest will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. If the amounts
available in the Distribution Account and the Reserve Fund
are insufficient to pay the amount of interest due and
payable on the Class A Notes on any Payment Date, such
shortfall will be carried forward and added to the amount
due on such Class A Notes on the next Payment Date. Any
such amount carried forward will bear interest, to the
extent legally permissible, at a rate per annum which shall
be equal to 200 basis points in excess of the Class A Note
Interest Rate.
<PAGE>
(b) The principal of the Class A Notes shall be
payable commencing on the Amortization Date and each Payment
Date thereafter and otherwise in accordance with the
Agreement, to the extent of the amount available after
payment of all interest payable on the Notes, to the extent
that funds remain in the Collection Account, as provided in
the Agreement. The Holders of the Class A Notes as of the
Record Date in respect of a Payment Date shall be entitled
to the interest accrued and payable and the principal
payable on such Payment Date. Payments of principal to such
Holders shall be made in the proportion that the unpaid
principal balance of the Class A Notes registered in the
name of each such Holder on such Record Date bears to the
aggregate unpaid principal balance of all the Class A Notes
(the "Outstanding Class A Note Principal Balance") on such
Record Date. All payment obligations under a Class A Note
are discharged to the extent such payments are made to the
Holder of record.
The principal and interest to be distributed on any Payment
Date will, as provided in the Agreement, be distributed to the
Person in whose name this Class A Note is registered on the
Record Date for such Payment Date.
Payments on the Class A Notes shall be made by the Trustee
by wire transfer of immediately available funds to the account of
the Person entitled thereto at a bank or other entity having
appropriate facilities therefor if such Person shall have so
notified the Trustee in writing by the Record Date immediately
prior to such Payment Date and is the registered owner of Class A
Notes in the initial aggregate principal amount equal to or in
excess of $500,000. The final installment of principal of and
interest on each Class A Note shall be payable on or before its
Class A Stated Maturity. The Trustee shall notify the Person in
whose name a Class A Note is registered at the close of business
on the twenty-fifth day of the month next preceding the month of
the Payment Date on which the Issuer expects that the final
installment of principal of and interest on such Class A Note
will be paid. Upon payment of the final installment of principal
of and interest on each Class A Note, the Holders will return the
Class A Notes to the Trustee for cancellation.
The Class A Notes may be redeemed, at the option of the
Issuer, on notice as provided in the Agreement, in whole but not
in part, on any Payment Date at a price (the "Redemption Price")
equal to the sum of (i) 100% of the then Outstanding Class A Note
Principal Balance, (ii) accrued and unpaid interest to such
Payment Date and (iii) the applicable Yield Maintenance Amount,
if any. The Class A Notes are additionally subject from time to
time to redemption (i) in part, pursuant to a Special Redemption
and (ii) in whole but not in part, pursuant to a Mandatory
<PAGE>
Redemption, respectively, under the limited circumstances set
forth in the Agreement. The price to be paid for Class A Notes
so redeemed will be equal to the applicable Redemption Price.
Upon surrender for registration of transfer of any Class A
Note in certificated form at the office or agency of the Issuer
to be maintained in the United States of America, the Issuer
shall execute, and, upon an Issuer Order, the Trustee shall
authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Class A Notes of any
authorized denominations of a like aggregate principal amount.
Prior to due presentment for registration of transfer of any
Class A Note, the Issuer, the Trustee and any agent of the Issuer
or of the Trustee may treat the Person in whose name any Class A
Note is registered as the owner of such Class A Note for the
purpose of receiving payments of principal and interest on such
Class A Note and for all other purposes whatsoever, (whether or
not such Class A Note is overdue), and neither the Issuer, the
Trustee nor any agent of the Issuer or the Trustee shall be bound
by notice to the contrary.
If an Event of Default as defined in the Indenture shall
occur and be continuing, the principal of all of the Class A
Notes may, and in certain cases shall, become or be declared due
and payable in the manner and with the effect provided in the
Agreement.
The Agreement permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights of the Holders of the Class A Notes under the Agreement at
any time by the Issuer and the Trustee with the consent of the
Registered Holders of all Series evidencing 66 2/3% of the
Outstanding Note Principal Balance as of any date of
determination. Any such consent by the Holder of this Class A
Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Class A Note and of any Class A Note
issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof whether or not notation of such consent
is made upon this Class A Note.
The Class A Notes are issuable only in registered
certificated form in minimum denominations of $500,000 and
integral multiples of $100,000 in excess thereof, except that the
Issuer may issue one Class A Note in such denomination as it
deems necessary and appropriate to represent the remainder of the
Outstanding Class A Note Principal Balance as provided in the
Agreement.
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Class A Note
<PAGE>
shall not be entitled to any benefit under the Agreement, or be
valid or obligatory for any purpose.
THIS CLASS A NOTE AND THE AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH, AND GOVERNED BY,
THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, Dyn Funding Corporation has caused this
Class A Note to be signed by an authorized officer.
DYN FUNDING CORPORATION
By:______________________________
Name:
Title:
<PAGE>
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A Notes referred to in the within
mentioned Agreement.
Date of Authentication: BANKERS TRUST COMPANY
as Trustee
__________
By: ________________________
Name:
Title:
<PAGE>
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this Class A Note, shall be construed as though they
were written out in full according to applicable laws or
regulations:
UNIF GIFT MIN ACT--..........Custodian................
(Cust) (Minor)
COM -- as tenants in common Under Uniform Gifts to Minors
ENT -- as tenants by the Act..........................
entireties (State)
TEN -- as joint tenants with
rights of survivorship
and not as tenants in
common
Additional abbreviations may also be used though not in the above
list.
<PAGE>
<PAGE>
FORM OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto ___________________________________________
______________________________________________________________
______________________________________________________________
Please print or typewrite name and address of assignee
the within Class A Note and does hereby irrevocably constitute
and appoint ______________________________________________
Attorney in fact to transfer the said Class A Note on the books
thereof of the within named Corporation, with full power of
substitution in the premises.
Dated: ___________________
______________________________*
Signature Guaranteed:
______________________________
_______________________
NOTICE: The signature to this assignment must correspond with
the name as written upon the face of this Class A Note in every
particular without alteration or enlargement or any change
whatever. The signature must be guaranteed by an institution
which is a member of one of the following recognized Signature
Guaranty Program: (i) The Securities Transfer Agent Medallion
Program (STAMP); (ii) The New York Stock Exchange Medallion
Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP);
or (iv) in such other guarantee program acceptable to the
Trustee.
<PAGE>
EXHIBIT B
FORM OF CLASS B NOTE
THE CLASS B NOTES ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT, THE
INVESTMENT COMPANY ACT AND APPLICABLE STATE SECURITIES LAWS. THE
CLASS B NOTES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT TO (A)
"QUALIFIED INSTITUTIONAL BUYERS" (AS DEFINED IN RULE 144A UNDER
THE ACT ("RULE 144A")) AS PERMITTED UNDER RULE 144A OR (B)
INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE ACT) AND AS PERMITTED UNDER
APPLICABLE STATE SECURITIES LAWS.
THE UNPAID PRINCIPAL BALANCE OF THIS CLASS B NOTE WILL BE AS
SET FORTH ON ATTACHMENT A. ANYONE ACQUIRING THIS CLASS B NOTE
MAY ASCERTAIN ITS CURRENT PRINCIPAL BALANCE BY INQUIRY OF THE
TRUSTEE. THE RIGHTS OF A HOLDER OF THIS CLASS B NOTE ARE SUBJECT
TO THE PROVISIONS OF THE WITHIN-REFERENCED AGREEMENT.
DYN FUNDING CORPORATION
Floating Rate Contract Receivable Collateralized Note
Series 1997-1, Class B
Note No. __ Stated Maturity: October 31, 2002
CUSIP No. 267743 AB 8
Dyn Funding Corporation, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay
to ____________________ or registered assigns, in accordance with
the terms of the DynCorp Trade Receivables Master Indenture,
dated April 18, 1997 (the "Indenture"), between the Issuer and
Bankers Trust Company, as trustee (the "Trustee", which term
includes any successor Trustee), as supplemented by the Series
1997-1 Supplement, dated April 18, 1997 (the "Series 1997-1
Supplement"), between the Issuer and the Trustee (the Series
1997-1 Supplement and the Indenture being collectively referred
to herein as the "Agreement"), the principal sum set forth on
Attachment A hereto, which shall not exceed ____________________
DOLLARS ($__________), as shall have been advanced and then be
outstanding hereunder as herein described, and interest on the
unpaid amount hereof in the manner hereinafter described until
this Class B Note has been paid in full. However, principal with
respect to the Class B Notes may be paid earlier or later as
described in the Agreement, and the principal amount of the Class
<PAGE>
B Notes may be increased, but not in excess of the Class B
Purchase Limit, from time to time as provided in the Agreement.
This Class B Note is one of a duly authorized issue of
Series 1997-1 Notes of the Issuer, designated as the Floating
Rate Contract Receivable Collateralized Notes, Series 1997-1,
Class B (herein referred to as the "Class B Notes"), limited in
aggregate principal amount to $90,000,000 under the Agreement,
subject to the terms, provisions and conditions of the Agreement,
to which Agreement reference is made for a statement of the
respective rights thereunder of the Issuer, the Trustee and the
Holders of the Series 1997-1 Notes, and the terms upon which the
Series 1997-1 Notes are, and are to be, authenticated and
delivered. Also issued under the Agreement are the 7.486% Fixed
Rate Contract Receivable Collateralized Notes, Series 1997-1,
Class A. A summary of certain of the pertinent provisions of the
Agreement is set forth hereinafter. All terms used in this Class
B Note that are not otherwise defined herein shall have the
meanings assigned to them in the Agreement.
Each payment of this Class B Note shall be applied first to
the payment of interest accrued and unpaid on this Class B Note
and any Commitment Fee due to the Purchaser pursuant to the
Class B Note Purchase Agreement and then, if principal is then
payable, to the payment of principal of this Class B Note.
The interest on this Class B Note and principal of this
Class B Note shall be distributable in lawful money of the United
States in the following manner:
(a) Interest will accrue on the average daily
outstanding Class B Note Principal Balance, if any, from the
Closing Date through April 29, 1997 and with respect to each
Interest Period thereafter, at the rate of 0.70% per annum
above LIBOR (the "Class B Note Interest Rate"), as more
specifically set forth in the Agreement and will be due and
payable on the 30th day of each month or, if such day is not
a Business Day, the next succeeding Business Day commencing
on April 30, 1997 (each, a "Payment Date"). Interest will
be calculated on the basis of the actual number of days
elapsed in a 360-day year. If the amounts available in the
Distribution Account and Reserve Fund are insufficient to
pay the amount of interest due and payable on the Class B
Notes on any Payment Date, such shortfall will be carried
forward and added to the amount due on such Class B Notes on
the next Payment Date. Any such amount carried forward will
bear interest, to the extent legally permissible, at a rate
per annum which shall be equal to 200 basis points in excess
of the Class B Note Interest Rate.
<PAGE>
(b) The principal of the Class B Notes shall be
payable commencing on the Amortization Date and each Payment
Date thereafter and otherwise in accordance with the
Agreement, to the extent of the amount available after
payment of all interest payable on the Notes, to the extent
that funds remain in the Collection Account, as provided in
the Agreement. On any Payment Date during the Non-
Amortization Period, the Issuer may designate amounts on
deposit in the Collection Account to pay principal in whole
or in part of the Class B Notes. The Holders of the Class B
Notes as of the Record Date in respect of a Payment Date
shall be entitled to the interest accrued and payable and
the principal payable on such Payment Date. Payments of
principal to such Holders shall be made in the proportion
that the unpaid principal balance of the Class B Notes
registered in the name of each such Holder on such Record
Date bears to the aggregate unpaid principal balance of all
the Class B Notes (the "Outstanding Class B Note Principal
Balance") on such Record Date. All payment obligations
under a Class B Note are discharged to the extent such
payments are made to the Holder of record.
The principal and interest to be distributed on any Payment
Date will, as provided in the Agreement, be distributed to the
Person in whose name this Class B Note is registered on the
Record Date for such Payment Date.
Payments on the Class B Notes shall be made by the Trustee
by wire transfer of immediately available funds to the account of
the Person entitled thereto at a bank or other entity having
appropriate facilities therefor if such Person shall have so
notified the Trustee in writing by the Record Date immediately
prior to such Payment Date and is the registered owner of Class B
Notes in the initial aggregate principal amount equal to or in
excess of $500,000. The final installment of principal of and
interest on each Class B Note shall be payable on or before its
Class B Stated Maturity. The Trustee shall notify the Person in
whose name a Class B Note is registered at the close of business
on the twenty-fifth day of the month next preceding the month of
the Payment Date on which the Issuer expects that the final
installment of principal of and interest on such Class B Note
will be paid. Upon payment of the final installment of principal
of and interest on each Class B Note, the Holders will return the
Class B Notes to the Trustee for cancellation.
The Class B Notes may be paid, in whole or in part from time
to time, at the option of the Issuer, on any Payment Date.
Upon surrender for registration of transfer of any Class B
Note in certificated form at the office or agency of the Issuer
to be maintained in the United States of America, the Issuer
<PAGE>
shall execute, and, upon an Issuer Order, the Trustee shall
authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Class B Notes of any
authorized denominations of a like aggregate principal amount.
Prior to due presentment for registration of transfer of any
Class B Note, the Issuer, the Trustee and any agent of the Issuer
or of the Trustee may treat the Person in whose name any Class B
Note is registered as the owner of such Class B Note for the
purpose of receiving payments of principal and interest on such
Class B Note and for all other purposes whatsoever, (whether or
not such Class B Note is overdue), and neither the Issuer, the
Trustee nor any agent of the Issuer or the Trustee shall be bound
by notice to the contrary.
If an Event of Default as defined in the Indenture shall
occur and be continuing, the principal of all of the Class B
Notes may, and in certain cases shall, become or be declared due
and payable in the manner and with the effect provided in the
Agreement.
The Agreement permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights of the Holders of the Class B Notes under the Agreement at
any time by the Issuer and the Trustee with the consent of the
Registered Holders of all Series evidencing 66 2/3% of the
Outstanding Note Principal Balance as of any date of
determination. Any such consent by the Holder of this Class B
Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Class B Note and of any Class B Note
issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof whether or not notation of such consent
is made upon this Class B Note.
The Class B Notes are issuable only in registered
certificated form in minimum denominations of $500,000 and
integral multiples of $100,000 in excess thereof, except that the
Issuer may issue one Class B Note in such denomination as it
deems necessary and appropriate to represent the remainder of the
Outstanding Class B Note Principal Balance as provided in the
Agreement.
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Class B Note
shall not be entitled to any benefit under the Agreement, or be
valid or obligatory for any purpose.
THIS CLASS B NOTE AND THE AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH, AND GOVERNED BY,
THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, Dyn Funding Corporation has caused this
Class B Note to be signed by an authorized officer.
DYN FUNDING CORPORATION
By:______________________________
Name:
Title:
<PAGE>
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class B Notes referred to in the within
mentioned Agreement.
Date of Authentication: BANKERS TRUST COMPANY
as Trustee
__________, 1997
By: ________________________
Name:
Title:
<PAGE>
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this Class B Note, shall be construed as though they
were written out in full according to applicable laws or
regulations:
UNIF GIFT MIN ACT--..........Custodian................
(Cust) (Minor)
COM -- as tenants in common Under Uniform Gifts to Minors
ENT -- as tenants by the Act..........................
entireties (State)
TEN -- as joint tenants with
rights of survivorship
and not as tenants in
common
Additional abbreviations may also be used though not in the above
list.
<PAGE>
<PAGE>
FORM OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto ___________________________________________
______________________________________________________________
______________________________________________________________
Please print or typewrite name and address of assignee
the within Class B Note and does hereby irrevocably constitute
and appoint ___________________________________________________
Attorney in fact to transfer the said Class B Note on the books
thereof of the within named Corporation, with full power of
substitution in the premises.
Dated: ___________________
______________________________*
Signature Guaranteed:
______________________________
_______________________
NOTICE: The signature to this assignment must correspond with
the name as written upon the face of this Class A Note in every
particular without alteration or enlargement or any change
whatever. The signature must be guaranteed by an institution
which is a member of one of the following recognized Signature
Guaranty Program: (i) The Securities Transfer Agent Medallion
Program (STAMP); (ii) The New York Stock Exchange Medallion
Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP);
or (iv) in such other guarantee program acceptable to the
Trustee.
<PAGE>
<PAGE>
Attachment A
Date of Principal Interest Principal Interest
Increase Advanced Paid Paid Rate
<PAGE>
EXHIBIT C
(1) The Purchaser understands and acknowledges that
the Notes have not been registered under the Act or any
other applicable securities law, and may not be offered,
sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act of 1933, as
amended (the "Act"), or any other applicable law or pursuant
to an exemption therefrom and the conditions for transfer
set forth in paragraph (4) below.
(2) The Purchaser is either:
(a) an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) promulgated
under the Act) ("Accredited Investors"); or
(b) a "Qualified Institutional Buyer" as defined
in Rule 144A promulgated under the Act ("Rule 144A"),
and is aware that any sale of the Notes to it will be
made in reliance on Rule 144A. Such acquisition will
be for its own account or for the account of another
Qualified Institutional Buyer.
(3) Each purchaser of the Notes who is a Qualified
Institutional Buyer or an Accredited Investor as described
in Sections 2(a) and 2(b) above is purchasing the Notes for
its own account, or for one or more investor accounts for
which it is acting as a fiduciary or agent, in each case for
investment, and not with a view to, or for offer or sale in
connection with, any distribution thereof, subject to any
requirement of law that the disposition of its property or
the property of such investor account or accounts to be at
all times within its or their control and subject to its or
their ability to resell the Notes pursuant to Rule 144A, or
other exemption from registration available under the Act.
Such purchaser agrees, on its own behalf and on behalf of
any investor account for which it is purchasing the Notes,
and each subsequent holder of the Notes by its acceptance
thereof will agree, to offer, sell or otherwise transfer
such Notes only (a) pursuant to a registration statement
which has been declared effective under the Act, (b) to a
person it reasonably believes is a Qualified Institutional
Buyer that purchases for its own account or for the account
of a Qualified Institutional Buyer to whom notice is given
that the transfer is being made in reliance on Rule 144A and
with respect to which the purchaser will provide to the Note
Registrar a signed letter containing certain representations
and warranties relating to the proposed transferee and the
restrictions on transfer of the Notes, (c) to an Accredited
<PAGE>
Investor that, prior to such transfer, furnishes to the
Registrar a signed letter containing certain representations
and agreements relating to the restrictions on transfer of
the Notes a signed letter containing certain representations
and warranties relating to the proposed transferee and the
restrictions on transfer of the Notes (the form of which
letter may be obtained from the Registrar), (c) to an
Accredited Investor that, prior to such transfer, furnishes
to the Registrar a signed letter containing certain
representations and agreements relating to the restrictions
on transfer of the Notes or (d) pursuant to an exemption
from such registration requirements as confirmed in an
opinion of counsel satisfactory to the Issuer and the Note
Registrar, subject in each of the foregoing cases to any
requirement of law that the disposition of its property or
the property of such investor account or accounts to be at
all times within its or their control.
(4) The Purchaser will be required to certify whether
such purchaser is a "benefit plan investor" as defined in
Section 2510.3-101(f)(2) of the Labor Regulations
promulgated under ERISA, or if such purchaser is an
insurance company licensed to issue contracts of insurance
in any state, whether the source of funds from which its
investment is to be made is the general account of such
insurance company.
(5) It acknowledges that the Issuer and others will
rely upon the truth and accuracy of the foregoing
acknowledgements, representations and agreements and agrees
that, if any of the acknowledgements, representations or
warranties deemed to have been made by its purchase of the
Notes are no longer accurate, it shall promptly notify the
Issuer. If it is acquiring any Notes as a fiduciary or
agent for one or more investor accounts, it represents that
it has sole investment discretion with respect to each such
account and that it has full power to make the foregoing
acknowledgements, representations and agreements on behalf
of each such account.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
March 21, 1997 included in DynCorp's Form 10-K for the year ended December 31,
1996 and to all references to our Firm included in this registration statement.
/s/ Arthur Andersen, LLP
ARTHUR ANDERSEN LLP
Washington, D. C.
May 7, 1997
