<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
-----------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-3658
--------------
THE FIRST AMERICAN FINANCIAL CORPORATION
--------------------------------------------
(Exact name of registrant as specified in its charter)
Incorporated in California 95-1068610
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
114 East Fifth Street, Santa Ana, California 92701-4699
-------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(714) 558-3211
----------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes [_] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
$1 par value - 57,287,968 as of August 7, 1998
<PAGE>
INFORMATION INCLUDED IN REPORT
------------------------------
Part I: Financial Information
Item 1. Financial Statements
A. Condensed Consolidated Statements of Income
B. Condensed Consolidated Balance Sheets
C. Condensed Consolidated Statements of Cash Flows
D. Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Part II: Other Information
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Items 1-4 have been omitted because they are not applicable with respect to the
current reporting period.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE FIRST AMERICAN FINANCIAL CORPORATION
----------------------------------------
(Registrant)
/s/ Thomas A. Klemens
----------------------------------------
Thomas A. Klemens
Executive Vice President, Chief Financial Officer
(Principal Financial Officer and Duly
Authorized to Sign on Behalf of Registrant)
Date: August 13, 1998
1
<PAGE>
Part I: Financial Information
---------------------
Item 1. Financial Statements
--------------------
THE FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
------------------------
Condensed Consolidated Balance Sheets
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 297,975,000 $ 181,531,000
-------------- --------------
Accounts and accrued income receivable, net 165,093,000 128,017,000
-------------- --------------
Investments:
Deposits with savings and loan associations and banks 31,422,000 29,029,000
Debt securities 199,946,000 151,503,000
Equity securities 24,851,000 13,904,000
Other long-term investments 56,508,000 35,047,000
-------------- --------------
312,727,000 229,483,000
-------------- --------------
Loans receivable 68,641,000 63,378,000
-------------- --------------
Property and equipment, at cost 422,932,000 323,065,000
Less- accumulated depreciation (145,554,000) (122,688,000)
-------------- --------------
277,378,000 200,377,000
-------------- --------------
Title plants and other indexes 198,431,000 100,626,000
-------------- --------------
Assets acquired in connection with claim settlements
(net of valuation reserves of $11,056,000 and $11,135,000) 19,132,000 21,119,000
-------------- --------------
Deferred income taxes 19,806,000 31,563,000
-------------- --------------
Goodwill and other intangibles, net 147,342,000 132,361,000
-------------- --------------
Deferred policy acquisition costs 26,759,000 25,016,000
-------------- --------------
Other assets 64,998,000 54,673,000
-------------- --------------
$1,598,282,000 $1,168,144,000
============== ==============
Liabilities and Stockholders' Equity
Demand deposits $ 63,379,000 $ 62,475,000
-------------- --------------
Accounts payable and accrued liabilities 219,554,000 168,133,000
-------------- --------------
Deferred revenue 119,706,000 104,124,000
-------------- --------------
Reserve for known and incurred but not reported claims 262,824,000 250,826,000
-------------- --------------
Income taxes payable 24,126,000 3,987,000
-------------- --------------
Notes and contracts payable (Note 4) 145,032,000 41,973,000
-------------- --------------
Minority interests in consolidated subsidiaries 86,735,000 25,214,000
-------------- --------------
Guaranteed Preferred Beneficial Interests in Company's
Junior Subordinated Deferrable Interest Debentures 100,000,000 100,000,000
-------------- --------------
Stockholders' equity:
Preferred stock, $1 par value
Authorized - 500,000 shares; outstanding - none
Common stock, $1 par value (Note 5)
Authorized - 108,000,000 shares
Outstanding - 56,820,000 and 52,122,000 shares 56,820,000 52,122,000
Additional paid-in capital (Note 5) 84,116,000 9,205,000
Retained earnings 429,278,000 344,645,000
Net unrealized gain on securities 6,712,000 5,440,000
-------------- --------------
576,926,000 411,412,000
-------------- --------------
$1,598,282,000 $1,168,144,000
============== ==============
</TABLE>
2
<PAGE>
THE FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
------------------------
Condensed Consolidated Statements of Income
-------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30 June 30
----------------------------- -----------------------------
1998 1997 1998 1997
------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Revenues
Operating revenues $695,463,000 $443,447,000 $1,257,077,000 $819,872,000
Investment and other income 8,820,000 6,927,000 52,255,000 13,379,000
------------ ------------ -------------- ------------
704,283,000 450,374,000 1,309,332,000 833,251,000
------------ ------------ -------------- ------------
Expenses
Salaries and other personnel costs 219,067,000 157,812,000 418,189,000 298,599,000
Premiums retained by agents 194,982,000 128,962,000 335,027,000 251,155,000
Other operating expenses 149,336,000 93,689,000 284,336,000 175,649,000
Provision for title losses and other claims 32,203,000 22,457,000 59,531,000 41,049,000
Depreciation and amortization 14,597,000 9,156,000 28,303,000 18,141,000
Premium taxes 5,231,000 4,561,000 9,385,000 8,722,000
Interest 5,443,000 2,538,000 9,019,000 3,660,000
------------ ------------ -------------- ------------
620,859,000 419,175,000 1,143,790,000 796,975,000
------------- ------------ -------------- ------------
Income before income taxes and
minority interests 83,424,000 31,199,000 165,542,000 36,276,000
Income taxes 29,900,000 11,700,000 59,300,000 13,600,000
------------- ------------ -------------- ------------
Income before minority interests 53,524,000 19,499,000 106,242,000 22,676,000
Minority interests 8,418,000 983,000 16,171,000 1,294,000
------------- ------------ -------------- ------------
Net income $ 45,106,000 $ 18,516,000 $ 90,071,000 $ 21,382,000
============= ============ ============== ============
Net income per share (Note 5):
Basic $ 0.83 $ .35 $ 1.69 $ .41
============= ============ ============== ============
Diluted $ 0.80 $ .35 $ 1.63 $ .40
============= ============ ============== ============
Cash dividends per share (Note 5) $ .05 $ .04 $ .10 $ .08
============= ============ ============== ============
Weighted average number of shares (Note 5):
Basic 54,297,000 52,179,000 53,346,000 52,116,000
============= ============ ============== ============
Diluted 56,292,000 52,968,000 55,254,000 53,088,000
============= ============ ============== ============
</TABLE>
3
<PAGE>
THE FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
------------------------
Condensed Consolidated Statements of Cash Flows
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30
----------------------------
1998 1997
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 90,071,000 $ 21,382,000
Adjustments to reconcile net income to cash
provided by operating activities-
Provision for title losses and other claims 59,531,000 41,049,000
Depreciation and amortization 28,303,000 18,141,000
Minority interests in net income 16,171,000 1,294,000
Investment gain (Note 2) (32,449,000)
Other, net (496,000) (434,000)
Changes in assets and liabilities excluding effects of
company acquisitions and noncash transactions-
Claims paid, including assets acquired, net of recoveries (45,653,000) (36,775,000)
Net change in income tax accounts 27,927,000 7,677,000
Increase in accounts and accrued income receivable (20,486,000) (4,405,000)
Increase (decrease) in accounts payable and accrued liabilities 37,011,000 (12,503,000)
Increase (decrease) in deferred revenue 5,399,000 (1,459,000)
Other, net (4,137,000) (10,251,000)
------------- ------------
Cash provided by operating activities 161,192,000 23,716,000
------------- ------------
Cash flows from investing activities:
Net cash effect of company acquisitions 5,031,000 (37,977,000)
Net increase in deposits with banks (2,197,000) (8,201,000)
Net increase in loans receivable (5,263,000) (5,525,000)
Purchases of debt and equity securities (87,840,000) (40,963,000)
Proceeds from sales of debt and equity securities 19,815,000 21,691,000
Proceeds from maturities of debt securities 10,592,000 10,427,000
Net decrease in other investments 271,000 366,000
Capital expenditures (74,780,000) (33,265,000)
Proceeds from sale of property and equipment 254,000 569,000
------------- ------------
Cash used for investing activities (134,117,000) (92,878,000)
------------- ------------
Cash flows from financing activities:
Net change in demand deposits 904,000 4,847,000
Proceeds from issuance of junior subordinated
deferrable interest debentures 100,000,000
Proceeds from issuance of debt 99,456,000
Repayment of debt (9,519,000) (37,337,000)
Purchase of Company shares (2,245,000)
Proceeds from exercise of stock options 1,994,000 282,000
Proceeds from issuance of stock to employee savings plan 8,531,000
Distributions to minority shareholders (6,559,000) (219,000)
Cash dividends (5,438,000) (4,176,000)
------------- ------------
Cash provided by financing activities 89,369,000 61,152,000
------------- ------------
Net increase (decrease) in cash and cash equivalents 116,444,000 (8,010,000)
Cash and cash equivalents- Beginning of year 181,531,000 173,439,000
------------- ------------
- End of first half $ 297,975,000 $165,429,000
============= ============
Supplemental information:
Cash paid during the first half for:
Interest $ 6,267,000 $ 2,088,000
Premium taxes $ 10,421,000 $ 10,243,000
Income taxes $ 36,302,000 $ 7,197,000
Noncash investing and financing activities:
Shares issued for stock bonus plan $ 2,637,000 $ 2,185,000
Liabilities incurred in connection with company acquisitions $ 89,779,000 $ 40,184,000
Net unrealized gain on securities $ 1,272,000 $ 701,000
Company acquisitions in exchange for common stock $ 66,447,000
</TABLE>
4
<PAGE>
THE FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
------------------------
Notes to Condensed Consolidated Financial Statements
----------------------------------------------------
(Unaudited)
Note 1 - Basis of Condensed Consolidated Financial Statements
- -------------------------------------------------------------
The condensed consolidated financial information included in this report has
been prepared in conformity with the accounting principles and practices
reflected in the consolidated financial statements included in the annual report
filed with the Commission for the preceding calendar year. All adjustments are
of a normal recurring nature and are, in the opinion of management, necessary to
a fair statement of the consolidated results for the interim periods. Certain
1997 interim amounts have been reclassified to conform with the current period
presentation. This report should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
Note 2 - Business Combinations
- ------------------------------
On January 1, 1998, the Company formed a limited liability corporation (LLC)
with Experian Group (Experian). The purpose of the LLC is to combine certain
operations of the Company's subsidiary, First American Real Estate Information
Services, Inc., with Experian's Real Estate Solutions division (RES). The LLC
is 80% owned by the Company and 20% owned by Experian. RES is a supplier of
core real estate data, providing, among other things, property valuation
information, title and tax information and imaged title documents. This
business combination has been accounted for under the purchase method of
accounting, and accordingly, the purchase price was allocated to the assets
acquired and liabilities assumed based on the estimated fair values at January
1, 1998. In addition, as a result of the transaction, the Company recognized an
investment gain of $32.4 million in the first quarter 1998. The operating
results of the LLC are included in the Company's consolidated financial
statements commencing January 1, 1998.
On June 3, 1998, the Company acquired Data Tree Corporation, a California
company in the business of providing database management and document imaging
systems to county recorders, governmental agencies and the title industry. This
acquisition has been accounted for by the purchase method of accounting and
accordingly, the assets acquired and liabilities assumed have been recorded at
their estimated fair value at the date of acquisition.
Note 3 - Other Comprehensive Income
- -----------------------------------
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." This statement requires
the reporting of comprehensive income in addition to net income. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not been
recognized in the calculation of net income. Currently, the only comprehensive
income item that affects the Company is unrealized gains and losses on debt and
equity securities.
The Company reported a net unrealized gain of $1.3 million and $0.7 million for
the six-month period ended June 30, 1998 and 1997, respectively. Accordingly,
comprehensive income for the two respective periods was $91.4 million and $22.1
million.
Note 4 - Senior Debentures
- --------------------------
On April 7, 1998, the Company issued and sold $100.0 million of 7.55% senior
debentures, due April 1, 2028. The 30-year bonds were issued at 99.456% of the
principal amount. The Company has used a portion of the net proceeds from the
sale of these 30-year securities to repay certain debt obligations and purchase
land for the Company's new corporate facilities. The remaining proceeds will be
used for general corporate purposes.
5
<PAGE>
Note 5 - Stock Split
- --------------------
On July 17, 1998, the Company distributed, to shareholders of record on July 7,
1998, a 3-for-1 common stock split in the form of a 200% stock dividend. This
resulted in an increase of 37,895,936 common shares outstanding with the par
value of these additional shares being capitalized by a transfer from additional
paid-in-capital to the common stock account. In order to effect the stock split,
the Company increased its authorized shares from 36,000,000 to 108,000,000. All
references in the consolidated financial statements with regards to common
stock, additional paid-in-capital, number of shares of common stock and per
share amounts have been restated to reflect the stock split.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
- -------------
Any statements in this document looking forward in time involve risks and
uncertainties, including but not limited to the following risks: the effect of
interest rate fluctuations; changes in the performance of the real estate
markets; the effect of changing economic conditions; the demand for and the
acceptance of the Company's products; and contingencies associated with the Year
2000 issue.
RESULTS OF OPERATIONS
Three and six months ended June 30:
OVERVIEW
Low mortgage interest rates and an improving national real estate economy
resulted in relatively strong revenues for the first half of 1997. However,
profits for the first half of 1997 were adversely affected by the need for title
operations to increase staffing levels in order to service the relatively high
number of title orders opened during the period. Furthermore, the Company's
information services operations experienced higher overhead during the first
half of 1997 as they integrated acquisitions and transitioned new accounts to
their systems. Favorable real estate conditions continued throughout 1997 and,
coupled with market share increases in all of the Company's primary business
segments, culminated in the best year overall in the Company's history.
Starting in the fourth quarter 1997 and into 1998, lower mortgage interest rates
and higher consumer confidence lead to record-setting residential resale
activity as well as a substantial increase in refinance transactions nationwide.
This, coupled with the particularly strong California real estate market,
contributed to record-setting revenues and net income for the second quarter and
first half of 1998. Net income and net income per diluted share for the second
quarter 1998 was $45.1 million and $0.80, respectively. Net income and net
income per diluted share for the first half of 1998 (excluding a previously
announced first quarter investment gain of $19.6 million on an after-tax basis,
or $0.36 per diluted share, relating to the joint venture with Experian) was
$70.4 million and $1.27 per diluted share, respectively.
OPERATING REVENUES
Set forth below is a summary of operating revenues for each of the Company's
segments.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------------------- ----------------------------------
($000) ($000)
1998 % 1997 % 1998 % 1997 %
--------- ---- -------- ---- ---------- ---- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Title Insurance:
Direct operations $274,827 40 $186,876 42 $ 500,546 40 $334,550 41
Agency operations 243,519 35 160,660 36 420,055 33 312,766 38
--------- ---- -------- ---- ---------- ---- -------- ---
518,346 75 347,536 78 920,601 73 647,316 79
Real Estate Information 156,495 22 79,656 18 296,855 24 141,703 17
Home Warranty 14,274 2 11,214 3 27,447 2 21,282 3
Trust and Banking 6,348 1 5,041 1 12,174 1 9,571 1
--------- ---- -------- ---- ---------- ---- -------- ---
Total $695,463 100 $443,447 100 $1,257,077 100 $819,872 100
--------- ---- -------- ---- ---------- ---- -------- ---
</TABLE>
Title Insurance. Operating revenues from direct title operations increased
47.1% and 49.6% for the three and six months ended June 30, 1998, respectively,
when compared with the same periods of the prior year. These increases were
primarily attributable to an increase in the number of title orders closed by
the Company's direct operations, as well as an increase in the average revenues
per order closed. The Company's direct operations closed 302,000 and 562,600
title orders during the three and six months ended June 30,1998, respectively,
representing increases of 31.7% and 37.0% when compared with the same periods of
the prior year. These increases were due in large part to the factors mentioned
above, primarily the resurgence of real estate activity in California, a state
heavily concentrated with direct operations, as well as increases in the
Company's national market share. The average revenues per order closed were $910
and $890 for the three and six months ended June 30, 1998, respectively,
increases of 11.7% and 9.3% when compared with $815 and $814 for the same
periods of the prior year.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations (continued)
- -------------------------
These increases were primarily due to appreciating residential real estate
values. Operating revenues from agency operations increased 51.6% and 34.3% for
the three and six months ended June 30, 1998, respectively, when compared with
the same periods of the prior year. These increases were primarily due to the
same factors affecting direct operations mentioned above, compounded by the
inherent delay in reporting by agents.
Real Estate Information. Real estate information operating revenues increased
96.5% and 109.5% for the three and six months ended June 30, 1998, respectively,
when compared with the same periods of the prior year. These increases were
primarily attributable to the same economic factors affecting title insurance
mentioned above, as well as $35.9 million and $74.1 million of operating
revenues contributed by new acquisitions for the respective periods.
Home Warranty. Home warranty operating revenues increased 27.3% and 29.0% for
the three and six months ended June 30, 1998, respectively, when compared with
the same periods of the prior year. These increases were primarily attributable
to improvements in the residential resale markets in which this business segment
operates.
INVESTMENT AND OTHER INCOME
Investment and other income totaled $8.8 million and $52.3 million for the three
and six months ended June 30, 1998, respectively, increases of $1.9 million and
$38.9 million when compared with the same periods of the prior year. The
increase for the current three-month period was primarily due to a 28.4%
increase in the average investment portfolio balance due in large part to the
investment of a portion of the proceeds from the Company's $100 million senior
debentures (see Note 4 to the condensed consolidated financial statements). The
increase for the current six-month period was primarily attributable to an
investment gain of $32.4 million recognized in the first quarter relating to the
joint venture agreement with Experian.
TOTAL OPERATING EXPENSES
Title Insurance. Salaries and other personnel costs were $160.2 million and
$305.1 million for the three and six months ended June 30, 1998, respectively,
increases of 33.1% and 33.2% when compared with the same periods of the prior
year. These increases were primarily due to costs incurred servicing the
record-setting number of transactions processed during the current three and six
month periods.
Agents retained $195.0 million and $335.0 million of title premiums generated by
agency operations for the three and six months ended June 30, 1998,
respectively, which compares with $129.0 million and $251.2 million for the same
periods of the prior year. The percentage of title premiums retained by agents
ranged from 79.8% to 80.3% due to regional variances (i.e., the agency share
varies from region to region and thus the geographical mix of agency revenues
causes this variation).
Other operating expenses were $77.9 million and $145.8 million for the three and
six months ended June 30, 1998, respectively, increases of 35.6% and 32.8% when
compared with the same periods of the prior year. These increases were
primarily attributable to the impact of certain incremental costs associated
with processing the record-setting title order volume during the respective
periods.
The provision for title losses as a percentage of title insurance operating
revenues was 3.9% for the six months ended June 30, 1998 and 1997, respectively.
This constant loss percentage was due to stable claims experience.
Premium taxes for title insurance were $8.9 million and $8.3 million for the six
months ended June 30, 1998 and 1997, respectively. Expressed as a percentage of
title insurance operating revenues, premium taxes were 1.0% for the six months
ended June 30, 1998 and 1.3% for the same period of the prior year. The
decrease in percentage was primarily due to changes in the Company's non-title
insurance subsidiaries' contribution to revenues as well as changes in the
geographical mix of title insurance operating revenues.
Real Estate Information. Real estate information personnel and other operating
expenses were $112.2 million and $218.0 million for the three and six months
ended June 30, 1998, respectively, increases of 82.6% and 95.0% when compared
with the same periods of the prior year. These increases were primarily due to
costs incurred servicing the increased business volume, $29.8 million and $63.0
million of costs associated with new acquisitions, and higher overhead costs
attributable to the integration of the new acquisitions and transitioning new
accounts to their systems.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations (continued)
- -------------------------
Home Warranty. Home warranty personnel and other operating expenses were $4.0
million and $8.1 million for the three and six months ended June 30, 1998,
respectively, increases of 24.4% and 27.0% when compared with the same periods
of the prior year. These increases were primarily attributable to costs
incurred servicing the increased business volume and expansion into new
territories. The provision for home warranty losses expressed as a percentage
of home warranty operating revenues was 53.0% and 56.9% for the six months ended
June 30, 1998 and 1997, respectively. The decrease in loss ratio was primarily
due to a decrease in the average number of claims per contract.
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS
Set forth below is a summary of income before income taxes and minority
interests for each of the Company's segments.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------------------------- ------------------------------
($000) ($000)
1998 % 1997 % 1998 % 1997 %
-------- --- ------- --- -------- --- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Title Insurance $ 56,395 60 $21,438 56 $ 86,656 57 $ 21,381 44
Real Estate Information 32,433 34 13,144 35 55,968 37 20,967 43
Home Warranty 3,311 4 2,444 6 6,337 4 4,080 9
Trust and Banking 2,022 2 937 3 3,610 2 1,852 4
-------- --- ------- --- -------- --- --------
Total before corporate 94,161 100 37,963 100 152,571 100 48,280 100
=== === === ===
Corporate (10,737) (6,764) 12,971 (12,004)
-------- ------- -------- --------
Total $ 83,424 $31,199 $165,542 $ 36,276
======== ======= ======== ========
</TABLE>
In general, the title insurance business is a lower profit margin business when
compared to the Company's other segments. The lower profit margins reflect the
high cost of producing title evidence whereas the corresponding revenues are
subject to regulatory and competitive pricing restraints. Due to this
relatively high proportion of fixed costs, title insurance profit margins
generally improve as closed order volumes increase. In addition, title
insurance profit margins are affected by the composition (residential or
commercial) and type (resale, refinancing or new construction) of real estate
activity. Profit margins from resale and new construction transactions are
generally higher than from refinancing transactions because in many states there
are premium discounts on, and cancellation rates are higher for, refinance
transactions. Title insurance profit margins are also affected by the
percentage of operating revenues generated by agency operations. Profit margins
from direct operations are generally higher than from agency operations due
primarily to the large portion of the premium that is retained by the agent.
Real estate information pretax profits are generally unaffected by the type of
real estate activity but increase as the volume of residential real estate loan
transactions increase. Included in Corporate for the six months ended June 30,
1998 was an investment gain of $32.4 million (see Note 2 to the condensed
consolidated financial statements).
INCOME TAXES
The effective income tax rate was 35.8% for the six months ended June 30, 1998,
and 37.5% for the same period of the prior year. The decrease in effective rate
was primarily attributable to changes in the ratio of permanent differences to
income before income taxes.
MINORITY INTERESTS
Minority interest expense was $8.4 million for the three months ended June 30,
1998, an increase of $7.4 million when compared with the same period of the
prior year. Minority interest expense was $16.2 million for the six months
ended June 30, 1998, an increase of $14.9 million when compared with the same
period of the prior year. These increases were primarily attributable to the
strong operating results of the Company's joint venture with Experian.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations (continued)
- -------------------------
NET INCOME
Net income for the three and six months ended June 30, 1998, was $45.1 million,
or $0.80 per diluted share, and $90.1 million, or $1.63 per diluted share,
respectively. Net income for the six months ended June 30, 1998, included an
investment gain of $19.6 million on an after-tax basis, or $0.36 per diluted
share, relating to the joint venture with Experian. Net income for the three
and six months ended June 30, 1997, was $18.5 million, or $0.35 per diluted
share, and $21.4 million, or $0.40 per diluted share, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Total cash and cash equivalents increased $116.4 million and decreased $8.0
million for the six months ended June 30, 1998 and 1997, respectively. The
increase for the current year period was primarily attributable to cash provided
by operating activities and proceeds from the issuance and sale of senior
debentures, offset in part by capital expenditures, net purchases of debt and
equity securities and the repayment of debt. The decrease for the prior year
period was primarily due to the cash effect of company acquisitions, the net
purchases of debt and equity securities, capital expenditures and the repayment
of debt, offset in part by the proceeds from the issuance of junior subordinated
debentures.
On April 7, 1998, the Company issued and sold $100.0 million of 7.55% senior
debentures, due April 1, 2028. The Company has used a portion of the net
proceeds from the sale to repay certain debt obligations and purchase land for
the Company's new corporate facilities. The remaining proceeds will be used for
general corporate purposes.
Notes and contracts payable as a percentage of total capitalization increased to
16.0% at June 30, 1998, from 7.3% at December 31, 1997. This increase was
primarily due to the issuance and sale of the $100.0 million senior debentures,
offset in part by an increase in total capitalization due primarily to shares
issued in connection with company acquisitions, increased minority interests and
net income for the period.
The Company's management has initiated a program to evaluate the Year 2000 issue
as it relates to its internal computer systems and third party computer systems
with which the Company interacts. The Company is currently completing the
inventory and assessment phase of the program, with the remaining phases
(renovation, testing and implementation) expected to be completed by midyear
1999. The Company has incurred to date approximately $3.1 million of costs
related to this issue. The majority of the costs are expected to be incurred in
the final three phases of the program. These costs, which include internal
staff costs as well as consulting and other expenses, are being expensed as
incurred. At this time, the Company is unable to reasonably estimate the total
costs for the Year 2000 issue.
Management believes that all of its anticipated cash requirements for the
immediate future will be met from internally generated funds and from the
remaining proceeds of the senior debentures.
10
<PAGE>
Part II: Other Information
-----------------
Item 5. Other Information.
-----------------
Pursuant to newly adopted rules of the Securities and Exchange
Commission, any shareholder who intends to present a proposal at the
Company's next Annual Meeting of Shareholders without requesting the
Company to include such proposal in the Company's proxy statement
should be aware that he must notify the Company not later than
February 9, 1999 of his intention to present the proposal. Otherwise,
the Company may exercise discretionary voting with respect to such
shareholder proposal pursuant to authority conferred on the Company by
proxies to be solicited by the Board of Directors of the Company and
delivered to the Company in connection with the meeting.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
(3) Restated Articles of Incorporation of The First American
Financial Corporation (the "Company") dated July 14, 1998,
incorporated by reference herein from Exhibit 3.1 of the
Company's Registration Statement on Form S-4 dated July 28,
1998.
(4) Senior Indenture dated as of April 7, 1998, between The
First American Financial Corporation and Wilmington Trust
Company as Trustee.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
During the quarterly period covered by this report, the Company
filed reports on Form 8-K dated April 7, 1998 (reporting on the
Company's issuance of $100,000,000 aggregate principal amount of
7.55% senior debentures due 2028) and June 26, 1998 (reporting
on, among other matters, the declaration of a "3 for 1" stock and
amendment of the Company's articles of incorporation to increase
the authorized number of Common shares in connection therewith.
11
<PAGE>
EXHIBIT INDEX
Sequentially
------------
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
(3) Restated Articles of Incorporation of The First
American Financial Corporation (the "Company"),
incorporated by reference herein from Exhibit
3.1 of the Company's Registration Statement on
Form S-4 dated July 28, 1998
(4) Senior Indenture dated as of April 7, 1998,
between The First American Financial Corporation
and Wilmington Trust Company as Trustee
(27) Financial Data Schedule
12
<PAGE>
EXHIBIT 4
________________________________________________________________________________
Conformed Copy
__________________________
SENIOR INDENTURE
Dated as of April 7, 1998
__________________________
Between
THE FIRST AMERICAN FINANCIAL CORPORATION
and
WILMINGTON TRUST COMPANY
as Trustee
________________________________________________________________________________
<PAGE>
THE FIRST AMERICAN FINANCIAL CORPORATION
Reconciliation and tie between the Trust Indenture Act of 1939 (including
cross-references to provisions of Sections 310 to and including 317) and the
Senior Indenture, dated as of April 7, 1998.
Trust Indenture Indenture
Act Section Section
- --------------- ---------
(S) 310 (a) (1), (2) and (5)................................. 6.9
(a) (3).............................................. Not Applicable
(a) (4).............................................. Not Applicable
(b).................................................. 6.8
6.10
(c).................................................. Not Applicable
(S) 311 (a).................................................. 6.13(a)
(b).................................................. 6.13(b)
(b) (2).............................................. 7.3(a) (2)
7.3(a) (2)
(S) 312 (a).................................................. 7.1
7.2(a)
(b).................................................. 7.2(b)
(c).................................................. 7.2(c)
(S) 313 (a).................................................. 7.3(a)
(b).................................................. 7.3(b)
(c).................................................. 7.3(a), 7.3(b)
(d).................................................. 7.3(c)
(S) 314 (a) (1), (2) and (3)................................. 7.4
(a) (4).............................................. 10.5
(b).................................................. Not Applicable
(c) (1).............................................. 1.2
(c) (2).............................................. 1.2
(c) (3).............................................. Not Applicable
(d).................................................. Not Applicable
(e).................................................. 1.2
(f).................................................. Not Applicable
(S) 315 (a).................................................. 6.1(a)
<PAGE>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
(b).................................................. 6.2
7.3(a) (6)
(c).................................................. 6.1(b)
(d).................................................. 6.1(c)
(d) (1).............................................. 6.1(a) (1)
(d) (2).............................................. 6.1(c) (2)
(d) (3).............................................. 6.1(c) (3)
(e).................................................. 5.14
(S) 316 (a).................................................. 1.1
(a) (1) (A).......................................... 5.12
(a) (1) (B).......................................... 5.13
(a) (2).............................................. Not Applicable
(b).................................................. 5.8
(c).................................................. 1.4(f)
(S) 317 (a) (1).............................................. 5.3
(a) (2).............................................. 5.4
(b).................................................. 10.3
(S) 318 (a).................................................. 1.7
____________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Senior Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION........ 1
Section 1.1 Definitions................................................. 1
Section 1.2 Compliance Certificate and Opinions......................... 9
Section 1.3 Forms of Documents Delivered to Trustee..................... 10
Section 1.4 Acts of Holders............................................. 11
Section 1.5 Notices, Etc. to Trustee and Company........................ 13
Section 1.6 Notice to Holders; Waiver................................... 14
Section 1.7 Conflict with Trust Indenture Act........................... 14
Section 1.8 Effect of Headings and Table of Contents.................... 14
Section 1.9 Successors and Assigns...................................... 14
Section 1.10 Separability Clause......................................... 14
Section 1.11 Benefits of Indenture....................................... 15
Section 1.12 Governing Law............................................... 15
Section 1.13 Non-Business Days........................................... 15
ARTICLE II
SECURITY FORMS............................. 15
Section 2.1 Forms Generally............................................. 15
Section 2.2 Legends..................................................... 17
Section 2.3 Form of Face of Security.................................... 20
Section 2.5 Form of Trustee's Certificate of Authentication............. 25
ARTICLE III
THE SECURITIES............................. 25
Section 3.1 Title and Terms............................................. 25
Section 3.2 Denominations............................................... 28
Section 3.3 Execution, Authentication, Delivery and Dating.............. 29
Section 3.4 Temporary Securities........................................ 31
Section 3.5 Registration, Transfer and Exchange......................... 31
<PAGE>
Page
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Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities............ 37
Section 3.7 Payment of Interest; Interest Rights Preserved.............. 38
Section 3.8 Persons Deemed Owners....................................... 40
Section 3.9 Cancellation................................................ 40
Section 3.10 Computation of Interest..................................... 40
Section 3.11 CUSIP Numbers............................................... 40
ARTICLE IV
SATISFACTION AND DISCHARGE........................ 41
Section 4.1 Satisfaction and Discharge of Indenture..................... 41
Section 4.2 Legal Defeasance............................................ 42
Section 4.3 Covenant Defeasance......................................... 42
Section 4.4 Conditions to Legal Defeasance or Covenant Defeasance....... 43
Section 4.5 Application of Trust Money.................................. 44
Section 4.6 Indemnity for U.S. Government Obligations................... 44
ARTICLE V
REMEDIES................................ 44
Section 5.1 Events of Default........................................... 44
Section 5.2 Acceleration of Maturity; Rescission and Annulment.......... 46
Section 5.3 Collection of Indebtedness and Suits for Enforcement by
Trustee..................................................... 47
Section 5.4 Trustee May File Proofs of Claim............................ 48
Section 5.5 Trustee May Enforce Claims Without Possession of Securities. 49
Section 5.6 Application of Money Collected.............................. 49
Section 5.7 Limitation on Suits......................................... 50
Section 5.8 Unconditional Right of Holders to Receive Principal, Premium
and Interest................................................ 50
Section 5.9 Restoration of Rights and Remedies.......................... 51
Section 5.10 Rights and Remedies Cumulative.............................. 51
Section 5.11 Delay or Omission Not Waiver................................ 51
<PAGE>
Page
----
Section 5.12 Control by Holders.......................................... 52
Section 5.13 Waiver of Past Defaults..................................... 52
Section 5.14 Undertaking for Costs....................................... 53
Section 5.15 Waiver of Usury, Stay or Extension Laws..................... 53
ARTICLE VI
THE TRUSTEE............................... 54
Section 6.1 Certain Duties and Responsibilities......................... 54
Section 6.2 Notice of Defaults.......................................... 55
Section 6.3 Certain Rights of Trustee................................... 56
Section 6.4 Not Responsible for Recitals or Issuance of Securities...... 57
Section 6.5 May Hold Securities......................................... 57
Section 6.6 Money Held in Trust......................................... 57
Section 6.7 Compensation and Reimbursement.............................. 57
Section 6.8 Disqualification; Conflicting Interests..................... 58
Section 6.9 Corporate Trustee Required; Eligibility..................... 58
Section 6.10 Resignation and Removal; Appointment of Successor........... 59
Section 6.11 Acceptance of Appointment by Successor...................... 61
Section 6.12 Merger, Conversion, Consolidation or Succession to Business. 62
Section 6.13 Preferential Collection of Claims Against Company........... 63
Section 6.14 Appointment of Authenticating Agent......................... 63
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY.......... 65
Section 7.1 Company to Furnish Trustee Names and Addresses of Holders... 65
Section 7.2 Preservation of Information, Communications to Holders...... 65
Section 7.3 Reports by Trustee.......................................... 65
Section 7.4 Reports by Company.......................................... 66
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE.......... 67
Section 8.1 Company May Consolidate, Etc., Only on Certain Terms........ 67
Section 8.2 Successor Corporation Substituted........................... 68
<PAGE>
Page
----
ARTICLE IX
SUPPLEMENTAL INDENTURES......................... 69
Section 9.1 Supplemental Indentures without Consent of Holders.......... 69
Section 9.2 Supplemental Indentures with Consent of Holders............. 70
Section 9.3 Execution of Supplemental Indentures........................ 71
Section 9.4 Effect of Supplemental Indentures........................... 71
Section 9.5 Conformity with Trust Indenture Act......................... 72
Section 9.6 Reference in Securities to Supplemental Indentures.......... 72
ARTICLE X
COVENANTS............................... 72
Section 10.1 Payment of Principal, Premium and Interest.................. 72
Section 10.2 Maintenance of Office or Agency............................. 73
Section 10.3 Money for Security Payments to be Held in Trust............. 73
Section 10.4 Statement as to Compliance.................................. 75
Section 10.5 Waiver of Certain Covenants................................. 75
Section 10.6 Calculation of Original Issue Discount...................... 75
Section 10.7 Limitation on Liens......................................... 76
ARTICLE XI
REDEMPTION OF SECURITIES........................ 76
Section 11.1 Applicability of This Article............................... 76
Section 11.2 Election to Redeem; Notice to Trustee....................... 77
Section 11.3 Selection of Securities to be Redeemed...................... 77
Section 11.4 Notice of Redemption........................................ 78
Section 11.5 Deposit of Redemption Price................................. 79
Section 11.6 Payment of Securities Called for Redemption................. 79
ARTICLE XII
SINKING FUNDS............................. 80
Section 12.1 Applicability of Article.................................... 80
<PAGE>
Page
----
Section 12.2 Satisfaction of Sinking Fund Payments with Securities....... 80
Section 12.3 Redemption of Securities for Sinking Fund................... 81
EXHIBITS
Exhibit A Transferrees Letter of Representation
<PAGE>
EXHIBIT "4"
SENIOR INDENTURE, dated as of April 7, 1998, between THE FIRST AMERICAN
FINANCIAL CORPORATION, a California corporation (hereinafter called the
"Company") having its principal office at 114 East Fifth Street, Santa Ana, CA
92701, and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Trustee
(hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured senior
debt securities in one or more series (hereinafter called the "Securities") of
substantially the tenor hereinafter provided and to provide the terms and
conditions upon which the Securities are to be authenticated, issued and
delivered.
All things necessary to make the Securities, when executed by the Company
and authenticated and delivered hereunder and duly issued by the Company, the
valid obligations of the Company, and to make this Indenture a valid agreement
of the Company, in accordance with their and its terms, have been done.
NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the
premises and the purchase of the Securities by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities or of any series thereof, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section
1.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned to them in
this Article, and include the plural as well as the singular;
(2) All other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
<PAGE>
2
(3) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles,
and the term "generally accepted accounting principles" with respect to any
computation required or permitted hereunder shall mean such accounting
principles which are generally accepted at the date or time of such computation;
provided, that when two or more principles are so generally accepted, it shall
mean that set of principles consistent with those in use by the Company;
(4) The words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision;
(5) The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation";
(6) Whenever the context may require, any gender shall be deemed to
include the others; and
(7) Unless the context otherwise requires, any reference to an "Article"
or a "Section" refers to an Article or a Section, as the case may be, of this
Indenture.
"Act" when used with respect to any Holder has the meaning specified in
Section 1.4.
"Additional Interest" means the interest, if any, that shall accrue on any
interest on the Securities of any series the payment of which has not been made
on the applicable Interest Payment Date and which shall accrue at the rate per
annum specified or determined as specified in such Security from the applicable
Interest Payment Date.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any 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;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Members" has the meaning set forth in Section 2.1.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 6.14 to act on behalf of the Trustee to authenticate Securities of
one or more series.
<PAGE>
3
"Board of Directors" means either the board of directors of the Company or
any committee of that board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors, or such committee of the Board of Directors or officers of the
Company to which authority to act on behalf of the Board of Directors has been
delegated, and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a
day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or (iii) a day on which the
Corporate Trust Office of the Trustee is closed for business.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" means the Common shares, $1.00 par value, of the Company.
"Company" means the Person named as the "Company" in the first paragraph of
this Indenture until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by the Chairman of the Board
of Directors, the Vice Chairman of the Board of Directors, its President or a
Vice President, and by its principal financial officer, its Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered, which
at the date hereof is
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration.
"corporation" includes a corporation, association, company, joint-stock
company or business trust.
<PAGE>
4
"Covenant Defeasance" has the meaning specified in Section 4.3.
"Credit Facility" shall mean the Amended and Restated Credit Agreement
among the Company, The Chase Manhattan Bank, and the lenders party thereto from
time to time, dated as of July 29, 1997, as amended from time to time.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Definitive Securities" has the meaning set forth in Section 2.1..
"Depositary" means, with respect to the Securities of any series issuable
or issued in whole or in part in the form of one or more Global Securities, the
Person designated as Depositary by the Company pursuant to Section 3.1 with
respect to such series (or any successor thereto).
"Discount Security" means any security which provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2.
"Dollar" means the currency of the United States of America that, as at the
time of payment, is legal tender for the payment of public and private debts.
"Event of Default" unless otherwise specified in the supplemental indenture
creating a series of Securities has the meaning specified in Article V.
"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 1.4(f).
"Global 144A Security" has the meaning set forth in Section 2.1.
"Global Registered Security" has the meaning set forth in Section 2.1.
"Global Securities Legend" has the meaning set forth in Section 2.2.
"Global Security" has the meaning set forth in Section 2.1.
<PAGE>
5
"Holder" means a Person in whose name a Security is registered in the
Securities Register.
"Indebtedness" means indebtedness for money borrowed or indebtedness
evidenced by a bond, note, debenture or other evidence of indebtedness.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and shall
include the terms of each particular series of Securities established as
contemplated by Section 3.1.
"Interest Payment Date" means as to each series of Securities the Stated
Maturity of an installment of interest on such Securities.
"Legal Defeasance" has the meaning specified in Section 4.2.
"Lien" means any mortgage, pledge, hypothecation, encumbrance, charge or
security interest of any kind.
"Make Whole Amount" when used with respect to any Security means the amount
required to be paid by the Company in order to redeem such Security prior to its
Stated Maturity.
"Maturity" when used with respect to any Security means the date on which
the principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
"Non-Global Purchasers" has the meaning set forth in Section 2.1.
"Nonrecourse Indebtedness" has the meaning set forth in Section 5.1.
"Notice of Default" means a written notice of the kind specified in Section
5.1(3).
"Officers' Certificate" means a certificate signed by the Chairman of the
Board of Directors , a Vice Chairman of the Board of Directors, the President or
a Vice President, and by the principal financial officer, the Secretary or an
Assistant Secretary (or any person expressly authorized by any of the foregoing
persons) of the Company, and delivered to the Trustee.
<PAGE>
6
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, and who shall be acceptable to the Trustee.
"Original Issue Date" means the date of issuance specified as such in each
Security.
"Outstanding" means, when used in reference to any Securities, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Securities for whose payment or redemption price money in the
necessary amount has been theretofore deposited with the Trustee or any Paying
Agent in trust for the Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which other Securities
have been authenticated and delivered or which have been paid pursuant to
Section 3.6, unless proof satisfactory to the Trustee is presented that any such
Securities are held by Holders in whose hands such Securities are valid, binding
and legal obligations of the Company; provided, however, that in determining
whether the Holders of the requisite principal amount of Outstanding Securities
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder, Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or 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 Securities which the
Trustee actually knows to be so owned shall be so disregarded. Securities 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 Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate of the Company
or such other obligor. Upon the written request of the Trustee, the Company
shall furnish to the Trustee promptly an Officers' Certificate listing and
identifying all Securities, if any, known by the Company to be owned or held by
or for the account of the Company or any other obligor on the Securities or any
Affiliate of the Company or such obligor, and, subject to the provisions of
Section 6.1(b), the Trustee shall be entitled to accept such Officers'
Certificate as conclusive evidence of the facts therein set forth and of the
fact that all Securities not listed therein are Outstanding for the purpose of
any such determination.
<PAGE>
7
"Paying Agent" means the Trustee or any Person authorized by the Company to
pay the principal of (or premium, if any) or interest on any Securities on
behalf of the Company.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, trust, unincorporated organization or government or
any agency or political subdivision thereof.
"Place of Payment" means, with respect to the Securities of any series, the
place or places where the principal of (and premium, if any) and interest on the
Securities of such series are payable pursuant to Sections 3.1 and 3.11.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.6 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.
"Purchase Money Lien" means (i) a Lien upon any capital stock of any
Restricted Subsidiary acquired before or after the date of the Indenture if such
Lien is for the purpose of financing the acquisition of the capital stock of
such Restricted Subsidiary, and does not exceed the cost to the Company or any
Subsidiary of acquiring the capital stock of such Restricted Subsidiary and such
financing is effected concurrently with, or within six months after, the date of
such acquisition and (ii) any extension, renewal or refinancing of any such Lien
described in clause (i) immediately above so long as the principal amount of
obligations secured thereby shall not exceed the original principal amount of
obligations so secured at the time of any such extension, renewal or
refinancing.
"QIB" means any "qualified institutional buyer" (as defined under the
Securities Act).
"Redemption Date," when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price" means, when used with respect to any Security to be
redeemed, the price or Make Whole Amount at which it is to be redeemed pursuant
to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date
with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 3.1 with respect
<PAGE>
8
to Securities of a series, (i) if the Securities of a series are represented by
one or more Global Securities, the Business Day next preceding such Interest
Payment Date and (ii) if any of the Securities of a series are not represented
by one or more Global Securities, the date which is fifteen days next preceding
such Interest Payment Date (whether or not a Business Day).
"Responsible Officer" when used with respect to the Trustee means any
officer of the Trustee within the Corporate Trust Office of the Trustee with
direct responsibility for the administration of this Indenture and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of that officer's knowledge of and familiarity
with the particular subject.
"Restricted Securities Legend" has the meaning set forth in Section 2.2.
"Restricted Subsidiary" means any Subsidiary that is a licensed insurance
company having capital and surplus in excess of $2.5 million.
"Rights Plan" means a plan of the Company providing for the issuance by the
Company to all holders of its Common Stock of rights entitling the holders
thereof to subscribe for or purchase shares of Common Stock or any class or
series of preferred stock of the Company, which rights (i) are deemed to be
transferred with such shares of Common Stock, (ii) are not exercisable and (iii)
are also issued in respect of future issuances of Common Stock, in each case
until the occurrence of a specified event or events.
"Rule 144A" has the meaning set forth in Section 2.1.
"Securities" or "Security" has the meaning set forth in the first recital
of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.5.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7.
<PAGE>
9
"Stated Maturity" when used with respect to any Security or any installment
of principal thereof or interest thereon means the date specified pursuant to
the terms of such Security as the date on which the principal of such Security
or such installment of interest is due and payable, as such date, in the case of
such principal, may be shortened or extended as provided pursuant to the terms
of such Security and this Indenture.
"Subsidiary" means a corporation or business trust, a majority of the
outstanding voting securities of which is owned, directly or indirectly, by the
Company and/or one or more Subsidiaries.
"Total Capitalization" means, as of the date of determination, the sum of
(i) all Indebtedness of the Company outstanding as of such date, including,
without limitation, the Company's junior deferrable interest debentures, the
Securities and all Indebtedness under the Credit Facility, (ii) the Company's
consolidated shareholders' equity at the end of the most recently completed
fiscal quarter of the Company immediately preceding such date of determination
for which financial statements are or are required to be available and (iii) the
minority interests in Subsidiaries of the Company at the end of the most
recently completed fiscal quarter of the Company immediately preceding such date
of determination for which financial statements are or are required to be
available.
"Transfer Restricted Securities" Securities that bear or are required to
bear the Restricted Securities Legend set forth in Section 2.2 hereof.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder and, if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C. (S)
77aaa-77bbbb), as amended and as in effect on the date as of this Indenture,
except as provided in Section 9.5.
"U.S. Government Obligations" has the meaning specified in Section 4.4.
"Vice President", when used with respect to the Company means any duly
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
<PAGE>
10
SECTION 1.2 Compliance Certificate and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent
(including covenants, compliance with which constitutes a condition precedent),
if any, provided for in this Indenture relating to the proposed action or
request have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent (including covenants
compliance with which constitute a condition precedent), if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such Officers' Certificate and Opinion of Counsel is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than the certificates provided
pursuant to Section 10.4) shall include:
(1) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has made
or caused to be made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such individual, such
condition or covenant has been complied with.
<PAGE>
11
SECTION 1.3 Forms of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer or counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate or
opinion is based are erroneous. Any Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel rendering such Opinion of Counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
<PAGE>
12
SECTION 1.4 Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given to or taken by Holders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by an agent or proxy duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments is or are
delivered to the Trustee, and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent or proxy shall be
sufficient for any purpose of this Indenture and (subject to Section 6.1)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by
the certificate of any notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a Person acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) The fact and date of the execution by any Person of any such instrument
or writing, or the authority of the Person executing the same, may also be
proved in any other manner which the Trustee deems sufficient and in accordance
with such reasonable rules as the Trustee may determine.
(d) The ownership of Securities shall be proved by the Securities Register.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the transfer
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 Company in reliance
thereon, whether or not notation of such action is made upon such Security.
(f) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this
<PAGE>
13
Indenture to be given, made or taken by Holders of Securities of such series,
provided that the Company may not set a record date for, and the provisions of
this paragraph shall not apply with respect to, the giving or making of any
notice, declaration, request or direction referred to in the next paragraph. If
any record date is set pursuant to this paragraph, the Holders of the relevant
Outstanding Securities on such record date, and no other Holders, shall be
entitled to take the relevant action, whether or not such Holders remain Holders
after such record date, provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of the relevant Outstanding Securities on such
record date. Nothing in this paragraph shall be construed to prevent the Company
from setting a new record date for any action for which a record date has
previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be cancelled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requisite principal amount of the
relevant Outstanding Securities on the date such action is taken. Promptly after
any record date is set pursuant to this paragraph, the Company, at its own
expense, shall cause notice of such record date, the proposed action by Holders
and the applicable Expiration Date to be given to the Trustee in writing and to
each Holder of the relevant Securities in the manner set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities entitled to join in the giving or making
of (i) any Notice of Default, (ii) any declaration of acceleration referred to
in Section 5.2, (iii) any request to institute proceedings referred to in
Section 5.7(2) or (iv) any direction referred to in Section 5.12, in each case
with respect to the relevant Securities. If any record date is set pursuant to
this paragraph, the Holders of the relevant Outstanding Securities on such
record date, and no other Holders, shall be entitled to join in such notice,
declaration, request or direction, whether or not such Holders remain Holders
after such record date, provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of the relevant Outstanding Securities on such
record date. Nothing in this paragraph shall be construed to prevent the Trustee
from setting a new record date for any action for which a record date has
previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be cancelled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requisite principal amount of the
relevant Outstanding Securities on the date such action is taken. Promptly after
any record date is set pursuant to this paragraph, the Trustee, at the Company's
expense, shall cause notice of such record date, the proposed action by Holders
and the applicable Expiration Date to be given to the Company in writing and to
each Holder of the relevant Securities in the manner set forth in Section 1.6.
<PAGE>
14
With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day, provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of the relevant Outstanding Securities in the manner set forth in
Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
(g) Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
SECTION 1.5 Notices, Etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or the Company shall be sufficient for every
purpose hereunder if made, given, furnished or filed in writing to or with the
Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or any Holder shall be sufficient for every
purpose (except as otherwise provided in Section 5.1) hereunder if in writing
and mailed, first class, postage prepaid, to the Company addressed to it at the
address of its principal office specified in the first paragraph of this
instrument or at any other address subsequently furnished in writing to the
Trustee by the Company.
<PAGE>
15
SECTION 1.6 Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Securities
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
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
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 Holders
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.
SECTION 1.7 Conflict with Trust Indenture Act.
At such time, if any, as this Indenture is qualified under the Trust
Indenture Act, if any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act through operation of Section 318(c) thereof, such imposed duties
shall control.
SECTION 1.8 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 1.9 Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 1.10 Separability Clause.
In case any provision of this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
<PAGE>
16
SECTION 1.11 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors and
assigns, holders of indebtedness ranking pari passu with the Securities and the
Holders of the Securities any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 1.12 Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPLES THEREOF.
SECTION 1.13 Non-Business Days.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or the Securities) payment of interest or
principal (and premium, if any) need not be made on such date, but may be made
on the next succeeding Business Day (and no interest shall accrue for the period
from and after such Interest Payment Date, Redemption Date or Stated Maturity,
as the case may be, until such next succeeding Business Day) except that, if
such Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day (in each case with the same force
and effect as if made on the Interest Payment Date or Redemption Date or at the
Stated Maturity).
ARTICLE II
SECURITY FORMS
SECTION
2.1 Forms Generally.
The Securities of each series and the Trustee's certificate of
authentication shall be in substantially the forms set forth in this Article, or
in such other form or forms as shall be established by or pursuant to a Board
Resolution or in one or more indentures supplemental hereto, in each case with
such appropriate insertions, omissions, substitutions and other variations
<PAGE>
17
as are required or permitted by this Indenture and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with applicable tax laws or the rules of
any securities exchange or automated quotation system on which the Securities
may be listed or traded or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of the
Securities. If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 3.3 with respect to the authentication and
delivery of such Securities.
Securities registered under the Securities Act, shall be issued initially
in the form of one or more permanent global Securities in definitive, fully
registered form without interest coupons with the Global Securities Legend set
forth in Section 2.2 hereof (each, a "Global Registered Security"), which shall
--------------------------
be duly executed by the Company and authenticated by the Trustee as hereinafter
provided.
Securities that are not registered under the Securities Act and are offered
and sold to QIBs in reliance on Rule 144A under the Securities Act ("Rule
----
144A"), shall be issued initially in the form of one or more permanent global
- ----
Securities in definitive, fully registered form without interest coupons with
the Global Securities Legend and Restricted Securities Legend set forth in
Section 2.2 hereof (each, a "Global 144A Security"; and when referred to herein
--------------------
with a Global Registered Security, a "Global Security"), which shall be duly
---------------
executed by the Company and authenticated by the Trustee as hereinafter
provided.
This paragraph shall apply only to Global Securities. Members of, or
participants in, the Depositary ("Agent Members") shall have no rights under
-------------
this Indenture with respect to any Global Security held on their behalf by the
Depositary or by the Trustee as the custodian of the Depositary or under such
Global Security, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices of the Depositary
governing the exercise of the rights of a holder of a beneficial interest in any
Global Security.
<PAGE>
18
Except as provided in Section 3.5, owners of beneficial interests in Global
Securities will not be entitled to receive Definitive Securities (as hereinafter
defined). Securities that are not registered under the Securities Act and are
offered and sold to Persons who are not QIBs (referred to herein as the "Non-
----
Global Purchasers") shall be issued initially to such Persons in the form of
- -----------------
certificated Securities bearing the Restricted Securities Legend set forth in
Section 2.2 below ("Definitive Securities"); provided, however, that upon
--------------------- -------- -------
transfer of such Definitive Securities to a QIB, such Definitive Securities
will, unless a Global Security has previously been exchanged, be exchanged for
an interest in a Global Security pursuant to the provisions of Section 3.5
hereof. Definitive Securities will bear the Restricted Securities Legend set
forth in Section 2.2 unless removed in accordance with Section 2.2 hereof.
The Securities shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange or automated quotation system on which the Securities may be listed or
traded, on a steel engraved border or steel engraved borders or may be produced
in any other manner permitted by the rules of any securities exchange or
automated quotation system on which the Securities may be listed or traded, all
as determined by the officers executing such Securities, as evidenced by their
execution of such securities.
SECTION 2.2 Legends.
Each Security certificate evidencing Global Securities (and all Securities
issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form ("Global Securities Legend"):
------------------------
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
<PAGE>
19
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF."
Each Security certificate evidencing Global 144A Securities and Definitive
Securities (and all Securities issued in exchange therefor or substitution
thereof) shall bear a legend in substantially the following form ("Restricted
Securities Legend"):
"THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS
SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF,
REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE ISSUER OF THIS
SECURITY THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY PRIOR TO THE LATER OF THE DATE WHICH IS
TWO YEARS AFTER THE DATE OF ORIGINAL ISSUANCE HEREOF AND THE LAST DATE ON
WHICH THE ISSUER OF THIS SECURITY OR ANY AFFILIATE OF THE ISSUER OF THIS
SECURITY WAS THE OWNER OF SUCH RESTRICTED SECURITIES (OR ANY PREDECESSOR)
EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES IN A TRANSACTION
MEETING THE REQUIREMENTS
<PAGE>
20
OF RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY APPLICABLE
JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE RESTRICTIONS
SET FORTH IN (II) ABOVE. ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO
THE FOREGOING CLAUSES (II)(C), (D) AND (E) IS SUBJECT TO THE RIGHT OF THE
ISSUER OF THIS SECURITY TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THE ISSUER IN FORM AND
SUBSTANCE."
Upon any sale or transfer of a Transfer Restricted Security (including any
Transfer Restricted Security represented by a Global 144A Security) pursuant to
Rule 144 under the Securities Act or pursuant to an effective registration
statement under the Securities Act:
(a) in the case of any Transfer Restricted Security that is a Definitive
Security, the Registrar shall permit the Holder thereof to exchange such
Transfer Restricted Security for a Definitive Security that does not bear
the Restricted Securities Legend set forth above and rescind any
restriction on the transfer of such Security; and
(b) in the case of any such Transfer Restricted Security represented by a
Global 144A Security, such Transfer Restricted Security shall not be
required to bear the Restricted Securities Legend, although it shall
continue to be subject to the provisions of Section 3.5 hereof; provided,
--------
however, that with respect to any request for an exchange of a Transfer
-------
Restricted Security that is represented by a Global 144A Security for a
Definitive Security that does not bear the Restricted Securities Legend,
which request is made in reliance upon Rule 144, the Holder thereof shall
certify in writing to the Trustee that such request is being made pursuant
to Rule 144 (such certification to be in the form set forth on the reverse
of the Security).
<PAGE>
21
SECTION 2.3 Form of Face of Security.
THE FIRST AMERICAN FINANCIAL CORPORATION
CUSIP ____
__% Senior Debentures Due ______________
No. __________ $__________
THE FIRST AMERICAN FINANCIAL CORPORATION, a corporation organized and
existing under the laws of the state of California (hereinafter called the
"Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay
to____________________, or registered assigns, the principal sum of __________
Dollars on __________ __, ____. The Company further promises to pay interest on
said principal sum from __________ __, ____ or from the most recent interest
payment date (each such date, an "Interest Payment Date") on which interest has
been paid or duly provided for, [monthly] [quarterly] [semi-annually] in arrears
on [insert applicable Interest Payment Dates] of each year, commencing
__________, at the rate of ____% per annum, until the principal hereof shall
have become due and payable, [if applicable, insert plus Additional Interest, if
any,] until the principal hereof is paid or duly provided for or made available
for payment. The amount of interest payable for any period shall be computed on
the basis of twelve 30-day months and a 360-day year. The amount of interest
payable for any partial period shall be computed on the basis of the number of
days elapsed in a 360-day year of twelve 30-day months. In the event that any
date on which interest is payable on this Security is not a Business Day, then a
payment of the interest payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date the payment was originally payable. A "Business Day" shall mean any
day other than (i) a Saturday or Sunday, (ii) a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or (iii) a day on which the Corporate Trust
Office of the Trustee is closed for business. The interest installment so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in the Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities is registered at the close of
business on the Regular Record Date for such interest installment, which shall
be the [insert definition of Regular Record Dates]. Any such interest
installment not so punctually paid or duly provided for shall forthwith cease to
be payable to the Holder on such Regular Record Date and may either be paid to
the Person in whose name this Security (or one or more
<PAGE>
22
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Securities of
this series may be listed or traded, and upon such notice as may be required by
such exchange or self-regulatory organization, all as more fully provided in
said Indenture.
Payment of principal of (and premium, if any) and interest on this Security
will be made at the office or agency of the Company maintained for that purpose
in the United States, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts [if applicable, insert -; provided, however, that at the option of the
Company payment of interest may be made (i) by check mailed to the address of
the Person entitled thereto as such address shall appear in the Securities
Register or (ii) by wire transfer in immediately available funds at such place
and to such account as may be designated in writing at least 15 days before the
relevant Interest Payment Date by the Person entitled thereto as specified in
the Securities Register]
The indebtedness evidenced by this Security is unsecured and ranks senior
in right of payment to all existing or future indebtedness of the Company that
is by its terms expressly subordinated in right of payment to this Security and
ranks pari passu with all other indebtedness of the Company.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
<PAGE>
23
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
THE FIRST AMERICAN FINANCIAL
CORPORATION
By: _______________________________
[President or Vice President]
Attest:
_____________________________________
[Secretary or Assistant Secretary]
SECTION 2.4 Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under a Senior Indenture, dated as of __________ __, 1998 (herein called
the "Indenture"), between the Company and Wilmington Trust Company, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Trustee, the Company and the
Holders of the Securities, and of the terms upon which the Securities are, and
are to be, authenticated and delivered. This Security is one of the series
designated on the face hereof, limited in aggregate principal amount to
$[__________].
All terms used in this Security that are defined in the Indenture shall
have the meanings assigned to them therein.
[If applicable, insert- The Company may at any time, at its option, on or
after _________, ____, and subject to the terms and conditions of Article XI of
the Indenture, redeem this Security in whole at any time or in part from time to
time at a redemption price equal to the [following prices, expressed in
percentages of the principal amount, plus accrued and unpaid interest, [if
<PAGE>
24
applicable, insert -including Additional Interest, if any] to but excluding the
Redemption Date. If redeemed during the 12-month period beginning _____ __:
Redemption
Year Price
---- ----------
20__ %
20__
20__
20__
20__
20__
20__
20__
20__
20__
and at 100% on or after _________ __, 20__] [Make Whole Amount].
The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Security upon compliance by the Company with certain
conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
Company and the Trustee at any time to enter into a supplemental indenture or
indentures for the purpose of modifying in any manner the rights and obligations
of the Company and of the Holders of the Securities, with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Securities of all series to be affected by such supplemental indenture. The
Indenture also contains provisions permitting Holders of specified percentages
in principal amount of the Securities of all series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not notation of such consent or waiver is made upon this Security.
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25
[If the Security is not a Discount Security, -As provided in and subject to
the provisions of the Indenture, if an Event of Default with respect to the
Securities of this series at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities of this series may declare the
principal amount of all the Securities of this series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders) and upon any such declaration the principal amount of and the
accrued interest (including any Additional Interest) on all the Securities of
this series shall become immediately due and payable.]
[If the Security is a Discount Security, -As provided in and subject to the
provisions of the Indenture, if an Event of Default with respect to the
Securities of this series at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than such portion
of the principal amount as may be specified in the terms of this series may
declare an amount of principal of the Securities of this series to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders). Such amount shall be equal to - insert formula for
determining the amount. Upon any such declaration, such amount of the principal
of and the accrued interest (including any Additional Interest) on all the
Securities of this series shall become immediately due and payable.]
Upon payment (i) of the amount of principal so declared due and payable and
(ii) of interest on any overdue principal and overdue interest (in each case to
the extent that the payment of such interest shall be legally enforceable), all
of the Company's obligations in respect of the payment of the principal of and
interest, if any, on this Security shall terminate.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Securities Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company maintained under Section 10.2 of the Indenture duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Securities Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees. No service charge shall be made for any such registration of
<PAGE>
26
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Securities of this series are issuable only in registered form without
coupons in denominations of $__________ and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of such series of a different authorized denomination, as
requested by the Holder surrendering the same.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES THEREOF.
SECTION 2.5 Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:_____________ The Wilmington Trust Company as Trustee
By:____________________________________
Authorized Signatory
ARTICLE III
THE SECURITIES
SECTION
3.1 Title and Terms.
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27
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued from time to time in one or more series. The
following matters shall be established in or pursuant to a Board Resolution, and
set forth in an Officers' Certificate, or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of a series:
(a) the title of the Securities of such series, which shall distinguish the
Securities of the series from all other Securities;
(b) the limit, if any, upon the aggregate principal amount of the
Securities of such series which may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.6 and except for any
Securities which, pursuant to the last paragraph of Section 3.3, are deemed
never to have been authenticated and delivered hereunder); provided, however,
that the authorized aggregate principal amount of such series may be increased
above such amount by a Board Resolution to such effect;
(c) the Stated Maturity or Maturities on which the principal of the
Securities of such series is payable or the method of determination thereof;
(d) the rate or rates, if any, at which the Securities of such series shall
bear interest, if any, the rate or rates and extent to which Additional
Interest, if any, shall be payable in respect of any Securities of such series,
the Interest Payment Dates on which such interest shall be payable, and the
Regular Record Date for the interest payable on any Interest Payment Date or the
method by which any of the foregoing shall be determined;
(e) the place or places where the principal of (and premium, if any) and
interest on the Securities of such series shall be payable, the place or places
where the Securities of such series may be presented for registration of
transfer or exchange, and the place or places where notices and demands to or
upon the Company in respect of the Securities of such series may be made;
(f) the period or periods within which, or the date or dates on which, if
any, the price or prices (including, if applicable, Make Whole Amounts) at which
and the terms and conditions upon which the Securities of such series may be
redeemed, in whole or in part, at the option of the Company;
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28
(g) the obligation or the right, if any, of the Company to redeem, repay or
purchase the Securities of such series pursuant to any sinking fund,
amortization or analogous provisions or upon the happening of a specified event,
or at the option of a Holder thereof, and the period or periods within which,
the price or prices at which, the currency or currencies (including currency
unit or units) in which and the other terms and conditions upon which Securities
of the series shall be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation;
(h) the denominations in which any Securities of such series shall be
issuable, if other than denominations of $1,000 and any integral multiple
thereof;
(i) if other than Dollars, the currency or currencies (including currency
unit or units) in which the principal of (and premium, if any) and interest, if
any, on the Securities of the series shall be payable, or in which the
Securities of the series shall be denominated;
(j) the additions, modifications or deletions, if any, in the Events of
Default or covenants of the Company set forth herein with respect to the
Securities of such series;
(k) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series that shall be payable upon
declaration of acceleration of the Maturity thereof;
(l) the additions or changes, if any, to this Indenture with respect to the
Securities of such series as shall be necessary to permit or facilitate the
issuance of the Securities of such series in bearer form, registrable or not
registrable as to principal, and with or without interest coupons;
(m) any index or indices used to determine the amount of payments of
principal of and premium, if any, on the Securities of such series or the manner
in which such amounts will be determined;
(n) whether the Securities of the series, or any portion thereof, shall
initially be issuable in the form of a temporary Global Security representing
all or such portion of the Securities of such series and provisions for the
exchange of such temporary Global Security for definitive Securities of such
series;
(o) if applicable, that any Securities of the series shall be issuable in
whole or in part in the form of one or more Global Securities and, in such case,
the respective Depositaries for such Global Securities, the form of any legend
or legends which shall be borne by any such Global
<PAGE>
29
Security in addition to or in lieu of that set forth in Section 2.2 and any
circumstances in addition to or in lieu of those set forth in Section 3.5 in
which any such Global Security may be exchanged in whole or in part for
Securities registered, and any transfer of such Global Security in whole or in
part may be registered, in the name or names of Persons other than the
Depositary for such Global Security or a nominee thereof;
(p) the appointment of any Paying Agents for the Securities of such series;
(q) the terms of any right to convert or exchange Securities of such series
into any other securities or property of the Company, and the additions or
changes, if any, to this Indenture with respect to the Securities of such series
to permit or facilitate such conversion or exchange;
(r) the terms of any right to convert or exchange Securities of such series
into any other securities or property of the Company, and the additions or
changes, if any, to this Indenture with respect to the Securities of such series
to permit or facilitate such conversion or exchange;
(s) the additions, modifications or deletions, if any, in the Events of
Default that apply to any Securities of the series and any change in the right
of the Trustee or the requisite Holder of such Securities to declare the
principal amount thereof due and payable pursuant to Section 5.2;
(t) the relative degree, if any, to which the Securities of the series
shall be senior to or be subordinated to other series of Securities in right of
payment, whether such other series of Securities are Outstanding or not; and
(u) any other terms, conditions and rights of the Securities of such series
(which terms, conditions and rights shall not be inconsistent with the
provisions of this Indenture).
All Securities of any one series shall be substantially identical except as
to denomination and except as may otherwise be provided herein or in or pursuant
to such Board Resolution and set forth in such Officers' Certificate or in any
such indenture supplemental hereto.
If any of the terms of the Securities of any series are established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate setting forth the terms of the series.
<PAGE>
30
SECTION 3.2 Denominations.
The Securities of each series shall be in registered form without coupons
and shall be issuable in denominations of $1,000 and any integral multiple
thereof, unless otherwise specified as contemplated by Section 3.1.
SECTION 3.3 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its President
or one of its Vice Presidents under its corporate seal reproduced or impressed
thereon and attested by its Secretary or one of its Assistant Secretaries. The
signature of any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities. At any time and from time to
time after the execution and delivery of this Indenture, the Company may deliver
Securities of any series executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and make such Securities available for delivery. If the
form or terms of the Securities of the series have been established by or
pursuant to one or more Board Resolutions as permitted by Sections 2.1 and 3.1,
in authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive, and (subject to Section 6.1) shall be fully protected in
relying upon, an Opinion of Counsel stating,
(1) if the form of such Securities has been established by or pursuant
to Board Resolution as permitted by Section 2.1, that such form has been
established in conformity with the provisions of this Indenture;
(2) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 3.1, that such terms
have been established in conformity with the provisions of this Indenture;
(3) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such
<PAGE>
31
Opinion of Counsel, will constitute valid and legally binding obligations
of the Company enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles; and
(4) that all requirements of New York, California and Federal law in
respect of the execution and delivery by the Company of such Securities,
and all covenants and conditions set forth in this Indenture which are
conditions precedent hereto, have been complied with.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
signatories, and such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly authenticated
and delivered hereunder. Notwithstanding the foregoing, if any Security shall
have been authenticated and delivered hereunder but never issued and sold by the
Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 3.9, for all purposes of this Indenture such
Security shall be deemed never to have been authenticated and delivered
hereunder and shall not be entitled to the benefits of this Indenture.
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32
SECTION 3.4 Temporary Securities.
Pending the preparation of definitive Securities of any series, the Company
may execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities of such series in lieu
of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will cause
Definitive Securities of such series to be prepared without unreasonable delay.
After the preparation of Definitive Securities, the temporary Securities shall
be exchangeable for Definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for that purpose
without charge (except for tax or other governmental charges, if applicable) to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities, the Company shall execute and the Trustee shall authenticate and
make available for delivery in exchange therefor one or more definitive
Securities of the same series, of any authorized denominations having the same
Original Issue Date and Stated Maturity and having the same terms as such
temporary Securities. Until so exchanged, the temporary Securities of any series
shall in all respects be entitled to the same benefits under this Indenture as
definitive Securities of such series.
SECTION 3.5 Registration, Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Securities and of
transfers of Securities. Such register is herein sometimes referred to as the
"Securities Register." The Trustee is hereby appointed "Securities Registrar"
for the purpose of registering Securities and transfers and exchanges of
Securities as herein provided.
Upon surrender for registration of transfer of any Security at the office
or agency of the Company designated for that purpose the Company shall execute,
and the Trustee shall authenticate and make available for delivery, in the name
of the designated transferee or transferees, one or more new Securities of the
same series of any authorized denominations, of a like aggregate principal
amount, of the same Original Issue Date and Stated Maturity and having the same
terms.
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33
At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of a like
aggregate principal amount, of the same Original Issue Date and Stated Maturity
and having the same terms, upon surrender of the Securities to be exchanged at
such office or agency. Whenever any Securities are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and make
available for delivery, the Securities which the Holder making the exchange is
entitled to receive.
All Securities issued upon any transfer or exchange of Securities shall be
the valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Securities surrendered upon such
transfer or exchange.
Every Security presented or surrendered for transfer or exchange shall (if
so required by the Company or the Securities Registrar) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Securities Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
transfer or exchange of Securities.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only to
Global Securities:
(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global
Security or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered,
in the name of any Person other than the Depositary for such Global
Security or a nominee thereof unless (A) such Depositary (i) has notified
the Company that it is unwilling or unable to continue as Depositary for
such Global Security or (ii) has ceased to be a clearing agency registered
under the Exchange Act at a time when the Depositary is required to be so
registered to act as depositary, in either case unless the Company has
approved a successor Depositary within 90 days, (B) there shall have
occurred and be continuing an Event of Default with respect to such Global
Security, (C) the Company in its sole discretion determines that such
Global
<PAGE>
34
Security will be so exchangeable or transferable or (D) there shall exist
such circumstances, if any, in addition to or in lieu of the foregoing as
have been specified for this purpose as contemplated by Section 3.1.
(3) Subject to Clause (2) above, any exchange of a Global Security for
other Securities may be made in whole or in part, and all Securities issued
in exchange for a Global Security or any portion thereof shall be
registered in such names as the Depositary for such Global Security shall
direct.
(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Section, Section 3.4, 3.6, 9.6 or
11.6 or otherwise, shall be authenticated and delivered in the form of, and
shall be, a Global Security, unless such Security is registered in the name
of a Person other than the Depositary for such Global Security or a nominee
thereof.
The provisions of Clause (1) below shall only apply to transfers and
exchanges of Definitive Securities:
(1) When Definitive Securities are presented by a Holder to the
Securities Registrar with a request:
(a) to register the transfer of such Definitive Securities; or
(b) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Securities Registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that:
-------- -------
(i) such Definitive Securities shall be duly endorsed or
accompanied by a written instrument of transfer in form reasonably
satisfactory to the Company and the Securities Registrar, duly
executed by such Holder or his attorney duly authorized in writing;
and
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35
(ii) if such Definitive Securities are Transfer Restricted
Securities, such Definitive Securities shall also be accompanied by
the following additional information and documents, as applicable:
(A) if such Transfer Restricted Securities are being
delivered to the Securities Registrar by a Holder for
registration in the name of such Holder, without transfer, a
certification from such Holder to that effect (in the form set
forth on the reverse of the Security); or
(B) if such Transfer Restricted Securities are being
transferred (x) to the Company or to a QIB in accordance with
Rule 144A under the Securities Act or (y) pursuant to an
effective registration statement under the Securities Act, a
certification from such Holder to that effect (in the form set
forth on the reverse of the Security); or
(C) if such Transfer Restricted Securities are being
transferred (w) pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S under the Securities
Act; or (x) to an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities
Act that is acquiring the Security for its own account, or for
the account of such an institutional accredited investor, in each
case in a minimum principal amount of the Securities of $100,000
for investment purposes and not with a view to, or for offer or
sale in connection with, any distribution in violation of the
Securities Act; or (y) in reliance on another exemption from the
registration requirements of the Securities Act: (i) a
certification to that effect from such Holder (in the form set
forth on the reverse of the Security), (ii) if the Company or the
Trustee so requests, an Opinion of Counsel reasonably acceptable
to the Company and to the Trustee to the effect that such
transfer is in compliance with the Securities Act and (iii) in
the case of clause (x), a signed letter from the transferee
substantially in the form of Exhibit A hereto.
The provisions of Clause (1) below shall only apply to transfers and
exchanges of a Definitive Security for a beneficial interest in a Global
Security.
(1) A Definitive Security may not be exchanged for a beneficial
interest in a Global Security except upon satisfaction of the requirements
set forth below. Upon receipt
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36
by the Trustee of a Definitive Security, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Trustee,
together with:
(a) certification, in the form set forth on the reverse of the
Security, to the effect that such Definitive Security is being
transferred to a QIB in accordance with Rule 144A under the Securities
Act; and
(b) written instructions from the Holder thereof directing the
Trustee to make, or to direct the Securities Registrar to make, an
endorsement on the Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the Global
Security,
then the Trustee shall cancel such Definitive Security and cause, or direct
the Securities Registrar to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Securities Registrar, the aggregate principal amount of Securities
represented by the Global Security to be increased accordingly. If no
Global Securities are then outstanding, the Company shall issue and the
Trustee shall authenticate, upon written order of the Company in the form
of an Officers' Certificate, a new Global Security in the appropriate
principal amount. The Trustee shall deliver copies of each certification
and instruction received by it pursuant to clauses (a) and (b) above to the
Depositary and, upon receipt thereof, the Depositary shall make appropriate
adjustments to its books and records to reflect exchange of such Definitive
Security for an interest in the Global Security in accordance with this
Section 3.5.
The provisions in Clauses (1) and (2) below shall only apply to the
transfer and exchange of a beneficial interest in a Global Security for a
Definitive Security.
(1) Any person having a beneficial interest in a Global Security may
upon request exchange such beneficial interest for a Definitive Security of
the same aggregate principal amount; provided that such request is
--------
accompanied by the information specified below. Upon receipt by the
Trustee of written instructions (or such other form of instructions as is
customary for the Depositary) from the Depositary or its nominee on behalf
of any Person having a beneficial interest in a Global Security and, in the
case of a Transfer Restricted Security, the following additional
information and documents (all of which may be submitted by facsimile):
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37
(a) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the owner of a beneficial
interest in a Global Security, a certification from such Person to
that effect (in the form set forth on the reverse of the Security); or
(b) if such beneficial interest is being transferred (x) to a QIB
in accordance with Rule 144A under the Securities Act or (y) pursuant
to an effective registration statement under the Securities Act, a
certification from such person to that effect (in the form set forth
on the reverse of the Security); or
(c) if such beneficial interest is being transferred (w) pursuant
to an exemption from registration in accordance with Rule 144 or
Regulation S under the Securities Act; or (x) to an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3)
or (7) under the Securities Act that is acquiring the security for its
own account, or for the account of such an institutional accredited
investor, in each case in a minimum principal amount of the Securities
of $100,000 for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution in violation of the
Securities Act; or (y) in reliance on another exemption from the
registration requirements of the Securities Act: (i) a certification
to that effect from the transferee (in the form set forth on the
reverse of the Security), (ii) if the Company or the Trustee so
requests, an Opinion of Counsel reasonably acceptable to the Company
and to the Trustee to the effect that such transfer is in compliance
with the Securities Act, and (iii) in the case of clause (x), a signed
letter from the transferee in the form of Exhibit A hereto;
then the Securities Registrar, at the direction of the Trustee, will cause,
in accordance with the standing instructions and procedures existing
between the Depositary and the Securities Registrar, the aggregate
principal amount of the Global Security to be reduced accordingly and,
following such reduction, the Company will execute and the Trustee will
authenticate and deliver to the transferee one or more Definitive
Securities in accordance with clause (2) below.
(2) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 3.5 shall be
registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee in writing. The
Trustee shall
<PAGE>
38
deliver such Definitive Securities to the Persons in whose names such
Securities are so registered in accordance with the instructions of the
Depositary.
Neither the Company nor the Trustee shall be required, pursuant to the
provisions of this Section, (a) to issue, transfer or exchange any Security of
any series during a period beginning at the opening of business 15 days before
the day of selection for redemption of Securities pursuant to Article XI and
ending at the close of business on the day of mailing of notice of redemption or
(b) to transfer or exchange any Security so selected for redemption in whole or
in part, except, in the case of any Security to be redeemed in part, any portion
thereof not to be redeemed.
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee together with such
security or indemnity as may be required by the Company or the Trustee to save
each of them harmless, the Company shall execute and the Trustee shall
authenticate and make available for delivery in exchange therefor a new Security
of the same issue and series of like tenor and principal amount, having the same
Original Issue Date and Stated Maturity and bearing the same interest rate as
such mutilated Security, and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and to the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security, and
(ii) such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute
and upon its request the Trustee shall authenticate and make available for
delivery, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same issue and series of like tenor and principal amount, having the same
Original Issue Date and Stated Maturity and bearing the same interest rate as
such destroyed, lost or stolen Security, and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company 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 expenses (including
the fees and expenses of the Trustee) connected therewith.
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Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security 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 Securities of that series duly issued hereunder.
The provisions of this Section 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 Securities.
SECTION 3.7 Payment of Interest; Interest Rights Preserved.
Interest on any Security of any series which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date, shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
in respect of Securities of such series, except that, unless otherwise provided
in the Securities of such series, interest payable on the Stated Maturity of the
principal of a Security shall be paid to the Person to whom principal is paid.
The initial payment of interest on any Security of any series which is issued
between a Regular Record Date and the related Interest Payment Date shall be
payable as provided in such Security or in the Board Resolution pursuant to
Section 3.1 with respect to the related series of Securities. At the option of
the Company, interest on any series of Securities may be paid (i) by check
mailed to the address of the Person entitled thereto as it shall appear on the
Securities Register of such series or (ii) by wire transfer in immediately
available funds at such place and to such account as designated by the Person
entitled thereto as specified in the Securities Register of such series.
Any interest on any Security which is payable, but is not timely paid or
duly provided for, on any Interest Payment Date for Securities of such series
(herein called "Defaulted Interest"), shall forthwith cease to be payable to the
------------------
registered Holder on the relevant Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities of such series in respect of which
interest is in default (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be
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paid on each Security and the date of the proposed payment, and at the same time
the Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Upon such deposit, the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first class, postage prepaid, to each Holder of a
Security of such series at the address of such Holder as it appears in the
Securities Register not less than 10 days prior to such Special Record Date. The
Trustee may (but shall have no duty to), in its discretion, in the name and at
the expense of the Company, cause a similar notice to be published at least once
in a newspaper, customarily published in the English language on each Business
Day and of general circulation in the Borough of Manhattan, The City of New
York, but such publication shall not be a condition precedent to the
establishment of such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having been mailed
as aforesaid, such Defaulted Interest shall be paid to the Persons in whose
names the Securities of such series (or their respective Predecessor Securities)
are registered on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
or automated quotation system on which the Securities of the series in respect
of which interest is in default may be listed or traded and, upon such notice as
may be required by such exchange (or by the Trustee if the Securities are not
listed), if, after notice given by the Company to the Trustee of the proposed
payment pursuant to this Clause, such payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
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41
SECTION 3.8 Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name any Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 3.7) any interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
SECTION 3.9 Cancellation.
All Securities surrendered for payment, redemption, transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee, and any such Securities and Securities surrendered directly to the
Trustee for any such purpose shall be promptly canceled by it. The Company may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Securities so delivered shall be promptly canceled by
the Trustee. No Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities shall be returned by the
Trustee to the Company and destroyed by the Company.
SECTION 3.10 Computation of Interest.
Except as otherwise specified as contemplated by Section 3.1 for Securities
of any series, interest on the Securities of each series for any period shall be
computed on the basis of a 360-day year of twelve 30-day months and interest on
the Securities of each series for any partial period shall be computed on the
basis of the number of days elapsed in a 360-day year of twelve 30-day months.
SECTION 3.11 CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on
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42
the Securities, and any such redemption shall not be affected by any defect in
or omission of such numbers. The Company will promptly notify the Trustee of any
change in the CUSIP numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION
4.1 Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on written demand of and at the
expense of the Company, shall execute instruments supplied by the Company
acknowledging satisfaction and discharge of this Indenture, when (1) either (A)
all Securities theretofore authenticated and delivered (other than (i)
Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 3.6 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 10.3) have been delivered to the Trustee for
cancellation; or (B) all such Securities not theretofore delivered to the
Trustee for cancellation (i) have become due and payable, or (ii) will become
due and payable at their Maturity within one year, or (iii) if redeemable at the
option of the Company, are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of the Company and the Company,
in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited
with the Trustee as funds in trust for such purpose in an amount sufficient to
pay and discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal and interest to the
date of such deposit (in the case of Securities which have become due and
payable) or to the Maturity or Redemption Date, as the case may be; (2) the
Company has paid or caused to be paid all other sums payable hereunder by the
Company; and (3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with. Notwithstanding the satisfaction and
discharge of this Indenture, the obligations of the Company to the Trustee under
Section 6.7 and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of clause (1) of this Section, the obligations of the Trustee
under Section 4.5 and the last paragraph of Section 10.3 shall survive.
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43
SECTION 4.2 Legal Defeasance.
In addition to discharge of this Indenture pursuant to Section 4.1, in the
case of any Securities with respect to which the exact amount described in
subparagraph A of Section 4.4 can be determined at the time of making the
deposit referred to in such subparagraph A, the Company shall be deemed to have
paid and discharged the entire indebtedness on all the Securities as provided in
this Section on and after the date the conditions set forth in Section 4.4 are
satisfied, and the provisions of this Indenture with respect to the Securities
shall no longer be in effect (except as to (i) rights of registration of
transfer and exchange of Securities, (ii) substitution of mutilated, defaced,
destroyed, lost or stolen Securities, (iii) rights of Holders of Securities to
receive, solely from the trust fund described in subparagraph A of Section 4.4,
payments of principal thereof and interest, if any, thereon upon the original
stated due dates therefor (but not upon acceleration), (iv) the rights,
obligations, duties and immunities of the Trustee hereunder, (v) this Section
4.2 and (vi) the rights of the Holders of Securities as beneficiaries hereof
with respect to the property so deposited with the Trustee payable to all or any
of them) (hereinafter called "Legal Defeasance"), and the Trustee, at the cost
and expense of the Company, shall execute proper instruments supplied by the
Company acknowledging the same.
SECTION 4.3 Covenant Defeasance.
In the case of any Securities with respect to which the exact amount
described in subparagraph A of Section 4.4 can be determined at the time of
making the deposit referred to in such subparagraph A, (a) the Company shall be
released from its obligations under any covenants specified in or pursuant to
this Indenture (except as to (i) rights of registration of transfer and exchange
of Securities, (ii) substitution of mutilated, defaced, destroyed, lost or
stolen Securities, (iii) rights of Holders of Securities to receive, solely from
the trust fund described in subparagraph A of Section 4.4, payments of principal
thereof and interest, if any, thereon upon the original stated due dates
therefor (but not upon acceleration), (iv) the rights, obligations, duties and
immunities of the Trustee hereunder, (v) this Section 4.3 and (vi) the rights of
the Holders of Securities as beneficiaries hereof with respect to the property
so deposited with the Trustee payable to all or any of them), and (b) the
occurrence of any event specified in Section 5.1(3) (with respect to any of the
covenants specified in or pursuant to this Indenture) shall be deemed not to be
or result in an Event of Default, in each case with respect to the Outstanding
Securities as provided in this Section on and after the date the conditions set
forth in Section 4.4 are satisfied (hereinafter called "Covenant Defeasance"),
and the Trustee, at the cost and expense of the Company, shall execute proper
instruments supplied by the Company acknowledging the same. For this purpose,
such Covenant Defeasance means that the Company may omit to comply with and
shall have no
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44
liability in respect of any term, condition or limitation set forth in any such
covenant (to the extent so specified in the case of Section 5.1(3)), whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document, but the remainder of this Indenture
and the Securities shall be unaffected thereby.
SECTION 4.4 Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section 4.2
or 4.3 to the Outstanding Securities:
A. with reference to Section 4.2 or 4.3, the Company has irrevocably
deposited or caused to be irrevocably deposited with the Trustee as funds in
trust, specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of Securities (i) cash in an amount, (ii) direct
obligations of the United States of America, backed by its full faith and credit
or obligations of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the timely payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
United States of America (collectively, "U.S. Government Obligations"), maturing
as to principal and interest, if any, at such times and in such amounts as will
ensure the availability of cash, or (iii) a combination thereof, in each case
sufficient, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay and discharge the principal of and interest, if any, on all
Securities on each date that such principal or interest, if any, is due and
payable;
B. in the case of Legal Defeasance under Section 4.2, the Company has
delivered to the Trustee an Opinion of Counsel based on the fact that (x) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (y), since the date hereof, there has been a change in the
applicable United States federal income tax law, in either case to the effect
that, and such opinion shall confirm that, the Holders of the Securities of such
series will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit and Legal Defeasance and will be subject to federal
income tax on the same amount and in the same manner and at the same times as
would have been the case if such deposit and Legal Defeasance had not occurred;
C. in the case of Covenant Defeasance under Section 4.3, the Company
has delivered to the Trustee an Opinion of Counsel to the effect that, and such
opinion shall confirm that, the Holders of the Securities will not recognize
income, gain or loss for federal income tax
<PAGE>
45
purposes as a result of such deposit and Covenant Defeasance and will be subject
to federal income tax on the same amount in the same manner and at the same
times as would have been the case if such deposit and Covenant Defeasance had
not occurred;
D. such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under, any agreement or
instrument to which the Company is a party or by which it is bound; and
E. the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent contemplated by this provision have been complied with.
SECTION 4.5 Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all money
and U.S. Government Obligations deposited with the Trustee pursuant to Section
4.1 and Section 4.4 shall be held in trust and such money and all money from
such U.S. Government Obligations shall be applied by it, in accordance with the
provisions of the Securities and this Indenture, to the payment, either directly
or through any Paying Agent (including the Company acting as its own Paying
Agent) as the Trustee may determine, to the Persons entitled thereto, of the
principal and interest for whose payment such money and U.S. Government
Obligations has been deposited with the Trustee.
SECTION 4.6 Indemnity for U.S. Government Obligations.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 4.4 or the principal or interest received in
respect of such obligations other than any such tax, fee or other charge that by
law is for the account of the Holders of Outstanding Securities.
ARTICLE V
REMEDIES
SECTION
5.1 Events of Default.
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46
"Event of Default", wherever used herein with respect to the Securities of
any series, 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):
(1) default in the payment of any interest upon any Security of that
series, including any Additional Interest in respect thereof, when it becomes
due and payable, and continuance of such default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any, on) any
Security of that series at its Maturity; or
(3) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Company in this Indenture with respect to that
series (other than a covenant or warranty a default in the performance of which
or the breach of which is elsewhere in this Section specifically dealt with),
and continuance of such default or breach for a period of 90 days after there
has been given, by registered or certified mail, to the Company by the Trustee
or to the Company and the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Securities of that series a written notice specifying
such default or breach and requiring it to be remedied; or
(4) the entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company 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
(5) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part
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47
of its property, or the making by it of an assignment for the benefit for
creditors, or the admission by it in writing of its inability to pay its debts
generally as they become due and its willingness to be adjudicated a bankrupt,
or the taking of corporate action by the Company in furtherance of any such
action; or
(6) any default or event of default under any Indebtedness of the Company
or any of its Subsidiaries other than Indebtedness secured by assets of the
Company or any of its Subsidiaries the terms of which limit the remedies of the
holder or holders thereof primarily to the assets so secured ("Nonrecourse
Indebtedness"), which default or event of default results in at least $10
million of aggregate principal amount of such Indebtedness being declared due
and payable prior to maturity and such acceleration is not rescinded within 10
days thereafter; or
(7) failure by the Company or any of its Subsidiaries to pay at maturity
any Indebtedness other than Nonrecourse Indebtedness in excess of $10 million
aggregate principal amount, and such failure shall not have been cured within 10
days thereafter; or
(8) any other Event of Default provided with respect to Securities of that
series.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in Section
5.1(4) or 5.1(5)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if the
Securities of that series are Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all the Securities of
that series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders) and upon any such declaration
such principal amount (or specified portion thereof) of and the accrued interest
on all the Securities of such series shall become immediately due and payable.
If an Event of Default specified in Section 5.1(4) or 5.1(5) with respect to
Securities of any series at the time Outstanding occurs, the principal amount of
all the Securities of that series (or, if the Securities of that series are
Discount Securities, such portion of the principal amount of such Securities as
may be specified by the terms of that series) shall automatically, and without
any declaration or other action on the part of the Trustee or any Holder, become
immediately due and payable.
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48
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount (or, if the
Securities of that series are Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of the Outstanding
Securities of that series, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum sufficient to
pay:
(A) all overdue installments of interest (including Additional
Interest) on all Securities of that series,
(B) the unpaid principal of (and premium, if any, on) any Securities
of that series which have become due otherwise than by such declaration of
acceleration, and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel; and
(2) all Events of Default with respect to Securities of that series (or all
series, as the case may be), other than the non-payment of the principal of (or
the premium, if any, on) or interest on Securities of that series (or of all
series, as the case may be) which have become due solely by such acceleration,
have been cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if:
(1) default is made in the payment of any installment of interest
(including Additional Interest) on any Security when such interest becomes due
and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (and premium, if
any, on) any Security at the Maturity thereof,
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49
the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal, including any sinking fund payment or
analogous obligations (and premium, if any) and interest (including Additional
Interest); and, in addition thereto, all amounts owing the Trustee under Section
6.7.
If the Company 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
judicial 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 Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial 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 this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
SECTION 5.4 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors,
(a) the Trustee (irrespective of whether the principal of the Securities of
any series shall then be due and payable as therein expressed or by declaration
of acceleration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of overdue principal (and
premium, if any) or interest (including Additional Interest) shall be entitled
and empowered (but shall have no duty), to the fullest extent permitted by law,
by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (or,
if the Securities of that series are Discount Securities, such portion of the
principal amount as may be due and payable pursuant to a declaration in
accordance with Section 5.2) (and premium, if any) and
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50
interest (including Additional Interest) owing and unpaid in respect to the
Securities and to file such other papers or documents as may be necessary or
advisable and, at such time, if any, as this Indenture is qualified under the
Trust Indenture Act, to take any and all actions as are authorized under the
Trust Indenture Act in order to have the claims of the Holders and any
predecessor to the Trustee under Section 6.7 allowed in any such judicial
proceedings; and
(ii) in particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same in accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator, sequestrator
(or other similar official) in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee for distribution in
accordance with Section 5.6, and in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due to it and any predecessor Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.
SECTION 5.5 Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities 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 all the amounts owing the Trustee and any predecessor Trustee
under Section 6.7, its agents and counsel, be for the ratable benefit of the
Holders of the Securities in respect of which such judgment has been recovered.
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SECTION 5.6 Application of Money Collected.
Any money or property collected or to be applied by the Trustee with
respect to a series of Securities pursuant to this Article shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money or property on account of principal (or premium,
if any) or interest (including Additional Interest), upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any predecessor
Trustee under Section 6.7;
SECOND: To the payment of the amounts then due and unpaid upon such series
of Securities for principal (and premium, if any), interest (including
Additional Interest), in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such series of Securities for
principal (and premium, if any) and interest (including Additional Interest),
respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
SECTION 5.7 Limitation on Suits.
No Holder of any Securities of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture or for the
appointment of a receiver, assignee, trustee, liquidator, sequestrator (or other
similar official) or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities of that series;
(2) the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series 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;
(3) such Holder or Holders have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
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(4) the Trustee for 60 days after its receipt of such notice, request and
offer of security or indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Holders of a majority in principal
amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.
SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right which is absolute and unconditional to receive
payment of the principal of (and premium, if any) and (subject to Section 3.7)
interest (including Additional Interest) on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder.
SECTION 5.9 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
such Holder, then and in every such case the Company, the Trustee or the Holders
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 or the Holders shall continue as though no such
proceeding had been instituted.
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SECTION 5.10 Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of Section 3.6, no right
or remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or any Holder of any Security to
exercise any right or remedy accruing 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 or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or the Holders, as the case may be.
SECTION 5.12 Control by Holders.
The Holders of not less than of a majority in principal amount of the
Outstanding Securities of any series shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee, with respect
to the Securities of such series, provided that:
(1) such direction shall not be in conflict with any rule of law or with
this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
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(3) subject to the provisions of Section 6.1, the Trustee shall have the
right to decline to follow such direction if a Responsible Officer or Officers
of the Trustee shall, in good faith, determine that the proceeding so directed
would be unjustly prejudicial to the Holders not joining in any such direction
or would involve the Trustee in personal liability.
SECTION 5.13 Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may waive any past default hereunder and
its consequences with respect to such series except a default:
(1) in the payment of the principal of (or premium, if any) or interest
(including Additional Interest) on any Security of such series (unless all
Events of Default with respect to Securities of that series, other than the non-
payment of the principal of Securities of that series which has become due
solely by such acceleration, have been cured or annulled as provided in Section
5.3 and the Company has paid or deposited with the Trustee a sum sufficient to
pay all overdue installments of interest (including Additional Interest) on all
Securities of that series, the principal of (and premium, if any, on) any
Securities of that series which have become due otherwise than by such
declaration of acceleration, and all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel), or
(2) in respect of a covenant or provision hereof which under Article IX
cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Any such waiver shall be deemed to be on behalf of the Holders of all the
Securities of such series.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
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SECTION 5.14 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security 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
this Indenture, or in any suit against the Trustee for any action taken 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 and
expenses, 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 Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities of
any series, or to any suit instituted by any Holder for the enforcement of the
payment of the principal of (or premium, if any) or interest (including
Additional Interest) on any Security on or after the respective Stated
Maturities expressed in such Security.
SECTION 5.15 Waiver of Usury, Stay or Extension Laws.
The Company 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 usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (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.
ARTICLE VI
THE TRUSTEE
SECTION
6.1 Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
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(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions which by any provisions 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 on their face they
conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(3) 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 the direction of
Holders pursuant to Section 5.12 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 this Indenture with respect
to the Securities of such series.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there shall be reasonable grounds for believing that
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repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 6.2 Notice of Defaults.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities of any series, the Trustee shall transmit by mail to all Holders of
Securities of such series, as their names and addresses appear in the Securities
Register, notice of such default, unless such default shall have been cured or
waived; provided, however, that, except in the case of a default in the payment
of the principal of (or premium, if any) or interest (including Additional
Interest) on any Security of such series, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of Securities of such series; and provided, further,
that, in the case of any default of the character specified in Section 5.1(3),
no such notice to Holders of Securities of such series shall be given until at
least 30 days after the occurrence thereof. For the purpose of this Section, the
term "default" means any event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to Securities of such
series.
SECTION 6.3 Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, Security or
other paper or document 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 Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
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(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 Officers' Certificate;
(d) the Trustee may consult with counsel of its selection 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 at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders 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, indenture,
Security or other paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it may see fit, and,
if the Trustee shall determine to make such inquiry or investigation, it shall
be entitled to examine the books, records and premises of the Company,
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 or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder; and
(h) the Trustee shall not be liable for any action taken, suffered, or
omitted to be taken by it in good faith, without negligence and reasonably
believed by it to be authorized or within the discretion or rights or powers
conferred upon it by this Indenture.
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SECTION 6.4 Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of the Securities or the proceeds thereof.
SECTION 6.5 May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Securities
Registrar or such other agent.
SECTION 6.6 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company.
SECTION 6.7 Compensation and Reimbursement.
The Company, as borrower, agrees
(1) to pay to the Trustee from time to time such compensation as shall be
agreed in writing between the Company and the Trustee 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);
(2) 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 the reasonable compensation and the
expenses and disbursements of its agents and
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counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee and any predecessor Trustee for, and
to hold it harmless against, any and all loss, liability, damage, claim or
expense (including the reasonable compensation and the expenses and
disbursements of its agents and counsel) incurred without negligence or bad
faith, arising out of or in connection with the acceptance or administration of
this trust or the performance of its duties hereunder, 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. This
indemnification shall survive the termination of this Agreement and the
resignation or removal of the Trustee hereunder.
To secure the Company's payment obligations in this Section, the Company
and the Holders agree that the Trustee shall have a lien prior to the Securities
on all money or property held or collected by the Trustee. Such lien shall
survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Code of 1978, as amended, or any successor
statute.
SECTION 6.8 Disqualification; Conflicting Interests.
The Trustee for the Securities of any series issued hereunder shall be
subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing
herein shall prevent the Trustee from filing with the Commission the application
referred to in the second to last paragraph of said Section 310(b).
SECTION 6.9 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of the United
States of America or of any state or territory or the District of Columbia,
authorized under such laws to exercise corporate trust powers and subject to
supervision or examination by federal, state, territorial or District of
Columbia authority, or
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(b) a corporation or other Person organized and doing business under the
laws of a foreign government that is permitted to act as Trustee pursuant to a
rule, regulation or order of the Commission, authorized under such laws to
exercise corporate trust powers, and subject to supervision or examination by
authority of such foreign government or a political subdivision thereof
substantially equivalent to supervision or examination applicable to United
States institutional trustees,
in either case, having securities rated in one of the three highest rating
categories by a nationally recognized statistical rating organization and having
a combined capital and surplus of at least $50,000,000, subject to supervision
or examination by federal or state authority. 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, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article. Neither the Company nor any Person directly or indirectly controlling,
controlled by or under common control with the Company shall serve as Trustee
for the Securities of any series issued hereunder.
Section 6.10 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 shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. 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 with respect to the Securities of such
series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 30 days after such removal, the Trustee
being removed may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
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(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after
written request therefor by the Company or by any Holder who has been a bona
fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the Company or by any
such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver 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, (i) the Company, acting pursuant to the authority of a
Board Resolution, may remove the Trustee with respect to all Securities, or (ii)
subject to Section 5.14, any Holder who has been a bona fide Holder of a
Security 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 with respect to all Securities and the appointment of a successor
Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee with respect to the Securities of
that or those series. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee with respect to the Securities of such series and supersede
the successor Trustee appointed by the Company. If no successor Trustee with
respect to the Securities of any series shall have been so appointed by the
Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, subject to Section 5.14, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
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(f) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Securities of such series as their names and addresses appear in the
Securities Register. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its Corporate
Trust Office.
SECTION 6.11 Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to 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 and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of all amounts due to it under Section 6.7, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring
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Trustee shall become effective to the extent provided therein and each such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts, and duties of the retiring Trustee
with respect to the Securities of that or those series to which the appointment
of such successor Trustee relates; but, on request of the Company or any
successor Trustee, such retiring Trustee, upon payment of all amounts due to it
under Section 6.7, shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all rights, powers and trusts referred to in paragraph
(a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation 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 Securities shall 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 Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.
SECTION 6.13 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
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SECTION 6.14 Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect to
one or more series of Securities which shall be authorized to act on behalf of
the Trustee to authenticate Securities of such series issued upon original issue
and upon exchange, registration of transfer or partial redemption thereof or
pursuant to Section 3.6, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, or of any state or territory or
the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by federal, or state, territorial or
District of Columbia authority. If such Authenticating Agent publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section the
combined capital and surplus of such Authenticating Agent 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 an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be
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acceptable to the Company and shall give notice of such appointment in the
manner provided in Section 1.6 to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provision of
this Section.
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities referred to in the within mentioned
Indenture.
Dated: /s/
-------------------------------------------------
As Trustee
By:
----------------------------------------------
As Authenticating Agent
By:
----------------------------------------------
Authorized Officer
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ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION
7.1 Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after January 15 and July 15 in
each year, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such January 1 and July 1, and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished,
excluding from any such list names and addresses received by the Trustee in its
capacity as Securities Registrar.
SECTION 7.2 Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided in the Trust
Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of the
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
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SECTION 7.3 Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto. If
required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within
sixty days after each May 15 following the date of this Indenture deliver to
Holders a brief report, dated as of such May 15, which complies with the
provisions of such Section 313(a).
(b) If this Indenture shall have been qualified under the Trustee
Indenture Act, a copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Securities are listed, if any, and also with the Commission. The
Company will promptly notify the Trustee when any Securities are listed on any
stock exchange.
SECTION 7.4 Reports by Company.
The Company shall file with the Trustee and with the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided in the Trust Indenture Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act shall be filed with
the Trustee within 15 days after the same is required to be filed with the
Commission. At any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act, upon the request of a Holder or a beneficial owner of a
Security, the Company shall promptly furnish the information specified in Rule
144A (d) (4) of the Securities Act (or any successor provision), or cause such
information to be furnished, to such Holder or beneficial owner in order to
permit compliance by such Holder or beneficial owner with Rule 144A under the
Securities Act; provided, however, that the Company shall not be required to
furnish such information at any time to a prospective purchaser located outside
the United States who is not a "U.S. person" within the meaning of Regulation S
under the Securities Act. If this Indenture shall have been qualified under the
Trustee Indenture Act, the Company also shall comply with the other provisions
of Trust Indenture Act Section 314(a). Delivery of such reports, information and
documents to the Trustee is for informational purposes only and the Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein, including the Company's compliance with any of its covenants
hereunder (as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
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ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section
8.1 Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, unless:
(1) the Person formed by such consolidation or into which the Company is
merged or the Person which acquires by conveyance or transfer, or which leases,
the properties and assets of the Company substantially as an entirety shall be a
corporation, partnership or trust organized and existing under the laws of the
United States of America or any State or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and delivered to
the Trustee, in form satisfactory to the Trustee, the due and punctual payment
of the principal of (and premium, if any) and interest (including Additional
Interest) on all the Securities and the performance of every covenant of this
Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that such consolidation, merger, conveyance,
transfer or lease and any such supplemental indenture complies with this Article
and that all conditions precedent herein provided for relating to such
transaction have been complied with; and the Trustee, subject to Section 6.1,
may rely upon such Officers' Certificate and Opinion of Counsel as conclusive
evidence that such transaction complies with this Section 8.1.
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Section 8.2 Successor Corporation Substituted.
Upon any consolidation or merger by the Company with or into any other
Person, or any conveyance, transfer or lease by the Company of its properties
and assets substantially as an entirety to any Person in accordance with Section
8.1, the successor Person formed by such consolidation or into which the Company
is merged or to which such conveyance, transfer or lease is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor Person
had been named as the Company herein; and in the event of any such conveyance,
transfer or lease the Company shall be discharged from all obligations and
covenants under the Indenture and the Securities and may be dissolved and
liquidated.
Such successor Person may cause to be signed, and may issue either in its
own name or in the name of the Company, any or all of the Securities issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the written order of such successor Person
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall make
available for delivery any Securities which previously shall have been signed
and delivered by the officers of the Company to the Trustee for authentication
pursuant to such provisions and any Securities which such successor Person
thereafter shall cause to be signed and delivered to the Trustee on its behalf
for the purpose pursuant to such provisions. All the Securities so issued shall
in all respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Securities had been issued at the date of the
execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form may be made in the Securities thereafter to be
issued as may be appropriate.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
Section
9.1 Supplemental Indentures without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form reasonably satisfactory to
the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company, and the
assumption by any such successor of the covenants of the Company herein and in
the Securities contained; or
(2) to convey, transfer, assign, mortgage or pledge any property to or with
the Trustee or to surrender any right or power herein conferred upon the
Company; or
(3) to establish the form or terms of Securities of any series as permitted
by Sections 2.1 or 3.1; or
(4) to add to the covenants of the Company for the benefit of the Holders
of all or any series of Securities (and if such covenants are to be for the
benefit of less than all series of Securities, stating that such covenants are
expressly being included solely for the benefit of such series) or to surrender
any right or power herein conferred upon the Company; or
(5) to add any additional Events of Default for the benefit of the Holders
of all or any series of Securities (and if such additional Events of Default are
to be for the benefit of less than all series of Securities, stating that such
additional Events of Default are expressly being included solely for the benefit
of such series); or
(6) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall (a) become effective only
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture which is entitled to the benefit of
such provision or (b) not apply to any Outstanding Securities; or
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72
(7) to cure any ambiguity, to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising under
this Indenture, provided that such action pursuant to this clause (7) shall not
adversely affect the interest of the Holders of Securities of any series in any
material respect; or
(8) to evidence and provide for the acceptance of appointment hereunder by
a successor Trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 6.11(b); or
(9) at such time, if any, as this Indenture is qualified under the Trust
Indenture Act, to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust Indenture
Act.
Section 9.2 Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any installment of
interest (including any Additional Interest) on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or reduce any premium
payable upon the redemption thereof, or reduce the amount of principal of a
Discount Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2, or change the
place of payment where, or the coin or currency in which, any Security or
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 Redemption Date), or
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73
(2) reduce the percentage in principal amount of the Outstanding Securities
of any series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 5.13 or Section
10.5, except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent of
the Holder of each Security affected thereby.
A supplemental indenture that changes or eliminates any covenant or other
provision of this Indenture that has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 9.3 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 this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture, and that
all conditions precedent have been complied with. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 9.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
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Section 9.5 Conformity with Trust Indenture Act.
At such time, if any, as this Indenture is qualified under the Trust
Indenture Act, every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.6 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Company, bear a notation in form approved by the Company as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and made available for delivery by the Trustee in
exchange for Outstanding Securities of such series.
ARTICLE X
COVENANTS
Section 10.1 Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of (and premium,
if any) and interest (including Additional Interest) on the Securities of that
series in accordance with the terms of such Securities and this Indenture.
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Section 10.2 Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities, an office or agency where Securities of that series may be presented
or surrendered for payment and an office or agency where Securities of that
series may be surrendered for transfer or exchange and where notices and demands
to or upon the Company in respect of the Securities of that series and this
Indenture may be served. The Company initially appoints the Trustee, acting
through its Corporate Trust Office, as its agent for said purposes. The Company
will give prompt written notice to the Trustee of any change in the location of
any such office or agency. If at any time the Company shall fail to maintain
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 of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
of such purposes, and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in each Place of
Payment for Securities of any series for such purposes. The Company will give
prompt written notice to the Trustee of any such designation and any change in
the location of any such office or agency.
Section 10.3 Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest (including Additional Interest)
on any of the Securities of such series, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due until such sums shall be paid
to such Persons or otherwise disposed of as herein provided, and will promptly
notify the Trustee of its failure so to act.
Whenever the Company shall have one or more Paying Agents, it will, prior
to 10:00 a.m. New York City time on each due date of the principal of or
interest (including Additional Interest) on any Securities, deposit with a
Paying Agent a sum sufficient to pay the principal (and premium, if any) or
interest (including Additional Interest) so becoming due, such sum to be held in
trust for the benefit of the Persons entitled to such principal and premium (if
any) or interest, and
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(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its failure so to act.
The Company 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, subject to the provisions of this Section, that such Paying
Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest (including Additional Interest) on Securities 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;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities) in the making of any payment of principal (and
premium, if any) or interest (including Additional Interest);
(3) 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; and
(4) at such time, if any, as this Indenture is qualified under the Trust
Indenture Act, comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by the Company or any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of (and premium, if any)
or interest (including Additional Interest) on any Security and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall (unless otherwise required by mandatory
provision of applicable escheat or abandoned or unclaimed property law) be paid
on Company Request to the Company, or (if then held by the Company) shall
(unless otherwise required by mandatory provision of applicable escheat or
abandoned or unclaimed property law) be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured
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general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the direction and expense of the Company
cause to be published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation in the
Borough of Manhattan, The City of New York, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
Section 10.4 Statement as to Compliance.
The Company shall deliver to the Trustee, within 120 days after the end of
each calendar year of the Company ending after the date hereof, an Officers'
Certificate, one of the signatories of which shall be the principal executive,
principal financial or principal accounting officer of the Company, covering the
preceding calendar year, stating whether or not to the best knowledge of the
signers thereof the Company is in default in the performance, observance or
fulfillment of or compliance with any of the terms, provisions, covenants and
conditions of this Indenture, and if the Company shall be in default, specifying
all such defaults and the nature and status thereof of which they may have
knowledge. For the purpose of this Section 10.4, compliance shall be determined
without regard to any grace period or requirement of notice provided pursuant to
the terms of this Indenture.
Section 10.5 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any covenant
or condition provided pursuant to Section 3.1, 9.1(3) or 9.1(4) with respect to
the Securities of any series, if before or after the time for such compliance
the Holders of at least a majority in principal amount of the Outstanding
Securities of such series shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company in respect of any such covenant
or condition shall remain in full force and effect.
Section 10.6 Calculation of Original Issue Discount.
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The Company shall file with the Trustee promptly at the end of each
calendar year a written notice specifying the amount of original issue discount
(including daily rates and accrual periods) accrued on Outstanding Securities as
of the end of such year, if any.
Section 10.7 Limitation on Liens.
The Company shall not, and shall not permit any Subsidiary to, create,
assume, incur or suffer to exist any Lien, other than a Purchase Money Lien,
upon any capital stock of any Restricted Subsidiary, whether owned on the date
of the Indenture or thereafter acquired, to secure any Indebtedness (other than
the Senior Debentures) of the Company, any Subsidiary or any other Person
without in any such case making effective provision whereby all of the
outstanding Senior Debentures shall be directly secured equally and ratably with
such Indebtedness or, if such Indebtedness is secured by such a Lien and is
expressly subordinated or junior in right of payment to the Senior Debentures,
secured by such a Lien that is senior in priority to the Lien securing such
Indebtedness; provided, however, that this restriction will not apply to (i)
-----------------
Liens on the capital stock of any Restricted Subsidiary securing Indebtedness
outstanding from time to time, provided that the principal amount of all such
Indebtedness secured by Liens on the capital stock of any Restricted Subsidiary,
at the time of each incurrence of any portion of any such Indebtedness, does not
exceed 20% of Total Capitalization and (ii) Liens securing Indebtedness from the
Company to any wholly owned Restricted Subsidiary or from any wholly owned
Restricted Subsidiary to the Company or its subsidiaries.
Nothing in this Section 10.7 or elsewhere in this Indenture contained shall
prevent or be deemed to restrict any other property of the Company or its
Subsidiaries or to prohibit the creation, assumption, or guaranty by the Company
or any Subsidiary of any debentures, notes, or other evidences of unsecured
indebtedness, whether in the ordinary course of business or otherwise.
ARTICLE XI
REDEMPTION OF SECURITIES
Section 11.1 Applicability of This Article.
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Redemption of Securities of any series (whether by operation of a sinking
fund or otherwise) as permitted or required by any form of Security issued
pursuant to this Indenture shall be made in accordance with such form of
Security and this Article; provided, however, that if any provision of any such
form of Security shall conflict with any provision of this Article, the
provision of such form of Security shall govern. Except as otherwise set forth
in the form of Security for such series, each Security of such series shall be
subject to partial redemption only in the amount of $1,000 or, in the case of
the Securities of a series issued to a Trust, $1,000, or integral multiples
thereof.
Section 11.2 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by
or pursuant to a Board Resolution. In case of any redemption at the election of
the Company of the Securities, the Company shall, not less than 45 nor more than
60 days prior to the Redemption Date (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such date and of the
principal amount of Securities of that series to be redeemed. In the case of any
redemption of Securities prior to the expiration of any restriction on such
redemption provided in the terms of such Securities, the Company shall furnish
the Trustee with an Officers' Certificate and an Opinion of Counsel evidencing
compliance with such restriction.
Section 11.3 Selection of Securities to be Redeemed.
If less than all the Securities of any series are to be redeemed (unless
all the Securities of such series and of a specified tenor are to be redeemed or
unless such redemption affects only a single Security), the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities of such series
not previously called for redemption, by lot or such other method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of a portion of the principal amount of any Security of such series,
provided that the unredeemed portion of the principal amount of any Security
shall be in an authorized denomination (which shall not be less than the minimum
authorized denomination) for such Security. If less than all the Securities of
such series and of a specified tenor are to be redeemed (unless such redemption
affects only a single Security), the particular Securities to be redeemed shall
be selected not more than 60 days prior to the Redemption Date by the Trustee,
from the Outstanding Securities of such series and specified tenor not
previously called for redemption in accordance with the preceding sentence.
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The Trustee shall promptly notify the Company in writing of the Securities
selected for partial redemption and the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case of
any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security which has been or is to be redeemed. If the
Company shall so direct, Securities registered in the name of the Company, any
Affiliate or any Subsidiary thereof shall not be included in the Securities
selected for redemption.
Section 11.4 Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not later than the thirtieth day, and not earlier than the sixtieth day,
prior to the Redemption Date, to each Holder of Securities to be redeemed, at
the address of such Holder as it appears in the Securities Register.
With respect to Securities of each series to be redeemed, each notice of
redemption shall identify the Securities to be redeemed (including CUSIP number,
if a CUSIP number has been assigned to such Securities of such Series) and shall
state:
(a) the Redemption Date;
(b) the Redemption Price or, if the Redemption Price cannot be calculated
prior to the time the notice is required to be sent, an estimate of the
Redemption Price together with a statement that it is an estimate and the actual
Redemption Price will be calculated on the third Business Day prior to the
Redemption Date (and, if such an estimate of the Redemption Price is given, a
subsequent notice shall be given as set forth above on the date that such
Redemption Price is calculated setting forth the actual Redemption Price);
(c) if less than all Outstanding Securities of such particular series and
having the same terms are to be redeemed, the identification (and, in the case
of partial redemption, the respective principal amounts) of the particular
Securities to be redeemed;
(d) that on the Redemption Date, the Redemption Price will become due and
payable upon each such Security or portion thereof, and that interest thereon,
if any, shall cease to accrue on and after said date;
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(e) the place or places where such Securities are to be surrendered for
payment of the Redemption Price;
(f) that the redemption is for a sinking fund, if such is the case; and
(g) such other provisions as may be required in respect of the terms of a
particular series of Securities.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be revocable.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the Holder receives such
notice. In any case, a failure to give such notice by mail or any defect in the
notice to the Holder of any Security designated for redemption as a whole or in
part shall not affect the validity of the proceedings for the redemption of any
other Security.
Section 11.5 Deposit of Redemption Price.
Prior to 10:00 a.m. New York City time on the Redemption Date specified in
the notice of redemption given as provided in Section 11.4, the Company will
deposit with the Trustee or with one or more Paying Agents (or if the Company is
acting as its own Paying Agent, the Company will segregate and hold in trust as
provided in Section 10.3) an amount of money sufficient to pay the Redemption
Price of, and any accrued interest on (including Additional Interest), all the
Securities which are to be redeemed on that date.
Section 11.6 Payment of Securities Called for Redemption.
If any notice of redemption has been given as provided in Section 11.4, the
Securities or portion of Securities shall become due and payable on the date and
at the place or places stated in such notice at the applicable Redemption Price.
On presentation and surrender of such Securities at a Place of Payment in said
notice specified, the said Securities or the specified portions thereof shall be
paid and redeemed by the Company at the applicable Redemption Price, together
with accrued interest (including Additional Interest) to the Redemption Date;
provided, however, that, unless otherwise specified as contemplated by Section
3.1, installments of interest whose Stated Maturity is on or prior to the
Redemption Date will be payable to the Holders of such Securities, or one or
more Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
3.7.
<PAGE>
82
Upon presentation of any Security redeemed in part only, the Company shall
execute and the Trustee shall authenticate and make available for delivery to
the Holder thereof, at the expense of the Company, a new Security or Securities
of the same series, of authorized denominations, in aggregate principal amount
equal to the unredeemed portion of the Security so presented and having the same
Original Issue Date, Stated Maturity and terms. If a Global Security is so
surrendered, such new Security will also be a new Global Security.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal of and premium, if any, on such Security
shall, until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.
ARTICLE XII
SINKING FUNDS
Section 12.1 Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of any series except as otherwise specified as
contemplated by Section 3.1 for such Securities.
The minimum amount of any sinking fund payment provided for by the terms of
any Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any sinking fund payment in excess of such minimum amount which is
permitted to be made by the terms of such Securities of any series is herein
referred to as an "optional sinking fund payment". If provided for by the terms
of any Securities of any series, the cash amount of any sinking fund payment may
be subject to reduction as provided in Section 12.2. Each sinking fund payment
shall be applied to the redemption of Securities of any series as provided for
by the terms of such Securities.
Section 12.2 Satisfaction of Sinking Fund Payments with Securities.
In lieu of making all or any part of a mandatory sinking fund payment with
respect to any Securities of a series in cash, the Company may at its option, at
any time no more than 16 months and no less than 30 days prior to the date on
which such sinking fund payment is due, deliver to the Trustee Securities of
such series (together with the unmatured coupons, if any, appertaining
<PAGE>
83
thereto) theretofore purchased or otherwise acquired by the Company, except
Securities of such series that have been redeemed through the application of
mandatory or optional sinking fund payments pursuant to the terms of the
Securities of such series, accompanied by a Company Order instructing the
Trustee to credit such obligations and stating that the Securities of such
series were originally issued by the Company by way of bona fide sale or other
negotiation for value; provided that the Securities to be so credited have not
been previously so credited. The Securities to be so credited shall be received
and credited for such purpose by the Trustee at the Redemption Price for such
Securities, as specified in the Securities so to be redeemed, for redemption
through operation of the sinking fund and the amount of such sinking fund
payment shall be reduced accordingly.
Section 12.3 Redemption of Securities for Sinking Fund.
Not less than 30 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
such Securities pursuant to the terms of such Securities, the portion thereof,
if any, which is to be satisfied by payment of cash in the currency in which the
Securities of such series are payable (except as provided pursuant to Section
3.1) and the portion thereof, if any, which is to be satisfied by delivering and
crediting Securities pursuant to Section 12.2 and will also deliver to the
Trustee any Securities to be so delivered. Such Officers' Certificate shall be
irrevocable and upon its delivery the Company shall be obligated to make the
cash payment or payments therein referred to, if any, on or before the
succeeding sinking fund payment date. In the case of the failure of the Company
to deliver such Officers' Certificate (or, as required by this Indenture, the
Securities and coupons, if any, specified in such Officers' Certificate), the
sinking fund payment due on the succeeding sinking fund payment date for such
series shall be paid entirely in cash and shall be sufficient to redeem the
principal amount of the Securities of such series subject to a mandatory sinking
fund payment without the right to deliver or credit Securities as provided in
Section 12.2 and without the right to make the optional sinking fund payment
with respect to such series at such time.
Any sinking fund payment or payments (mandatory or optional) made in cash
plus any unused balance of any preceding sinking fund payments made with respect
to the Securities of any particular series shall be applied by the Trustee (or
by the Company if the Company is acting as its own Paying Agent) on the sinking
fund payment date on which such payment is made (or, if such payment is made
before a sinking fund payment date, on the sinking fund payment date immediately
following the date of such payment) to the redemption of Securities of such
series at the Redemption Price specified in such Securities with respect to the
sinking fund. Any sinking
<PAGE>
84
fund moneys not so applied or allocated by the Trustee (or, if the Company is
acting as its own Paying Agent, segregated and held in trust by the Company as
provided in Section 10.3) for such series and together with such payment (or
such amount so segregated) shall be applied in accordance with the provisions of
this Section 12.3. Any and all sinking fund moneys with respect to the
Securities of any particular series held by the Trustee (or if the Company is
acting as its own Paying Agent, segregated and held in trust as provided in
Section 10.3) on the last sinking fund payment date with respect to Securities
of such series and not held for the payment or redemption of particular
Securities of such series shall be applied by the Trustee (or by the Company if
the Company is acting as its own Paying Agent), together with other moneys, if
necessary, to be deposited (or segregated) sufficient for the purpose, to the
payment of the principal of the Securities of such series at Maturity. The
Trustee shall select the Securities to be redeemed upon such sinking fund
payment date in the manner specified in Section 11.3 and cause notice of the
redemption thereof to be given in the name of and at the expense of the Company
in the manner provided in Section 11.4. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Section 11.6. On or before each sinking fund payment date, the Company
shall pay to the Trustee (or, if the Company is acting as its own Paying Agent,
the Company shall segregate and hold in trust as provided in Section 10.3) in
cash a sum in the currency in which Securities of such series are payable
(except as provided pursuant to Section 3.1) equal to the principal and any
interest accrued to the Redemption Date for Securities or portions thereof to be
redeemed on such sinking fund payment date pursuant to this Section 12.3.
Neither the Trustee nor the Company shall redeem any Securities of a series
with sinking fund moneys or mail any notice of redemption of Securities of such
series by operation of the sinking fund for such series during the continuance
of a default in payment of interest, if any, on any Securities of such series or
of any Event of Default (other than an Event of Default occurring as a
consequence of this paragraph) with respect to the Securities of such series,
except that if the notice of redemption shall have been provided in accordance
with the provisions hereof, the Trustee (or the Company, if the Company is then
acting as its own Paying Agent) shall redeem such Securities if cash sufficient
for that purpose shall be deposited with the Trustee (or segregated by the
Company) for that purpose in accordance with the terms of this Article XII.
Except as aforesaid, any moneys in the sinking fund for such series at the time
when any such default or Event of Default shall occur and any moneys thereafter
paid into such sinking fund shall, during the continuance of such default or
Event of Default, be held as security for the payment of the Securities and
coupons, if any, of such series; provided, however, that in case such default or
Event of Default shall have been cured or waived herein, such moneys shall
thereafter be applied
<PAGE>
85
on the next sinking fund payment date for the Securities of such series on which
such moneys may be applied pursuant to the provisions of this Section 12.3.
* * * *
<PAGE>
86
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.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
THE FIRST AMERICAN FINANCIAL
CORPORATION
By: /s/ Thomas A. Klemens
--------------------------------
Name: Thomas A. Klemens
Title: EVP/CFO
WILMINGTON TRUST COMPANY
as Trustee
By: /s/ Denise M. Geran
--------------------------------
Name: Denise M. Geran
Title: Financial Services Officer
<PAGE>
EXHIBIT A
Transferee Letter of Representation
The First American Financial Corporation
Wilmington Trust Company, as Trustee
Dear Sirs:
This certificate is delivered to request a transfer of $
principal amount of the ________% Senior Debentures Due __________ (the
"Restricted Securities") of The First American Financial Corporation
("Company").
Upon transfer, the Securities would be registered in the name of the
new beneficial owner as follows:
Name: ___________________________________
Address: ________________________________
Taxpayer ID Number: _____________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act (an "Institutional
Accredited Investor") that is purchasing Restricted Securities with a principal
amount of at least $100,000, and if the Restricted Securities are to be
purchased for one or more accounts ("investor accounts") for which we are acting
as fiduciary or agent, each such account is an Institutional Accredited Investor
that is purchasing Restricted Securities with a principal amount of at least
$100,000. In the normal course of our business, we invest in or purchase
securities similar to the Restricted Securities and we have such knowledge and
experience in financial business matters as to be capable of evaluating the
merits and risks of purchasing the Restricted Securities. We are aware that we
(or any investor account) may be required to bear the economic risk of an
investment in the Restricted Securities for an indefinite period of time and we
are (or such account is) able to bear such risk for an indefinite period.
<PAGE>
88
2. We acknowledge that none of the Company or the Initial Purchasers
(as defined in the Offering Memorandum), or any person representing the Company
or the Initial Purchasers, has made any representation to us with respect to the
Company or the offering of the Restricted Securities, other than the Offering
Memorandum dated ____________________ (the "Offering Memorandum"), a copy of
which has been delivered to us and upon which we are relying in making our
investment decision with respect to the Restricted Securities. Accordingly, we
acknowledge that no representation or warranty is made by the Initial Purchasers
as to the accuracy or completeness of such materials. We have had access to
such financial and other information concerning the Company and the Restricted
Securities as we deemed necessary in connection with our decision to purchase
the Restricted Securities, including an opportunity to ask questions and request
information from the Company and the Initial Purchasers. We acknowledge that we
have read and agreed to the matters stated under the caption "Transfer
Restrictions" in such Offering Memorandum and the restrictions on duplication
and circulation of such Offering Memorandum.
3. We understand that any subsequent transfer of the Restricted
Securities is subject to certain restrictions and conditions set forth in the
Offering Memorandum under the caption "Transfer Restrictions" and we agree to be
bound by, and not to resell, pledge or otherwise transfer the Restricted
Securities except in compliance with such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
4. We understand and hereby acknowledge that prior to the
effectiveness of a registration statement filed with the Securities and Exchange
Commission relating to the Restricted Securities, the Restricted Securities have
not been registered under the Securities Act, and may not be sold except as
permitted in the following sentence. We agree to offer, sell or otherwise
transfer such Restricted Securities prior to the date which is two years after
the later of the date of original issue and the last date on which the Company
or any affiliate of the Company was the owner of such Restricted Securities (or
any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to
the Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) for so long as the Restricted Securities
are eligible for resale pursuant to Rule 144A under the Securities Act, to a
person we reasonable believe is qualified institutional buyer under Rule 144A
("QIB") that purchases for its own account or for the account of a QIB to whom
notice is given that the transfer is being made in reliance on Rule 144A, (d)
outside the United States in a transaction meeting the requirements of Rule 904
of Regulation S under the Securities Act or (e) pursuant to any other available
exemption from the registration requirements of the Securities Act, and, in each
case, in accordance with the applicable securities laws of any state of the
United States or any other applicable jurisdiction and
<PAGE>
89
subject to any requirement of law that the disposition of our property or the
property of such investor account or accounts be at all times within our or
their control. The foregoing restriction on resale will not apply subsequent to
the Resale Restriction Termination Date. We acknowledge that the Company and the
Trustee reserve the right prior to any offer, sale or other transfer prior to
the Resale Restriction Termination Date of the Restricted Securities pursuant to
clause (d) or (e) above to require the delivery of an opinion of counsel,
certifications or other information acceptable to the Company and the Trustee in
form and substance. We acknowledge that the Restricted Securities purchased by
us will be in the form of definitive physical certificates and will bear a
legend reflecting the substance of this paragraph 4.
5. Prior to any proposed transfer of the Restricted Securities
(other than pursuant to an effective registration statement) occurring before
the Resale Restriction Termination Date, we must check the appropriate box set
forth on the reverse of the certificate(s) evidencing such Restricted Securities
relating to the manner of such transfer and submit such certificate(s) to the
Trustee. We understand that the Trustee will not be required to accept any
Restricted Securities for registration of transfer, except upon presentation of
evidence satisfactory to the Company and to the Trustee that the foregoing
restrictions on transfer have been complied with.
6. We are acquiring the Restricted Securities for our own account or
for one or more accounts (each of which is an "institutional accredited
investor") as to each of which we exercise sole investment discretion.
7. We are not acquiring the Restricted Securities with a view to, or
for offer or sale in connection with, any distribution in violation of the
Securities Act.
8. We shall provide to any person purchasing any Restricted
Securities from us a notice advising such purchaser that transfers of the
Restricted Securities are restricted as set forth herein.
We acknowledge that you and others will rely upon our confirmations,
acknowledgments and agreements set forth herein, and we agree to notify you
promptly in writing if any of our representations or warranties herein ceases to
be accurate and complete. You are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
<PAGE>
90
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW.
TRANSFEREE:_____________________
BY______________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<DEBT-HELD-FOR-SALE> 199,946,000
<DEBT-CARRYING-VALUE> 0
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<TOTAL-INVEST> 312,727,000
<CASH> 297,975,000
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<DEFERRED-ACQUISITION> 26,759,000
<TOTAL-ASSETS> 1,598,282,000
<POLICY-LOSSES> 262,824,000
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 1,598,282,000
1,257,077,000
<INVESTMENT-INCOME> 16,512,000
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<INCOME-PRETAX> 149,371,000
<INCOME-TAX> 59,300,000
<INCOME-CONTINUING> 90,071,000
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<EPS-PRIMARY> 1.69
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